By Larry Stalcup
Two ranch management specialists suggest the traits of successful ranches are much the same as they were 75 years ago.
Clay Mathis, director of the King Ranch Institute for Ranch Management (KRIRM), says five factors contribute to a successful ranch: people who run it, resources, finances, customers and people who will keep it going.
Another trait common to successful ranches is stewardship – “the people who own and/or manage successful, sustainable ranches are stewards of the resources entrusted to them,” Mathis says.
Mathis and Rick Machen, who holds the KRIRM Paul C. Genho endowed chair in ranch management, have pooled their expertise to lead KRIRM’s program located on the Texas A&M University-Kingsville campus.
Machen and Mathis refer back to a master’s thesis by John G. Nye at Montana State College in 1939. Nye outlined five factors common to successful ranches which Mathis and Machen suggest are similar to the ones they recommended today.
Here is their modern-day list.
“Ranches do not manage themselves,” Machen says. “Ranches are successful as a result of the vision of, and management by, competent, motivated people with integrity, a strong work ethic and a passion for the land and animals, both domestic and wild.”
He says agriculture as a whole presents a challenging work environment, with long hours and often-thin profit margins. “Hence the need for strong work ethics and a passion for the profession,” Machen says. “The business is ever-changing and the successful realize they never know enough and must continually learn, adapt and progress in the management abilities.
“You have to have passion to be in this business. An example is those who lost cattle, grass and other resources in the recent wildfires. They pulled themselves up by boot straps and said ‘we will be here for another generation or two or three.’”
Machen reminds producers “it all starts” with soil, plant and water management. “We’re all farmers,” he explains, adding that it involves being able to capture energy from the sun, nutrients from soil and water to produce grass and other forage needed to produce pounds of beef. Management of wildlife habitats is also important to successful ranches.
“Stewards of successful ranches understand the fundamentals," Machen adds. "The business of ranching begins at the soil-water-plant interface. Consequently, natural resource stewardship and conservation must be the primary concern of every rancher. Soil is a precious resource that must be protected from erosion by plants that cover and hold it in place. Bare ground is a vulnerability and will compromise success.”
Good management of indirect and direct costs usually determine profit or loss in a cow-calf operation. Those costs are impacted by production parameters, such as conception rates, weaning weights and rates and calf gain. “They all relate back to the biggest factor, reproductive performance,” Machen says.
“Ranches that don’t generate long-term profit often erode their equity and/or resource base and will eventually cease to be successful,” Machen says. “Revenues less direct and indirect costs determine profit or loss. Successful ranches constantly focus on both sides of this equation.”
Managing cost of production will greatly impact profit potential, and lowering direct costs of labor, supplemental feed and depreciation is a key. “Moderate stocking rates and selection for easy-keeping, easy-calving females allows successful ranches to stretch labor across a greater number of cows,” Machen says.
“Also, strategic planned grazing minimizes the need for supplemental feed and hay and the labor cost associated with them. Depreciation involves the replacement female value, longevity and mature cow value as they exit the productive herd.”
Machen says successful ranches often have aggressive marketing plans to help offset price volatility. That may involve value-added calf, branded, retained ownership, niche markets such as all-natural or other programs geared toward better profit potential.
Price risk management through the use of futures and/or options may also be used to enhance profit. Machen reminds producers that such programs will likely require additional costs, and should be managed accordingly.
Mathis says successful businesses focus and refocus on the customer. A ranch’s customer may be an order buyer, stocker operator, feedyard or a packer. But ultimately, it’s the consumer, who’s typically not the rump-roast-for-dinner housewife from decades ago.
Today’s consumers often determine what’s for dinner via social media, and may also want to know the origin of that flat iron steak recipe taken from Twitter. “Consumers take the safety, wholesomeness and nutrient benefit of beef for granted,” Mathis says. “Most expect beef to be tender, juicy and flavorful.
“More recently, consumers are concerned about where their food is grown, who grew it and the environmental sustainability of the enterprise. Consequently, meeting customer expectations today involves more than producing a tender, juicy, flavorful eating experience.”
5. Future operators
“Keep the ranch in the family and the family in the ranch.” Mathis says that adage, originally coined by Donnell Brown, a Texas producer and promoter of ranching heritage, is the best formula for maintaining a successful ranch for generations to come.
“People are an essential renewable resource for successful ranches. Ranches that have remained intact for a century or more are perfecting the process of renewing ownership, leadership and management of the ranch and associated resources,” he says. “Succession planning is an active ongoing responsibility, not just an entry on the ‘to do’ list or an afterthought.”
Ranch owners, managers, foremen, cowboys, forage/hay managers, maintenance personnel and others will determine the success of a ranch, today and decades to come. These “people resources,” and their ability to manage natural resources and finances and meet the wants and needs of their customers will determine whether a ranch continues to produce quality beef at a profit, and in an environment and lifestyle they prefer.
The 1939 thesis on successful ranches by former Montana graduate student John G. Nye summarized five factors affecting success of ranches.
1. A definite long-time plan of operations for each individual unit based upon the adaptability of the plant and the type of production, as they are related to the physical environment.
2. Management and the ability of the operator to obtain high calf and lamb crops, high yields per acre of farm crops for supplementary feed, and high quality in his produce, plus advantageous prices for commodities.
3. Keep a complete and accurate set of records, and plan a definite budget of expenses and income.
4. Death loss in livestock must be held to a minimum.
5. The general price level of agricultural commodities is of importance, particularly as compared with that of other commodities. The writer placed this factor last in the group of factors determining the financial outcome of Montana ranch operations, largely because it is less subject to the control of the operator.
You can read Nye's original thesis at http://www.beefproducer.com/nye-study.
Stalcup writes from Amarillo, Texas.