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\n\t\t\t\t\t<\/div>\n<\/figure>\nIf you’re like most farmers and ranchers, your goal isn’t simply to produce more\u2014it’s to build a more profitable, resilient operation that can thrive for generations. Yet many producers continue doing what they’ve always done, hoping for better results, even as today’s economic realities make that approach increasingly difficult.\u00a0<\/span><\/p>\n Most of my writings and speaking in recent years have been centered on improving <\/span>farm and ranch profitability<\/b>, with soil health and grazing management serving as two of the greatest enablers.\u00a0 Thanks to several good and profitable ranch managers and other business mentors, I have been aware of these \u201cdeterminants\u201d for a long time.\u00a0 But, it is only after decades of practice and ranch profitability, that I have come to know that they are truly \u201cmajor determinants\u201d of profitability.<\/span><\/p>\n As your choices and decisions around each of these \u201cdeterminants\u201d improve, so will your profitability.\u00a0 However, you must recognize that they cannot be considered individually.\u00a0 There is a tremendous amount of interconnectedness between and across these determinants.\u00a0 Making changes in any one will almost assuredly make or require changes in one or more of the others. Do your best to become a systems or holistic thinker.<\/span><\/p>\n Your decisions will not be perfect nor do they need to be.\u00a0 If you do your best with what you currently know or can learn quickly, you will make progress.\u00a0 Making changes is a decision.\u00a0 Not making changes is also a decision which usually means staying with the traditional or conventional way of thinking and doing things which seldom work anymore.<\/span><\/p>\n The list of determinants that follow is not necessarily in any order of importance or economic significance. I believe that most farmers and ranchers are very intelligent people. Yet for some reason, many have not taken time to learn or understand what their leverage points are for profitability.\u00a0 They continually strive to do what they have always done just a little bit better. When in reality, they need to change some of the things they do.<\/span><\/p>\n Your choices might include cattle, bison, sheep, goats, or poultry.\u00a0 If you choose cattle, for example, then you still have important decisions to make: cow-calf, stocker only, cow calf\/yearling, terminal production where you sell<\/span> all the calves and purchase replacement cows, or maternal production where you raise replacement heifers and sell calves or yearling.\u00a0 These choices will make a huge difference in a ranch\u2019s profitability.\u00a0\u00a0<\/span><\/p>\n If you\u2019re not currently profitable\u2014or don\u2019t see a clear path to becoming so\u2014the logical move is to choose enterprises that drive the strongest financial return. But once you are consistently profitable, you gain the flexibility to prioritize what you enjoy most and then focus on improving the profitability of those enterprises.\u00a0<\/span><\/p>\n For cow-calf producers, I have found that, in many situations, terminal breeding programs where you sell all the calves (as calves or yearlings) and buy all your replacement cows are more profitable than maternal operations that produce their own replacement heifers. I hear all kinds of arguments that you can\u2019t buy cows as good as you produce.\u00a0 No, you can\u2019t, but they don\u2019t need to be.\u00a0 Cows are cows.\u00a0 Some are a little better than others.\u00a0 In a terminal program, every cow can produce a calf.\u00a0 In the maternal program, the yearling heifers will not produce a calf.\u00a0 Something has to replace that revenue.\u00a0 The only way maternal operations will compete with terminal operations in terms of profitability is if they can develop a lot of replacement heifers at a low cost and then sell a good group of bred cows (not heifers) each year at a premium price.\u00a0 On two different ranches that I managed for the same owner, the maternal ranch never did outperform the terminal ranch even though the terminal ranch had several disadvantages. (I must allow that in some harsh environments it can be difficult and perhaps impossible to find cows that are adapted enough to achieve good pregnancy rates.\u00a0 Raising your own replacements might be better in that context.)\u00a0<\/span><\/p>\n Overheads are often the biggest robber of profitability.\u00a0 Overheads come in two categories: 1) land and the things attached to it\u2014fences, buildings, corrals, irrigation facilities and equipment, roads, etc. and 2) people and the tools and equipment they need to do their job\u2014trucks, horses, four wheelers, side-by-sides, tools, equipment, etc.\u00a0 The decision to remove these costs is often more difficult emotionally than intellectually\u2014it\u2019s hard to part with that pickup and stock trailer or those two horses that we don\u2019t need any more or that calving shed, etc.