Month: July 2019

Woe is Me – By Kit Pharo

I skim through many beef publications on a daily basis.   Within the last two weeks, I have read the following statements in various online and printed publications.

  • The average age of farmers and ranchers in America has been increasing drastically over the past 30 years.
  • From 2002 to 2015, the cost to produce a weaned calf more than doubled from $400 to $875 per cow.
  • The average net farm/ranch income was negative for 2018.
  • Farm bankruptcies in some states were up 60% in 2018.
  • Calf losses this spring were well above average because of snow, cold and wind.
  • The USDA reported that since 2013 there has been more than a 50% reduction in net farm income.
  • Total farm income decreased $9.1 billion in 2018.
  • Total farm debt increased $410 billion in 2018.
  • Delayed corn planting will have a negative effect on feeder cattle prices.
  • Net income has been dropping due to circumstances out of farmers’ and ranchers’ control – dropping commodity prices, increasing input costs, machinery purchase costs and repairs and inclement weather.

These statements don’t paint a pretty picture, do they?   They leave little room for hope – especially for those who are struggling to make a decent living in the cow-calf business.   It’s easy to understand why some producers are throwing their hands up in despair, thinking, “Woe is me.   What can I do?”   Most are doing nothing – which just makes matters worse.

I believe all but one of the above statements are true.   The last statement, however, is FALSE!   It will make producers feel a little better about the situation they are in – but it will discourage them from taking any appropriate action.   Truth be known, very little is totally out of our control.   We just like to think things are out of our control because we’re afraid to think or look outside the box (paradigm) we have put ourselves in.

At the risk of upsetting more subscribers, I am going to do my best to challenge you to look and to think outside the box you have put yourself in.   We have all put ourselves in a box of some sort.   Our actions and our success are limited by the box we have put ourselves in.   Thinking outside your box will probably go against conventional thinking – but I want you to understand that it is possible to create a very profitable, enjoyable and sustainable business.   I want you to understand that it is possible to create a very bright and prosperous future for the next generation.

In last week’s “The Next Generation” article, I asked, “What do you need to do to adapt to the changes that are taking place in the cow-calf business?”   I went on to say, “If you have been paying attention, you already know the answer to that question.   The real question is… do you have enough courage to break away from the status quo, herd-mentality way of thinking so you can make the right decisions?”   Herein lies the problem for most people.

Let me begin by admitting we have no control over the weather.   However, we do have the ability to plan for most weather-related events and situations.   With a good grazing system and a good drought plan, we can decide when to turn our cows into cash to conserve our grass.   As Bud Williams once said, “You will never go broke having too much money or too much grass – but going broke is easy if you have too many cattle at the wrong time.”   We have the ability to take control of these situations.

Hundreds of cow-calf producers lose an inordinate number of calves every year while calving.   To add insult to injury, these same producers work harder than anyone else trying to save those calves.   Apparently, they do not realize they have control of when they turn their bulls out.   There are very few environments in which winter calving makes sense.   Why do wild ruminates wait until May to have their babies?   Why are all calves born with a summer hair coat?   There is nothing more enjoyable and profitable than calving on green grass.

I am also willing to admit we have very little control over the markets and the prices we receive.   The only way to take control of the prices you receive is to get out of the commodity business and sell a product like grass-finished beef directly to the consumer.   Several PCC customers have been very successful at doing this.

Farmers and ranchers cannot do much about commodity prices.   Most will whine and complain – but that does no good.   Many will blame others for their problems – but that does no good.   So, what can you do?   If what you are doing now is not working, you need to do something different.   This is as obvious as the nose on your face – but most people will not change a thing until they are forced to.   By that time, it will be too late for many.

PROFIT  =  (Production  x  Market Value)  –  Expenses

Since we have no control over the markets, we need to focus our attention on increasing production and/or decreasing expenses.   When we talk about increasing production, we are referring to production per acre – NOTper animal.   Focusing on production per animal (bragging rights) will actually decrease production and profit per acre.   The status quo beef industry has been focused on the wrong thing for the last 50 years.

I know several producers who have increased pounds and profit per acre by 50 to well over 200 percent.   That’s HUGE!   These producers have implemented proper grazing management to make the most of every ray of sunshine and drop of rain that falls on the land they control.   They also produce smaller, more efficient cows that fit their environment – instead of artificially changing the environment to fit their cows.   This allows them to increase stocking rate and production per acre.   If they can do it, why can’t you?

