The Ranch Management Professional™

The Ranch Management Professional™

Managing the Ranch as a Business with Restoration Grazing™

The Myth that is Conventional Range Management

by Dr. Jimmy T. (Gunny) LaBaume (Extracted from Chapter 3 of A Handbook for Ranch Managers by Jimmy T. LaBaume.)

 

Range managers like to trace the origin of their “profession” to the Taylor Grazing Act and the birth of the old “Grazing Service” which was the precursor of the modern day Bureau of Land Management (BLM). In other words, by their own admission, the so-called “science” of Range Management was a creation of the Federal Government. 

 

However, the actual birth of the “discipline” preceded the Taylor Grazing Act by several years—shortly after Teddy Roosevelt managed to ram his “Forest Preservation Act of 1899” through congress. In other words, the “discipline” was born by politics and created for the primary purpose of driving the grazer out of the forests.  

 

And things have changed very little to this day. Politicians continue to exert their control over the “science” through an army of federal and surrogate federal (state) bureaucrats. This is evident in the extent to which it controls and dictates university curriculum through hiring requirements.

 

Myth: The basis for conventional range management   

 

The field of range management is riff with myths, half-truths and even outright errors. I can’t help but laugh when I hear a conventionally indoctrinated range manager refer to what they do as “science.” No “science” can ever be underpinned by basic premises that are little more than myth.   

 

The following is a brief overview of some of these myths and half-truths. The initial part of the handbook presents the conventional “party line” of the range management “profession” which you need to know and understand before you can possibly understand the fallacies and weaknesses. Then, in the final chapter in this part, we will treat these fallacies and weaknesses in more detail. For now, the following are a few of the things you should keep in mind while progressing through the book.

 

The most fundamental of all is the myth that “overgrazing” is a function of livestock numbers. It is NOT. It is a function of time—how long the grazing animals remain on a particular area.

 

Closely behind is the old “rule of thumb” for grazing utilization—take half and leave half. This is pure malarkey for several reasons. First of all, it does a perennial grass plant no harm to defoliate it completely if it is dormant. Only if it is green and growing is grazing harmful. So, once again, the problem is solved by controlling time. Oh but we need it for “ground cover” to prevent “soil erosion” they wail. No we don’t. Approximately 85% of the forage ingested by a grazing animal is deposited right back on the soil in the form of dung or urine. Cow paddies provide ground cover. Furthermore, if the crust of the soil is broken and those paddies are trampled and churned into the soil along with plant seed, erosion would be a moot negligible.

 

And then, of course, is the concept of range condition class. The process of classifying rangeland as being in excellent, good, fair or poor condition is founded upon the assumption of some sort of mythical “climax” plant community—the range as it existed before the white man came and ruined it all.

 

First question: Good? Good for what? Giraffes? What is “good” for cattle may be “poor” for deer. All that is absolutely necessary on the range is the stabilization of the top two centimeters of the soil. All things beyond that are nothing more than rational management choices. 

 

The second question: Who can honestly say that they know what a pre-white man climax plant community actually looks like? Although the language has changed a bit in the past 20 years, this same tired old BS is now cloaked as the “Ecological Range Site.” However, it is noteworthy that I did actually hear the word “desertification” (a tired old 70s era term) used in one of the presentations at the last Society for Range Management meeting I suffered through.

 

The idea of “take half and leave half” as applied to certain “key species.” The term “key species” is defined below. For now, suffice it to say that a key species is one that is usually managed “for” – either for eradication or for proliferation. Used properly, this can be a useful concept. However, as you progress through this handbook, you will gain the understanding that the optimum way to manage rangeland ecosystems is to manage for the health of the system as a whole. If you manage “for” a particular species, you are doomed to lose that species. 

 

Then there is the idea that livestock select by species. What a ridiculous statement! To my knowledge, no one has ever heard a cow say, that’s gramma grass. I hear it is good. I think I’ll take a bite. Balderdash! Livestock select for palatability which is, not coincidentally, correlated with moisture content which is, in turn not coincidentally, correlated with protein content—according to the wisdom of nature. 

 

Overgrazing causes brush infestation? Not hardly. In fact, it is UNDER-grazing (often found side by side with over-grazing) that causes brush infestation.  Conventional range management recognizes what they call a “wolf plant” as an individual plant of a species that is normally utilized by livestock but is perpetually passed over and left un-grazed. These plants accumulate material from previous years’ growth that block sunlight from the growth points at the base of the plant causing the plant to become ever increasingly senescent until it eventually dies. It also provides the ideal habitat for seed germination and establishment of the so-called “troublesome” species. I took over 3,000 data points in a study I conducted on a wide variety of different range sites in Trans-Pecos Texas. Over 85% of young plants of the “troublesome” species were within the influence of one of these old, senescent perennial grass plants.