\u00a0 However, in my consulting business since retirement, the ranches that have made the fastest improvement in profitability are those that were willing to make the hard decisions to get rid of unneeded overheads\u2014even when it hurt emotionally. Seriously, we are in the business of managing overheads.\u00a0 It is usually an \u201ceither\/or\u201d decision.\u00a0 We need it or we don\u2019t.\u00a0 It is not easy emotionally, but so financially rewarding.<\/span><\/p>\n If you want to improve <\/span>ranch profitability<\/b>, one of the greatest opportunities is in making your land more productive and profitable. Often not owning more land\u2014it’s making the land you already have more productive. That starts with understanding the relationship between <\/span>stocking rate<\/b>,<\/span> cow size, soil health<\/b>, and <\/span>grazing management<\/b>.\u00a0<\/span><\/p>\n If your cows are smaller and\/or give less milk, you can run more of them on the same acreage.\u00a0 Several studies show that smaller cows with less milk production produce more pounds of calf per acre than larger cows giving more milk. (The smaller cows wean smaller calves, but not proportionally smaller.)\u00a0 The smaller calves sell for more dollars per pound. Thus more pounds per acre selling for more dollars per pound. There might be a point at which they are too small for the market, but don\u2019t be easily talked out of this.\u00a0 Large cows have other disadvantages too\u2014pregnancy rates are usually lower.<\/span><\/p>\n This offers one of the biggest opportunities to improve profit. I know a good number of ranchers that have doubled their carrying capacity and then their stocking rate. Most of them will tell you that the cash requirement for stock water development and fencing seemed fairly large at first. However, when they considered that they had doubled the number of livestock they could run on the same land, they thought the \u201cnew ranch\u201d was quite inexpensive; and they didn\u2019t have to pay property tax on it either.\u00a0 One rancher said that, while his herd size was growing, he quit feeding hay, he didn\u2019t have to add a truck, tractor, side-by side, personnel, or other costs.\u00a0 The only addition was on the days they worked cows\u2014three to five days per year.\u00a0 It took more labor on those days\u2014either traded with neighbors or paid day-labor. The reality is that grazing management on most ranches has the greatest potential to improve ranch profitability of anything we might change.\u00a0 It is also very satisfying and esthetically pleasing to be part of.<\/span><\/p>\n Any time you put a machine between the mouth of the cow and her feed source, it has just cost money.\u00a0 It may occasionally be justified, but not as often as most people do it.\u00a0 The happiest ranchers I know are those that shortened their winter feeding period by 30 days, then 60 days, then 90 days, and finally eliminated winter feeding altogether.\u00a0 They are not starving their cows.\u00a0 They have learned how to stockpile winter grazing and how to appropriately supplement protein, salt, and mineral to get cows through.\u00a0 In toughest places some have not entirely eliminated winter feeding.\u00a0 Others use some bale grazing or windrow grazing to greatly reduce the number of machine days and cost.\u00a0 Some quit trying to run cows at high elevations where the snow is deep for a long period of time.\u00a0 They run stockers instead or move the cows to winter grazing if not too far away. Some have selected cows that are more adapted to winter grazing.\u00a0 There are numerous ways to increase the number of grazing days and reduce the number of feeding days.\u00a0 Economically, this is a huge advantage. Check out this recent article<\/a> that I wrote on this topic.\u00a0<\/span><\/p>\n A cow\u2019s requirement for nutrients almost doubles when she calves.\u00a0 It is nice when Mother Nature provides that increase on her own.\u00a0 You can also avoid a lot of labor and facility costs. Therefore, the choice of a calving season for your ranch is very important economically.\u00a0 When I was still naive and calving in February and March in the northern part of the United States, I often told people that \u201cI\u201d was calving.\u00a0 Why was \u201cI\u201d calving?\u00a0 The cows are supposed to calve.\u00a0 We now simply let \u201cthe cows\u201d calve starting in late April or May\u2014no calving barns, jug pens, night shifts, etc.\u00a0 The weaned calf crop percentage is just as good as ever and the rebreed rate is perhaps a little better with almost no hay feeding.\u00a0 It\u2019s a lot better life for us and the cattle. I could go on.\u00a0 Each ranch needs to pick the time that is best for them considering goals, climate, grass production curves, etc.; but most who try are finding a late spring\/early summer season fits very well.\u00a0<\/span><\/p>\n Every cow that doesn\u2019t wean a calf represents a missed opportunity to produce income. Ideally every cow would get pregnant early in the breeding season, then have and wean a healthy live calf and accomplish this on low inputs.\u00a0 This will probably never happen for any of us; so let\u2019s cull those that don\u2019t.\u00a0 I am convinced that the heritability of fertility is much higher than usually reported for cows raised and run on moderate to low inputs\u2014like minimal to no hay feeding with moderate supplementation.