The average cost of producing a calf has more than doubled in the last 20 years.   That makes it very difficult for most producers to make a decent living.   In contrast, most long-time PCC customers have a cost of production that is 40 to 50 percent less than the national average.   That’s an advantage of $350 to $450 per calf!   If they can do it, why can’t you?   The easiest money you will ever make is the money you don’t spend.

The reason the average age of cow-calf producers has increased so rapidly over the last 30 years is because the next generation, for the most part, is not coming back to the farm or ranch.   The reason the next generation is not coming back is because very few cow-calf operations are profitable, enjoyable and sustainable.   The reason very few cow-calf operations are profitable, enjoyable and sustainable is because most producers are unwilling to make the necessary changes in their operation.   It is easier to say, “Woe is me,” than to think outside the box they have put themselves in.   We encourage you to choose a different route.   You can do it – and we can help!

Quote Worth Re-Quoting –

“You are responsible for your own happiness and success.”   ~ Harvey Mackay

The bigger-calf theory isn’t working right now

The solution is to sell cattle that have higher value of gain than your cost of gain.

It was an interesting week in the market. What I find even more interesting is how people can get so emotional about such things. Cattle marketing is simple math, and that should take the emotion out of things since math is fundamental and never changes.

That said, it is hard to override an old paradigm. This week the paradigms that hold onto conventional wisdom got smacked in the face.

Conventional wisdom says that it pays more to wean a bigger calf. This week I watched an auction that had a good amount of bawling calves sprinkled throughout the run of different weights. While the bigger calves did get more dollars per head, it wasn’t much more. When I calculated the value of that gain it proved what I already knew: The value of gain wasn’t all that great. From the smallest bawler to the heaviest calf, the value of gain was 45 cents.

Can you put the weight on for less than that? The value of gain between some of the other weights was less than 30 cents. I am pretty sure it’s costing more than that to put the weight on. My point is, those extra pounds were actually costing the producer money.

A commentator on the local radio was going on and on about the “rally” in eight-weights at a local sale barn this week. I pulled up the market report and those eight-weights had the lowest value of gain compared with all other weights. At that barn seven- and eight-weights were the only weights that were higher this week, and yet the eight-weights were still undervalued to the lighter feeders, and also undervalued compared with fats. So again convention wisdom got smacked. Just because they were higher didn’t mean that a person was going to profit from selling them.

I have had a few people ask me how this blog is being received by people since I talk a lot about turning cattle quicker instead of holding them and putting more weight on them. I just outlined above the math isn’t adding up by the long-held convention for adding weight to create value.

Here’s the thing, there are three components to maximizing profit, and one is turnover. If you owned a hardware store would you make more money if you were open two days a year, or 365 days a year? I have a friend who used to work in the parts department at a dealership, and he told me if a part didn’t turn over at least every 30 days they quit stocking it. I’m not saying we should trade our stocker cattle every month. What I’m saying is that we need to watch the value of the gain, and price relationships to prevent ourselves from getting cattle too big and becoming undervalued at times.

Next week is the last full week of auctions before some barns will go to their summer schedule. One thing I find interesting and am curious to see how it pans out is some barns are adding a special female sale to the schedule in the middle of summer. This typically doesn’t happen. There obviously is some interest in selling bred cows and pairs at that time, but will there be much buyer interest?

Marketing the Ranch

Marketing – The process of creating excitement about your product/service.
Sales – The process of actually selling your product/service.

Sales of the product on the Ranch – You have that figured out. Sales barns, video, and internet, they all get the job done very well with the largest number of potential buyers.

But – Marketing, that has been left up to the barns/video/internet sales facilitators. And how do they go about doing that. – The Sale Bill. The consignment list they post in publications and websites.

That’s IT!!!!!!

Why should you take an interest in “Marketing your Livestock”
Picture this – If there are 2 more bidders at the sale to BID on your livestock. 50,000 lbs at $1.10 = $55,000.
With 2 more bidders you could get say .05 +/- cents more?
50,000 lbs at $1.15 = $57,500.
$2500 More….

What can you do to “Market your Livestock”?
Website – $500 a year.
Print Media – $500 a year.
Social Media – $100 a year.

  • Take lots of pictures
  • Write down what you do.
  • Write down your genetics
  • Ad pictures to everything.

The more visual you are the more your pictures will sell your Calves.

Build upon the reputation that you already have.
By Investing $1.00 in your Marketing – You can get $2.00 back.

I can HELP – call 307.331.0357