 

Finally there is the idea that high individual animal performance (productivity as measured in such attributes as calf-crop and weaning weights) should always be top priority. As you will see in the chapter on range use economics, this is not true. If you have a 100% calf crop and they all weigh 500 lbs, you will not be able to make the mortgage payment if you only have one. A much more important measure is “turnoff” or how much product actually comes off of the land.

 

Of course the purpose for all of these myths is to support the ever present underlying assumption that it is man and his grazing animals that are primarily responsible for the “destruction” and “degradation” of the world’s rangeland resources. The fact that this paradigm (and the myths that support it) continue to persist really became obvious to me at the annual meeting of the Texas Section of the Society for Range Management held in Odessa, TX on 13, 14 and 15 October 2010. I will write about that in a later post.

 

Efficient or Effective?

by Dave Pratt

 

Effectiveness trumps efficiency. It isn't important to do something efficiently if you shouldn't be doing that thing. Agriculture is replete with examples.

 

Reproductive Efficiency

 

In between EL meetings this summer I spent an evening with Bill, a former Executive Link member. He told me his shift from February to June calving drastically reduced his costs to $60 per cow. He's reduced his substitute feeding to only the most severe weather and some years doesn't feed any hay at all. He provides only a mineral and a degradable protein seasonally so cows could graze stockpile grass. He weaned an 85% calf crop, and made a healthy profit doing it.

 

Bill's neighbor, who was not an alumnus but had been on our mailing list for years, invited us over for a beer, and started asking questions. When Bill said he weaned an 85% calf crop, the neighbor scoffed and bragged that his weaning rate is usually 95%. His cows calve in March. Not surprisingly, he feeds a lot of supplement and substitute feed. After a little napkin math I showed him that his feed costs were nearly $500/cow, $440, higher than Bill's. That's $440/cow to wean 10 more calves per 100 cows or $4,400 for each of those extra 10 calves.

 

Big Calves

 

But I wean much bigger calves than Bill, he argued. At 600 pounds, his calves were about 150 pounds heavier at weaning than Bills. For every 100 cows, he weaned 18,750 more pounds than Bill (85 calves x 150 extra pounds + 10 calves x 600 pounds = 18,750 pounds). With a little more napkin math I showed him that his cost of gain for those additional pounds was $2.34/pound. To rub salt in the wound I added, Of course Bill's lighter calves are probably worth about 10¢/pound more than your heavier calves.

 

As a group, North American ranchers are the most productive in the world. We wean bigger calves or more calves per cow than anyone else, anywhere else. We are hitting the bull's eye, but we are aiming at the wrong target. We've been focused for so long on increasing productivity that sometimes we don't realize that less can be more--less productivity can mean more profit.

 

The productivity paradigm is deeply ingrained. I recently asked a workshop audience if I showed you how to lower costs by $250 per cow, but you'd be weaning smaller calves and your income would drop by $50 per cow, would you be interested? One participant, speaking for several I fear, emphatically said, No! When I asked why he'd forgo the $200/cow improvement to the bottom line, he said, I wouldn't be as productive. His bottom line isn't profitability, it's productivity.

 

To Fertilize or Not To Fertilize

 

Tom McGrady is a good friend and a former Executive Link member. Tom lives in Montgomery, Texas and on a recent visit he told me a great Efficiency vs. Effectiveness story. You can hear Tom's story here Tom's Story.

 

I enjoy hearing Efficiency vs. Effectiveness stories like these. If you have an experience you'd like to share please post it to the blog.

 

Permalink: blog.ranchmanagement.com/2012/12/11/efficient-or-effective.aspx

 

Bud Williams Made Things Better For Animals and People

Bud Williams Made Things Better For Animals and People

 

by Dave Pratt

 

Bud Williams, known world-wide as the authority on low-stress livestock handling, died Monday, November 26, from pancreatic cancer. There is a brief message on Bud's Stockmanship website (www.stockmanship.com) that reads, Thanks to all of you for helping us make things better for the animals.

 

 

There's no doubt that Bud's concepts and methods made things better for the animals, but they also made things better for the people working those animals. He taught hundreds how to settle livestock after shipping. He explained to his students how they could apply cell grazing without fences by placing livestock in pastures. He taught how to move herds faster and more calmly without an army of people. He developed and taught practices for working animals in corrals that didn't rely on yelling, chasing or hot shots. He developed innovative facility designs like the Bud Box.

 

These are so well accepted now (even if they aren't always well practiced) that it is easy to forget how controversial they were just 20 years ago.

