Profits in ranching
Riverton – “Is it possible to be profitable in ranching?” asked Burke Teichert, well-known ranch economist, during Fremont Count Farm and Ranch Days on Feb. 7 in Riverton. “Yes, it is.”
Teichert continued, “I’ve had some arguments with some pretty good economists who want to tell me it’s very, very few ranches that make money. They say that most ranchers are hobbyists, but it seems most of the people I work with are people who need to be profitable and can’t stay in business if they aren’t.”
Teichert has worked in consulting for many years, working with people who are looking at how to make their ranches profitable.
“We can make ranches more profitable,” he said, noting ranchers must start by first understanding the factors that impact profitability.
To be profitable, Teichert noted ranchers have to manage the economics of their operation, as well as their relationships, in addition to managing the cowherd.
“The first weakness I see is that most of us love production,” he said. “We like to make our land more production, and we like to make our livestock more productive. We forget that we need to concentrate on economics and finance.”
Teichert said, in addition to economics, marketing and relationships are also important.
“We need to manage people and our relationships with the people,” he explained. “Sometimes when I say this, people say, ‘Well, it’s just me, the wife and the kids,’ but sometimes, those are the most important relationships – when I superimpose the business relationship on the family relationship.”
Additionally, Teichert says most ranchers work with bankers, equipment salesmen and more, all of which are vital parts of the operation.
“Once these people understand our objectives, they can help us be more profitable,” he noted. “I’m a real advocate of managing relationships with our customers, our vendors and the people we work with – be it employee, family members or whoever.”
“Never neglect the people management, because that, in the long run, is the management that will make the most money,” Teichert emphasized.
Whole-ranch profit and profit per acre both describe an important metric that is important for ranchers to assess.
“Oftentimes, we get hung up on profit per cow, profit for calf or production per cow or calf. That can be so distortive,” Teichert said. “If I can run fewer 1,000-pound cows than I can 800-pound cows, yes, they will be lighter, but not proportionally.”
If a ranch can wean more calves per acre that sell for a higher value, since they are lighter, by running smaller cows, the operation can often yield a higher profit per acre.
“We need to break away from a per-cow perspective to see how many more cows we could get if we did things another way,” he said. “Yes, the profit per cow might go down, but the whole ranch profit might go up. We need to be careful with these analyses.”
Outside the cowherd itself, to reach profitability, Teichert says overheads are an often-neglected component of cost that can be effectively reduced to decrease expenses.
“Most of our costs are overheads,” he explained, noting people, their tools, land and everything attached to the land are all overhead costs. “We don’t want any overheads that aren’t productive.”
“One of the toughest jobs we have is to reduce overheads until the very extent possible. We have to do it to where it hurts,” he said. “It is much easier to sit down with our financials and get rid of overheads, but emotionally, it’s very difficult.”
It’s easy to have more pick-ups, horses, four-wheelers or buildings than are really necessary, Teichert continued. Getting rid of those things to reduce costs, however, can be very difficult.
The second factor to consider for profitability is stocking rate.
“There are two significant ways we can change stocking rate,” he said. “First, we can decrease the size of the cow and decrease her milking ability to run quite a few more.”
Calves only need so much milk to get started, he explained. As cows have more milk, they lose efficiency because their intake needs increase. Teichert suggested reduction in milking ability can increase available forage, so stocking rates may be increased.
“The other way we can increase stocking rate is by better land management and better forage management,” he said. “Better management impacts soil, which impacts plants, and in turn, the plants impact livestock productivity and livestock health.”
Ranchers should also focus on fed feed versus grazed feed, added Teichert, who said, “Anytime we put a machine between the mouth of the cow and the feed source, we’ve just cost ourselves money.”
While farmer-ranchers have lower costs associated with harvesting and feeding forages, Teichert maintained, “I’m not against feedlots or backgrounding lots, but we have to be careful, especially when we’re feeding mama cows. The more that can be grazed, the better.”
Teichert also recognized Wyoming’s climate means feeding is necessary, but he encouraged ranchers to spread costs between other enterprises or other aspects of the operation to reduce costs associated with feeding.
Realized herd fertility, Teichert said, is also a highly important factor for profitability.
“If I have more pregnancies than I need because I can’t carry them all, I’ve found that most of the time, I can sell a pregnant cow for more money than an older cow can be sold,” he explained. “When I say realized herd fertility, we’re not talking about just conception rates. It’s about getting the cow to the end of the road and turning it into dollars.”
He defined realized herd fertility as conception plus survival until the point of sale.
The last major factor for profitable ranches is wise input use, Teichert said, also noting there is a difference between being tight and being cheap.
Referring to an old friend, Gordon Hazard, Teichert said, “When we spend a dollar, we have to get more back than just that dollar.”
When making purchases for inputs, he continued, “Make sure if we need something, we absolute need it, and if there isn’t a dollar return, we don’t need it.”
Teichert covered factors impacting profitability in the first half of his presentation at Fremont County Farm and Ranch Days. Look for more information on how to improve profits in next week’s Roundup.
Saige Albert is managing editor of the Wyoming Livestock Roundup. Send comments on this article to email@example.com.