\u00a0 The truly good ones get pregnant and that is much more heritable than for those cows raised with higher inputs to \u201cget a higher breed-up.\u201d Cows that are truly adapted to their environment can do this with little hay and only minimal supplementation.\u00a0 You can read more on this in this article I wrote.<\/a> The naturally fertile ones are the money makers even if their calves aren\u2019t the biggest.<\/span><\/p>\n Don\u2019t let the people selling feed and supplements sell you more than you should need.\u00a0 They will try\u2014that\u2019s their job.\u00a0 The rules of Economics say that, if the marginal return from the use of an input is larger than the marginal cost, you should use it.\u00a0 I beg to differ. In agriculture, where we deal with biology which is not nearly as predictable as chemistry and it is also buffeted by climate which further messes with the predictions, we need to project at least a two for one return.\u00a0 In other words, I don\u2019t want to use someone\u2019s medication or feed supplement or fertilizer unless it will give me back at least twice what I paid for it.\u00a0 Why?\u00a0 Our ability to estimate is not very good; and the salesperson will always be optimistic.\u00a0 Then what if the price of that input should double, and our cattle or our land are addicted to it, what will happen when we can no longer afford the input even if it was doing what we expected?\u00a0 I am not saying use no inputs.\u00a0 I think a low input approach is usually better than a no input approach.\u00a0 I think sometimes there could be a 10 to 1 benefit\/cost ratio. So, be cautious and use only the right inputs in reasonable amounts.<\/span><\/p>\n Marketing can make a huge difference.\u00a0 A little time spent thinking about time, form, and place can often yield much better market outlets and pricing opportunities.\u00a0 You don\u2019t need to be a marketing expert to strive for better results.\u00a0 There are experts that can help you when and if needed.\u00a0 <\/span>Time<\/b>\u2014what is the best time to offer my products for sale given the options in my area.\u00a0 Do I know the options? <\/span>Form<\/b>–what is the best <\/span>form<\/b> to sell given my herd dynamics, climate, location, and my marketing abilities and desires\u2014calves directly off the cow, preconditioned calves, yearlings, bred heifers, bred replacement cows, or even direct marketing of meat.\u00a0 There are ranchers that expose nearly every heifer calf born on the ranch to bulls for a short time and then keep all the pregnant heifers.\u00a0 This usually makes quite a few bred cows available for sale.\u00a0 I know others who move late calving cows to fall calving or to winter\/early spring calving to sell a bred cow rather than a cull cow.\u00a0 <\/span>\u00a0Place<\/b>\u2014what is the best place to offer my particular products for sale?\u00a0 There are many alternatives\u2014sale barn, direct order from local buyers, video auctions, futures and options, LRP, etc.\u00a0 A little time spent each week on these and other marketing ideas can yield a nice return on your invested time.<\/span><\/p>\n I think these truly are \u201cMajor Determinants of Profit.\u201d\u00a0 You will notice that weaning weight is not on the list.\u00a0 It is not because additional weaning weight always comes with a cost.\u00a0 Sometimes the added weight will increase profit; but sometimes it won\u2019t.\u00a0\u00a0<\/span><\/p>\n Costs can be subtle and sneaky.\u00a0 As you push for higher weaning weights, cow size usually increases and sometimes milk production also.\u00a0 Then you have to run fewer cows or buy more feed.\u00a0\u00a0<\/span><\/p>\n As you work to improve these \u201cdeterminants,\u201d remember that they are interconnected and work together. Making progress in these areas will certainly improve your profitability and your quality of life.\u00a0 You will also have a real sense of accomplishment from helping the ecosystem and the community in which you live.<\/span><\/p>\n If you’re ready to identify the biggest opportunities on your own farm or ranch, an Understanding Ag consultant can help.<\/a> Our experienced consultants work alongside producers to develop practical, profitable strategies that improve soil health, grazing management, and long-term farm profitability. Whether you’re just getting started or looking to fine-tune an existing operation, we’re here to help you build a more resilient and profitable future. Contact Understanding Ag today<\/a> to connect with a consultant and take the next step toward lasting profitability.<\/span><\/p>\n<\/div>\nMajor Determinants of Profit<\/b><\/h2>\n
Enterprise choice and selection<\/b><\/h3>\n
Overheads\u00a0<\/b><\/h2>\n
Stocking rate<\/b><\/h2>\n
Cow size and milking ability<\/b><\/h3>\n
Soil health and grazing management<\/b>\u00a0\u00a0<\/span><\/h3>\n
Fed feed vs. grazed feed<\/b>\u00a0\u00a0<\/span><\/h2>\n
Calving season<\/b><\/h2>\n
Herd fertility<\/b><\/h2>\n
Wise use of direct inputs to optimize profitability<\/b><\/h2>\n
Marketing<\/b>\u00a0<\/span><\/h2>\n
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