 

I first heard about Bud from Stan Parsons at a Ranching For Profit school in 1988. Stan showed the class some amazing video of Bud walking a cow away from her calf and single-handedly loading a cattle truck using a Bud Box. I'd never seen cattle flow that quickly, effortlessly, and silently. He showed scenes of Bud working elk in corrals and it ended with a remarkable demonstration of walking a massive herd of reindeer into a ramshackle set of corrals. Stan concluded the presentation by saying that Bud's techniques could reduce stress on animals and people, improve livestock performance, reduce costs and increase profit. Stan said that what Bud was teaching would be a breakthrough for any rancher open to learning these principles and techniques.

 

Not everyone was open to learning. The difficulty in learning something new often lies, not in understanding the new idea, but in letting go of the old one it may replace. Bud was an effective teacher, but our paradigms about the way we handle livestock are tightly held and difficult to suspend. I saw that first hand when I attended my first Bud Williams Stockmanship school a few years later. The concepts and techniques he presented seemed so simple and obvious, but went against just about everything I'd ever been taught about moving animals. Everyone I'd ever worked with used fear and force to make animals go here or there. Bud used positioning and motion, sometimes very subtle motion, to let the animals do what he wanted them to do.

 

Bud's contributions to ranching and ranchers went well beyond the pasture. His unique take on marketing focused on the three things we have in our inventory: money, grass and livestock. Bud said that you'd never go broke having too much money or too much grass, but you sure could have too many animals at the wrong time. He observed that most ranchers love their cows and hate their grass and said that it ought to be the other way around. He argued that you can't buy undervalued animals if you don't have grass to put them on and, since our cows eat up that grass, we ought to care about our grass at least as much as we care about our critters.

 

Conventional wisdom has been that you make a profit when you sell something. Bud disagreed and taught that you make the profit only after you replace the inventory that you sold. He'd challenge his students that, every day whether we realize it or not, we either buy or sell every animal we have. If we choose not to sell an animal at the market price today, then we ought to be willing to buy her (and another one just like her) at that price today.

 

Bud and his wife Eunice, married for 60 years, made an amazing team. Bud could not have had the impact that he had without Eunice's tireless support. When I first attended Bud's stockmanship school, Eunice ran the projector. She added her own valuable insights to the class to reinforce the concepts Bud was teaching us.

 

Bud and Eunice were especially committed to the next generation of ranchers. While they'd always go the extra mile (or more) for people serious about applying their concepts, they'd go even further for young people who were just starting out.

 

Several Ranching For Profit Alumni transformed their businesses using Bud's marketing and stockmanship principles. It's hard to think of anyone who's touched as many people (and animals) as powerfully and positively as Bud. While his influence survives in capable hands, he will be missed. Nearly everyone I meet who worked with Bud has a story to tell about the experience.

 

Buds Influence Lives On

 

Fortunately Buds influence will live on through the people hes influenced. Buds daughter Tina and her husband Richard McConnel offer courses on stockmanship and low stress livestock handling. To learn more click here.

 

Steve Cotes book Stockmanship: A Powerful Tool For Grazing Lands Management, which Bud reviewed and approved, does as good a job as a book can do describing Buds principles and techniques. Click here to download the book.

 

University of California, Livestock & Range Advisor, Roger Ingram, spent a sabbatical working with Bud to better understand his stockmanship principles. Roger wrote Low Stress Livestock Handling on Pasture and Range which does a great job of summarizing many of Buds stockmanship principles. Click here to access Rogers paper.

 

Permalink: blog.ranchmanagement.com/2012/11/27/bud-williams-made-things-better-for-animals-and-people.aspx

 

The Case Against Genetics

"But our choice of enterprises and the way we structure those enterprises ...trump the economic impact of genetics. It doesn't matter what breed of cow you have or how good a bull you use if you ought not have cows!"

 

I once asked Stan Parsons a related question. Say I only have a limited amount of capital--enough to buy a little better genetics but not enough for a large capital expenditure--would it be logical to purchase semen, for example. His response: "Shoot the salesman when he comes down the road."

 

Jimmy T. LaBaume, CEO

Land & Livestock International, Inc.

The Case Against Genetics

by Dave Pratt

Moments ago I read the following in a popular industry magazine: “…given the multiple challenges you face that are beyond your control drought, rising feed and fuel costs, escalating land values genetic selection may be the single most important component of your operation that you control.” If anyone out there believes that please explain it to me because I think genetics is WAY down the list of critical factors on which we as business owners need to focus. This really isn't a case against genetics. It is an argument for other things first.

 

What comes first? If you own a ranch and profit is one of your goals, start with the land, not the animals. Ranch land is worth a lot of money these days, but only a fraction of its value is tied to its potential for agricultural production. Capitalizing or concessionizing ranch resources may make a six or even seven figure difference to our bottom line. It's unlikely you'll get that kind of return from evaluating EPD’s.


Next? Some places are better suited to growing stock than breeding stock. Cow-calf enterprises on irrigated pasture usually aren't as profitable as stocker or heifer development enterprises can be on that same forage. It'd be a good idea to make sure we have the right enterprise mix before we get too worried about the genetic make-up of the animals in that enterprise.


