COMMON TRAITS OF SUCCESSFUL RANCHES
By Rick Machen, Ph.D. & Clay Mathis, Ph.D.
According to the latest tally, there are over 4,000 ranches and farms registered in the Texas Department of Agriculture’s Family Land Heritage Program, each having been in agriculture for at least 100 years.
What makes those ranches successful? In 1939, John Nye’s thesis Factors Contributing to Success and Failure of Montana Ranches outlined five factors of successful ranches:
- Long-term plan of operations for each enterprise
- High productivity, high quality and advantageous prices for commodities
- Complete, accurate records and budgets
- Minimum death loss of livestock
- Advantageous relationship between commodity prices and production cost
Almost eight decades later, these factors are still critical to the success of ranching operations, but they are not the “end all, be all.” Many experts have identified anywhere from three to twelve characteristics common to successful ranches; some have taken a much simpler approach. As fifth generation Texas rancher, Donnell Brown, frequently says, “Success is keeping the ranch in the family and the family in the ranch.”
How can today’s rancher define success, with so many criteria to choose from? Here are five components of one trait common to thriving ranches.
The Common Trait: Stewardship
The people who own or manage sustainable ranches are stewards — overseers, custodians and caretakers — of the resources entrusted to them. Stewards manage resources holistically for the long-term good of the land, livestock, wildlife, people and finances.
Following are five components and resources stewards must nurture for the long-term success of a ranch.
- People: The Management Team
Agriculture is a vital, but difficult profession. The work environment is often adverse, the hours long and the profit margins slim.
Successful ranches require management by competent, motivated people with integrity, strong work ethic and passion for the land and animals. The business is ever-changing and the successful realize they must continually adapt and progress.
Natural: Stewards understand ranching begins at the soil-water-plant interface. Natural resource conservation must be the primary concern of every rancher; maintaining natural resources, a career-long effort.
- Bare ground is a vulnerability. Soil must be covered by plants that hold it in place to protect from erosion.
- Managers cannot control the amount of precipitation, but stewards work diligently to capture every drop.
- Stockmen must nurture soil and grass by controlling graze and rest periods. As consecutive growing seasons are seldom identical, grazing management is a dynamic strategy.
- Successful ranches realize the war against invasive species will never end. Prescribed fire, herbicides and mechanical and biological management options are available, but consideration must be given to cost, efficacy and return on investment.
Livestock: Beef breeds continue to increase mature weight, milk production potential and carcass merit, leading to increased nutrient demand. Successful ranches match cow size and productivity with the productivity of the pasture, and pair periods of greatest nutrient demand with times of best forage quantity and quality. They also employ moderate stocking rates – pounds per animal to acres of pasture – to sustain the soil and forage resources, and minimize non-pasture feed costs.
Successful ranches keep a close watch on key animal performance indicators and evaluate achievements in relation to their goals. Sustainable ranches generally strive for a weaned calf crop – the percentage of cows exposed to a bull that deliver calves – above 90 percent, a calving interval less than 365 days and an annual cow maintenance cost well below calf market value.
Wildlife: Wildlife is an inherent component of the landscape and deserves consideration in the natural resource and management plan. In some regions such as South Texas, wildlife enterprises are a larger and more dependable revenue generator than livestock. Wildlife use can be either consumptive (hunting) or non-consumptive (photography, observation). Looking to the future, diversification from traditional livestock ventures will be critical for ranch sustainability.
Ranches that do not generate long-term profit will eventually fail. Put simply, profit or loss is calculated by subtracting direct and indirect costs from revenue. Successful ranches constantly focus on both sides of this equation.
Managing Costs: Beef producers often think of cattlemen in other countries as their competitors, and in the global marketplace this is true. Beef producers have limited control over the price of their commodity, though aggressive marketing efforts may increase revenue. However, their primary competitor is the cattleman across the fence. If their cost of production is consistently lower, their chances of sustainability and success are greater.
The greater opportunity for successful operations is to manage production cost. The big three direct costs are typically labor, supplement/hay and depreciation. Moderate stocking rates and selection of easy keeping, easy calving beef females allow ranches to stretch labor across a greater number of cows; strategic grazing minimizes the need for supplemental feed and hay; depreciation is a function of replacement female value, longevity and mature cow value as they exit the productive herd.
Investing Wisely: Proceed with caution when adding to overhead costs such as insurance, loan payments, utilities, maintenance and licenses. As a savvy old cattleman says, “Never buy what you can lease or rent. Never rent or lease what you can borrow.” Successful ranches limit the purchase of “stuff” to absolute necessities.
Saving When Possible: Like growing seasons, consecutive fiscal years are rarely the same. For example, returns over variable cost for Kansas cow/calf enterprises from 1975 through 2014 ranged from $76.40 to $589.50. During this period, no two consecutive years were the same.
Successful ranches expect and prepare for the tough times.
Successful businesses focus on the customer. For the ranch manager, the customer can be any combination of cattle buyer, feedyard, packer, hunter, hiker, photographer and eco-tourist.
Ultimately, however, the customer is the consumer, and consumer expectations have changed appreciably over the past two decades. Consumers take the safety, wholesomeness and nutrient benefit of beef for granted. Their concerns center around where their food is grown, who grew it and the environmental sustainability of the enterprise. Consequently, meeting customer expectations involves more than producing a tender, juicy, flavorful eating experience.
- People: The Next Generation
What about the next wave of managers? 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. Succession planning is an active, ongoing responsibility, and agriculture cannot be learned in the classroom or online alone.
Experience is an irreplaceable instructor. Successful ranches foster an environment wherein successful people raise and mentor their successors. Every mistake is a lesson, and knowledge and wisdom come from observation and participation. Work ethic is taught by example, and the passion for land, livestock and lifestyle is inscribed in DNA.
Ranches are not successful by default, but by the design of people passionate to “keep the ranch in the family and the family in the ranch.”
Dr. Rick Machen and Dr. Clay Mathis are professors at the King Ranch® Institute for Ranch Management at Texas A&M University, Kingsville.