And there's more. Assuming a cow/calf enterprise is a good fit to our resource, let's determine how it fits. We'd be well served to make sure our production schedule matches the forage cycle. In the Great Plains winter calving (February-April) might produce a big calf but usually requires winter feeding and all of the overhead costs that go along with that. Spring calving (May-June) may mean smaller calves, but often means less cost. The type of animal ideally suited to winter calving is unlikely to be the same that is ideally suited for a low-cost summer program. Before we worry about breed and body type and start picking bulls and replacement heifers, wouldn't it be best to know which production strategy produces the highest margin, the lowest overheads and provides the most protection from risk (severe winters, drought, etc.).


Since I brought it up, what about those heifers? The decision to buy them or raise them ourselves can have as much or more impact on our profitability than the type of heifer we choose. Furthermore, who ever said that replacements had to be heifers? Some of your neighbors, particularly those with herds calving later than yours, might be well advised to buy your open and late calving cows as their replacements. That avoids the cost and stress of calving out first calf heifers and the difficulty of getting them pregnant for the second time. These are just some of the questions that often trump the economic impact of genetics.


This is not to say that genetics isn't important. I'd be naive if I didn't recognize the value of having animals selected for and adapted to the environment and production schedule. But the article is wrong in suggesting that it is the “single most important” thing that you control.


Perhaps the thing that really set me off as I read the article is the way it portrayed us as victims. It implied that we are victims of drought, rising feed and fuel costs and other externalities. I don't mean to diminish the challenges we face when input costs rise faster than cattle prices or the economic and emotional toll we pay in drought; but the fact is that some of us weather the storm (or lack thereof) better than others. It's true that none of us individually dictates the cost of feed or fuel, or can make it rain. But our choice of enterprises and the way we structure those enterprises has everything to do with our exposure to the risk of drought, our need for feed and fuel and just about any other external factor you can name. Those decisions trump the economic impact of genetics. It doesn't matter what breed of cow you have or how good a bull you use if you ought not have cows!

 

 

Permalink: blog.ranchmanagement.com/2012/11/13/the-case-against-genetics.aspx

Rich Dad, Bankrupt Dad

This article is reminiscent of Stan Parsons who had (and still has) a great perspective on “capitalization” of the ranch. I recall some of his wisdom:

 

  1. Over-capitalization has a way of sneaking up on the ranch, one pick-up at a time.
  2. You don’t need all that fancy equipment. All you need is a Tyotoa pick-up and three hammers. That way, when times get hard, you can sell a hammer.
  3. Forget all those chemical and mechanical range improvements and improved animal genetics. The ranch improvement that will return the highest rate is fencing because it is fencing that gives you control over time.

 

(Author’s Note: Contrary to what conventional range managers might try to sell you, overgrazing is not a function of animal numbers. It is a function of time.)

 

Jimmy T. LaBaume, President & CEO

Land & Livestock International, Inc.

 

Rich Dad, Bankrupt Dad

 

By Dave Pratt

 

Earlier this month, Robert Kiyosaki, author of the best-selling financial advice book, Rich Dad, Poor Dad, filed for bankruptcy for one of his companies, Rich Global, LLC. Don’t worry about Kiyosaki.  He’s not about to become Poor Dad. It sounds like the bankruptcy laws protect his personal fortune (estimated at $80 million) and short his creditors by over $20 million. 

 

That doesn’t seem fair to me, but regardless of your views about the ethics of Kiyosaki’s bankruptcy, there are valuable lessons to be learned in Rich Dad, Poor Dad and I hope that the important message in Rich Dad, Poor Dad isn’t lost because of the messengers’ issues.

 

The most valuable lesson in Rich Dad, Poor Dad involves a unique definition of assets and liabilities.  Kiyosaki says that this is rule number one and that,  “If you want to be rich, this is all you need to know.”  What’s the rule?  In Kiyosaki’s words, it is simply this: “An asset is something that puts money in my pocket. A liability is something that takes money out of my pocket.” In Rich Dad, Poor Dad he writes, “Rich people acquire assets.  The poor and middle class acquire liabilities, but think they are assets.”

 

Of course Kiyosaki’s definitions run contrary to the way most of us normally think about assets and liabilities.  Economists, bankers, accountants and our balance sheets tell us that assets are things that we own and liabilities are things we owe.  That isn’t wrong, but it doesn’t explain why most ranchers are wealthy on the balance sheet and broke at the bank.  Kiyosaki’s definition does.

 

The assets on our balance sheet include things like vehicles, machinery, land and infrastructure.  But using the Rich Dad, Poor Dad definition these things are usually liabilities.  Ask yourself, Do these things put money in, or take money out, of my pocket? 

 

Repairs and maintenance, fuel, insurance, interest payments, taxes, these things take money out of your pocket, and unless you are in the car, equipment or land rental business, they don’t put money in your pockets. 

 

Kiyosaki would call these, and most of the other fixed assets we own, liabilities.  Owning these liabilities is a huge constraint to creating wealth because when most of your money is tied up in things that cost you money, you don’t have much left to invest in things that actually produce income.  This is the biggest financial problem in agriculture.  To view a four minute video with a more thorough explanation of this issue and a brief discussion of things you can do about it, click here.

 

In Rich Dad, Poor Dad, Kiyosaki explains that, “The rich can hide their wealth to protect their assets from creditors.”  That’s exactly what he’s been able to do. Whether or not that’s fair is a good question.  I sure wouldn’t think so if I was one of the creditors. 

 

Either way, it doesn’t diminish the valuable perspective on assets and liabilities offered in Rich Dad, Poor Dad.

 

Permalink: blog.ranchmanagement.com/2012/10/23/rich-dad-bankrupt-dad.aspx

  

Making Grass Finishing Profitable

Making Grass Finishing Profitable

By Dave Pratt

My crystal ball isn’t better than anybody else’s, but in mine I see the cost of energy increasing and the economics of feeding irrigated corn to cattle crashing. I see serious externalized ecological costs (the dead zone in the Gulf of Mexico, nitrates in ground water, etc.). Feedlots are a creation of the 50’s and 60’s. They followed the introduction of hybrid varieties of corn and nitrogen fertilizer. Today it is almost impossible to imagine the cattle industry without feedlots. Perhaps it is as hard as it would be to imagine Australia or Argentina with feed lots. My guess is that by 2040, the livestock industry will undergo a transformation again. After all, it is pretty hard to find a successful industry that doesn’t require radical transformation at least once a century to remain successful.

Some ranchers are trying to create an alternative to the cattle industry’s addiction to corn by creating conception to consumption grass finishing enterprises. Having more alternatives is a good thing and this alternative could reconnect consumers with producers and offer a product higher in anti-carcinogens than grain finished meat and milk. But to be sustainable a business must be profitable and conception to consumption grass finishing enterprises face several challenges to profitability that must be overcome if grass finishing is going to be a viable option for producers and widely available to consumers. The challenges include:

1. Not all grass is equal
 

Think of forage as being in one of three broad quality categories, breeding feed, growing feed and finishing feed. Breeding animals will perform well on growing or finishing feed, but are unlikely to give you the optimum return. In contrast, growing or finishing animals will not perform well on breeding feed. It is rare to have one ranch that has all three in the balance needed to support their breeding, growing and finishing enterprises.

2. Turnover: Slow & Low
 

It generally takes longer to finish animals on grass than it does on a feedlot ration. That means the capital invested in the animal is tied up longer. Compounding the challenge, the forage grazed by those large calves and yearlings that used to go to the feed lot, means that some other enterprise has less forage to use. So in addition to slower turnover, we may carry lower numbers.

3. Ranching v. Farming
 

There are some grass finishing proponents who insist that forage sequencing may be the key to producing a consistent high quality product. The most profitable ranch businesses rarely do any farming. Farming adds the need for equipment, the labor and gas to drive it, repair and maintenance costs, insurance, depreciation. Most grass finishers don’t have the economics of scale or margins to cover the capital and overheads required for farming.

4. Working For Free
 

I break conception to consumption businesses into two divisions: the livestock division and the meat division. The meat division purchases animals from the finishing enterprise in the livestock division. The procurement, slaughter, storage marketing and all other costs associated with processing and selling the meat, including labor, must be covered by the meat and bi-product sales. Your labor cost should be calculated at what you’d have to pay to have someone else do the work.

Bottom line: Include your full labor costs (paid and unpaid) in calculating your costs. Set your profit target and determine the margins and turnover you need to achieve it. Look for options to farm out the farming and to partner with people who have resources that will complement yours, including on the marketing and processing end of things (we don’t all have to reinvent the wheel).

Because they believe that grass finishing is a good thing to do, I wonder sometimes if people assume that they are more profitable than they really are. It reminds me of a great line in the movie My Cousin Vinnie. A witness said something took 5 minutes that actually takes 20 minutes to cook and Vinnie responds, “perhaps the laws of physics cease to exist on your stove.” Well, grass finishing or not, the laws of business and economics still exist on your ranch.

For a review of research comparing the nutritional differences between grain and grass finished beef click: http://www.csuchico.edu/grassfedbeef/research/Review Grassfed Beef 2010.pdf.

 

Permalink: blog.ranchmanagement.com/2012/10/09/making-grass-finishing-profitable-2.aspx

  

Pasture Insurance

What follows is a response to an article Dave Pratt wrote about government subsidized Pasture Insurance. The original article follows my response.

 

Dave, as always, great article! I will republish it on my blog with full credit, of course). As Ben Franklin said, We must all hang together or we shall all hang separately.

 

Actually, what makes the article “great” is that you openly invite comment. Had it not been for the 1st Amendment we all would have hung separately already.

 

Your question concerning the role of government in agriculture can be answered from two angles--the economic and the ethical. The two are not mutually exclusive.

 

Economic: The free market is the most efficient allocator of scarce because it does not rely on force or violence. Resources are bought and sold through voluntary exchange and both buyer and seller consider themselves better off at the moment of exchange.

 

As humans, we are motivated by self-interest. Government intervention with the free market always has unintended consequences because it distorts this incentive.

 

Welfare for agriculture has had the same effect on agriculture that welfare for individuals, large corporations, foreign countries, et al. has had on them—made them dependent.

 

These consequences are “untended” because of what Frédéric Bastiat called “the seen and the unseen.”

 

Example: If I break the windshield of your “Cowboy Cadillac, have we “created” a job? Well yes, for the windshield repair guy. That is “the seen.”

 

But, have we created “wealth?”  Absolutely not! Had you been left free to choose what to do with that money, you might have bought a new wool sweater. The job you would have created for the sheep herder reflects the desires of society for the use of scarce resources. That is “the unseen.”

 

There is no way to know but what the funds allocated to “pasture insurance” might not have been used by the free market to find a cure for cancer.

 

Government has no business fiddling with any segment of the economy.

 

Ethical: There are only a few truly universal ethical principles that have been accepted by almost all societies over recorded human history—it is not ethical to commit aggression in the form of fraud, force or violence—assault, robbery, rape, murder, extortion—all these acts are almost universally viewed as unethical.

 

Franz Oppenheimer defined the two ways of acquiring wealth.

 

  1. You can work for it. We call that the economic means.
  2. You can steal it. We call that the political means.

 

Simple fact: Government has nothing to give to anyone that it has not taken from someone else at the point of a gun!!!!

 

That too is “unseen.” But strip away all the layers and what do you have left?

 

You might as well take your shotgun over to your neighbor’s house and demand that he pay “more than 50% of your crop insurance premium” so that you can reap a “100% return over 5 years by receiving $2 for every $1 that you took from him.

 

It is amazing how many good, hard working, honest people there are who would never think about walking into a convenience store, sticking a gun in the clerks face and demanding the money. But, they think absolutely nothing about having the government commit the exact same act of violence on their behalf.

 

So, subsidies of any kind cannot be defended on either an economic or an ethical basis.

Pasture Insurance

by Dave Pratt

 

Warning: If you don’t believe that the government ought to subsidize farmers and ranchers don’t click <read more> because you may be tempted to get in line for a hand out.

 

I’m not a big fan of insurance. I recognize the need for insurance and my wife and I do insure our health, our home and our vehicles, but I don’t enjoy paying for something I hope I won’t need and will never have to use.  It makes me feel like I’m betting that things will go wrong.  

 

I’m not a big fan of government ag programs either.  Too often well-intentioned initiatives wind up having unanticipated, negative results.  The Emergency Feed Program is a classic example.  By reimbursing folks for some of their drought feeding costs, it encourages them to try to feed their way through droughts when they ought to be destocking. 

 

With my attitude about insurance and government programs you can probably imagine my first reaction when I heard about the USDA Risk Management Agency’s Pasture, Rangeland and Forage Insurance program. I was, to say the least, skeptical.  But the more I’ve learned about it the more attractive it looks.

 

The pasture insurance program doesn’t encourage or discourage any particular practice.  It just recognizes that when it doesn’t rain and your land dries up, so does your cash flow.  Here’s how the program works.  An insured rancher pays a premium to insure all or part of their pasture for all or part of the year. If rainfall in the period insured is less than a predetermined level, the rancher receives a payment.  If rainfall is above that index, there is no payment.  The insurance doesn’t require that the rancher do any reporting or record keeping. Insured ranchers don’t even have to submit a claim to get paid.  

 

I was first introduced to the program by Jen Livsey of Texas Ag Finance (and daughter of a Ranching For Profit School alumnus). Jen shared with me the research she’s done on premiums v. pay outs from Montana to Texas and Nebraska to California . Her analysis shows that in every region she’s studied the typical return over a 5 year period is 100%. In other words, for every $1 a producer pays in premiums, they typically receive $2 in claims!  How’s that possible?

 

If an insurance company is going to make money selling insurance (and I have no doubt that they make A LOT of money) the premiums collected must exceed the claims paid.  This program   seems like a recipe for insurance companies to go broke.   The reason they don’t go broke is because more than 50% of the premium is subsidized by USDA.

 

My intention in this ProfitTips is not to encourage or discourage your use of pasture insurance, but to simply make you aware of it.  To learn more, click here to view a video of Jen explaining the program or click read more for the Information Sheet. Jen also invites your inquiries. She can be reached at: Jen.Livesey@texasagfinance.com.

 

Programs like this raise an important question. What is the appropriate role for government in agriculture?  I’d appreciate your thoughts.

 

Permalink: blog.ranchmanagement.com/2012/09/25/pasture-insurance.aspx

 

 

The Practical Side of Biodiversity

The Practical Side Of Biodiversity

 

by Dave Pratt

 

I once asked ranching consultant Gregg Simonds, if there were only three things he could measure to evaluate the health of rangelands, what they would be.  He responded: 1. Cover, 2. Cover, and 3. Biodiversity.  Gregg wasn’t being facetious when he listed the top two criteria as cover.  There are several types of cover (soil cover, basal cover, canopy cover, etc.).  I never did pin Gregg down on which he thought were most important, but regardless of the type, cover is reasonably easy to measure and I think most of us can appreciate its importance.

It is harder to understand or appreciate the importance of biodiversity.  Biodiversity refers to the variety of plants, animals and microorganisms, the genes they contain and the ecosystems they form.  Genetic diversity is critical to maintaining the viability of populations within species.  Species diversity is vital for several reasons, not the least of which are the many interactive effects among organisms. For example, one gram of forest soil may have over 4,000 different species of bacteria.  The interaction of some of these bacteria with roots is essential for the vigorous growth of some commercial timber species.  Some of these bacteria are dispersed by voles, mice, insects and other creatures we normally think of as pests. In the absence of the microbes the trees don’t grow as rapidly and are more susceptible to disease and pollution.   How important are these rarely seen and easily forgotten organisms to the productivity of the forest and, therefore, the jobs in the timber industry?  That’s hard to quantify but it isn’t a stretch to see the relationship.  

We will never know or understand all of the relationships between organisms in a community. We do know that when we lose diversity, communities are more susceptible to disease out breaks, weed infestations and pest problems.  Diversity also plays a role in the ability of an ecosystem to function during and following severe environmental events like droughts. 

Cell grazing, which promotes root growth and creates habitat for desirable microbes in the soil, is just one of the many things we can do as ranchers to increase biodiversity on our properties.  Avoiding excess fertilization and the use of toxic chemicals also tend to maintain or increase biodiversity. There are several things we can do to enhance habitat for wildlife that increase diversity.  Wildlife waterers, like the ones I saw on Curtis Rankin’s ranch are a terrific example.  To see a video of the waterers that Curtis installs every time he puts in a tank for his cattle click here.    

In the long run, ecology and economics are inseparable.  In fact, I think of them as one in the same: eco-nomics or econ-ology.  In past editions of ProfitTips, I’ve written about many Ranching For Profit School alumni who used their knowledge to drastically increase their carrying capacity without spending money on herbicides or fertilizers (which tend to decrease biodiversity) or seeding.  What they feel for their land is probably not unique among ranchers. What they had that most of their neighbors didn’t was a deeper understanding of ecosystem processes and tools like cell grazing. The results we see consistently are more cover, more cover and more biodiversity.

 

Permalink: blog.ranchmanagement.com/2012/09/11/the-practical-side-of-biodiversity.aspx 

Much Ado About Something

Much Ado About Something

There’s a lot of talk about Mob Stocking these days. It has left me scratching my head, because what seems like a new and revolutionary concept to many is something we’ve been teaching at the Ranching For Profit School for over 30 years. Mob Stocking is simply the intense application of the five cell grazing principles, with particular emphasis on two of them.

 

Cell grazing involves five things:

 

  1. Providing adequate recovery for a pasture, after it has been grazed, for regrowth of both the foliage and roots.
    • Using short graze periods, consistent with the recovery period, to keep animals on fresh feed. This practice significantly increases the quality and quantify of forage consumed which improves animal performance. In mob stocking, animals may be moved several times each day.
      • Use the highest stock density possible. In true Mob Stocking, densities can exceed 1,000 head to the acre.
        • Use the largest herd consistent with good husbandry. Using large herds makes it easier to achieve “herd effect,” which can break capped soils, knock down lignified forage and jump start successional processes. Combining herds is usually the most practical way to increase herd size. This has the added benefits of increasing stock density and the number of paddocks available per herd, which leads to shorter graze periods.
          • Match the stocking rate to the carrying capacity. This is as simple (and difficult) as matching the forage demand to the forage supply.

 

Mob Stocking is simply the very intense application of these principles with emphasis on #3, using very high stock densities and #2, moving animals frequently. The results can be impressive, both positively and negatively. Dramatic improvements in the ecosystem health and productivity have been documented when Mob Stocking is done well. But done carelessly (e.g. leaving animals in one spot too long, or stressing them during the frequent moves) can lead to poor animal performance, an ecological wreck and a financial disaster.

A lot of people are riding the “Mob Stocking” wave these days. Several ranchers I’ve met with recently have said they are using Mob stocking, but they don’t even approach the intensity that one could reasonably call Mob Stocking. What’s that intensity? It’s a little like the Supreme Court’s definition of pornography…I can’t define it but I know it when I see it.
 

Drought Note

The majority of the western US is suffering through extreme drought. Combining herds to increase density and keep graze periods short while lengthening the rest period (what some would call mob stocking) is a tactic worth considering to help manage through drought, but it is no substitute for destocking. If you don't have the forage, you'd better not have the foragers. For more ideas on managing throught drought click here. If you would like to discuss your specific situation please e-mail me, pratt@ranchmanagement.com.

 

 

 

Permalink: blog.ranchmanagement.com/2012/08/07/much-ado-about-something.aspx

Making Land Prices Irrelevant

Making Land Prices Irrelevant

by Dave Pratt

John Marble is a writer, grazier and Ranching For Profit School alumnus in western Oregon. In the last edition of ProfitTips John described how he decreased overheads and improved the gross margin of his cows. In this edition John describes his thoughts about increasing turnover in a place where land values are extremely high and affordable long-term leases are nearly impossible to secure (sound familiar?).

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Land costs in my little valley are at around $20,000 per cow unit. Now that’s enough to depress a young rancher! I can’t pay for pasture at $20 K per cow, no matter how good my gross margin is. Rather than use land prices as an excuse I decided that I needed to make land cost irrelevant to growing my business.
 

Here’s a sample of the things I’ve used to grow my enterprise. Some of these may seem a bit simple or obvious but let me tell you, they weren’t apparent to me in 1988 before I first attended the Ranching For Profit School.

Rent Land

This is an obvious way to expand, but also one of those not-as-easy-as-it-looks deals. I would note that most of the properties I have been able to rent over the years came as a result of long-term relationships. These were deals that took a long time to put together, and were as much personal as business. That could be due to my lack of business sense. One other thing to keep in mind about rental properties: they represent a very easy way to radically increase operating overheads if you are not careful. Twenty miles here, twenty miles there, fuel is expensive and time is precious.

Custom Grazing

If you don’t have financial assets to buy or own more units, consider taking on custom grazing duties for other people. The financial returns from custom grazing may not be all that great, but the risk is zero, and if structured correctly, custom grazing should bring in predictable cash flow to help deal with routine overheads.
 

A tremendously under-valued part of custom grazing is that you often find yourself working with people who have a wealth of knowledge and experience in the cattle and grazing world. If you pay attention to what these folks are doing, you can find answers to plenty of difficult questions like, “How do some people make money in the cow and grass business?”

Custom Cattle Brokering

Once you develop a relationship with people who provide custom grazing cattle, you may find that there are other people around who want some of those cows too. In my case, I have been able to act as a broker for my custom cattle partners. This is modest margin work, but has very little overhead or direct costs.

Stop Making Hay

If you have committed half of your meadows to hay-making, an easy way to increase scale is simply to quit making hay and start grazing that land. Stan Parsons used to say, “If you can’t quit feeding hay, then for goodness sake, at least stop making it.” Ending hay-making comes with all sorts of other benefits too.

Shift to Seasonal Grazing

Changing from a traditional cow/calf operation to a seasonal grazing system meant that we were able to provide an extended rest period for all of our pastures. One result of this is that our grass is ready for grazing several weeks before any of our neighbors. This longer and earlier grazing season expands our scale, and also gives the strategic advantage of being able to buy cattle early.

Winter your Mother Cows Somewhere Else

If you really need to stay in the permanent cow/calf business, I’d encourage graziers to look at paying someone else to winter your cows. Sometimes hay producers view cow-feeding as a great way to market excess hay. This option requires a little pencil-pushing, but contracting-out your wintering is a pretty interesting lifestyle come February.

Look for Residue or By-products from Farming

In many parts of the country there is a significant intensive farming system in place, and most of the folks involved in that system have absolutely no interest in livestock or grazing. Finding grazing around the edges of farm land or using crop residual can be a very economical way to increase scale.

Multi-species grazing

Adding goats might be a way to increase stocking without increasing inputs. In our case, goats started out as an attempt to gain better control of weeds, but eventually became an important free-standing enterprise. Our return on goats is around %100 in 6 months.

Learn and Apply Cell Grazing

This one should probably go up near the head of the list, as there are many reasons for implementing a cell grazing program. But in terms of scale, a 50% or 100% increase in carrying capacity without increasing overheads or direct costs is hard to top.Permalink: blog.ranchmanagement.com/2012/07/24/making-land-prices-irrelevant.aspx

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