Profitable Farming and Ranching

Profit is not a four letter word!  In fact, if your farm or ranch is not profitable, what can you do for your family, your employees, your community, or for soil health and the environment in general?  There are a few wealthy land owners who want to focus on healthy soil, clean water, clean air, and a healthy eco-system with no regard for profitability.  In my consulting experience, I have found that even most of them get quite tired of subsidizing their farm or ranch from their own pocket—whether through the household budget, wealth accumulated from other ventures, or a large annual off-farm income.  

At the end of the day, true long-term stewardship requires profitability. 

Profitability Is the Great Enabler 

Profitable operations are the great enabler.  When we are profitable, we have the ability to experiment a little, try new ideas, seek out a better way, or go take a short course or workshop to tear down old paradigms and open our minds to new and better ways to farm and ranch.  Most of us are guilty of paradigm lockdown.  Once when working with a client, he told me that he had described me to his wife as an “out of the box” thinker.  He then said, “Last night I had to tell her that you were way out of the box.”  My response was that I was continually worried about building myself a new box—my new paradigm.  I don’t want to be constrained by a “box” or old habits.  We cannot continue using methods of the past or simply trying to do the old ways a little better.

Why Old Production Systems Are No Longer Sustainable 

When I was growing up on a cattle ranch in western Wyoming, we could buy a hay-field tractor, fuel, and family (mostly kids) labor quite inexpensively.  However, since that time of many years ago, the cost of machinery, fuel, and labor has risen much faster than the price of the products we produce. That is not sustainable.  

Instead of trying to get more efficient at production methods that are highly dependent on “fossil fuel and iron” or simply improving upon the old ways, we need to develop production methods that are much more dependent on sunshine, rainfall, soil health, and our human ingenuity (our ability to think, reason and dream). 

Setting Goals for a More Profitable and Sustainable Farm 

As we begin a pursuit of learning how to farm and ranch in a different (more profitable and sustainable) way, we should develop three main sets of goals: 1) Financial goals, 2) Land, soil health, and eco-system goals and 3) Quality of life goals.  

These goals must be mutually supportive of and not antagonistic to each other. True long-term success comes when profitability, land stewardship, and quality of life are all improving together rather than competing against each other. 

What You Must Manage in a Farm or Ranch Business 

While setting these goals and then when working within the context of the goals, we need to recognize the need to manage: 

Production

Production is what attracted most of us to agriculture.  We enjoy raising good crops and/or good livestock.  But knowing how to do that well doesn’t mean that we know how to run a business well that raises crops and/or produces livestock.  We must manage production in a cost effective manner. 

Economics and Finance

Economics helps us determine if something is or can be profitable.  Finance tells us if we have the cash necessary to make the desired changes.  We need to work with and understand both.

People

We always need to manage people (ourself-included) and improve the talent and abilities of our team— both family and non-family.  The manager’s job is to Create an environment in which people want to excel and then provide the tools, training and freedom to do it. This is not easy, but when done well is very effective.  You can then begin to assess the quality of your leadership. Leadership is best gauged by the voluntary response of those being led.  You might say, if the response is not voluntary, it isn’t leadership—perhaps pushership or coercion. Leading people well, even if it’s only family, pays great dividends.  Remember you may be managing a number of relationships with your vendors, buyers of your products, your banker, your attorney, your accountant, etc.  When well managed, these people can be very helpful sources of ideas and information.

Marketing

I taught an Ag Marketing course at two universities and thought that I knew how to market.  I did know that we should think about time (when do we place our products in the marketplace), which form do we sell (in cattle it might be weaned calves, yearlings, bred heifers, bred cows, pairs, or cull cows), and the best place to offer them for sale (sale barn, video, direct sales, etc.)  However, when I started to pay attention to what other people were doing, I discovered lots of ways to add value to a number of classes of sale cattle.  For example, instead of selling a heifer calf, I might sell an open yearling heifer or a bred cow. I hadn’t been thinking broadly enough about the form in which we should sell our animals or how we should present them in the market place.

When we recognize that we need our production systems to be much more dependent on sunlight, rainfall, soil health, and our ingenuity—and when we set some realistic goals and know what we have to manage—we can start to create a Shared Vision of what we want to become and how to get there.  

Strategies to Achieve Your Goals 

To do that we need some not perfectly designed strategies but well defined strategies to achieve our goals.  The strategies I would consider are:

Soil health and grazing management for farmland, irrigated pastures, and rangeland.  How to plan your grazing.  What will you do to have adequate stock water in enough places?  What will you do for animal control—fencing, herding, virtual fence, etc.?  I would include my animal feed supplementation, if any, in this strategy.

Livestock breeding strategies—breeds, calving season, herd health, sire selection, cow culling.  Are we in cow-calf production, cow-calf & yearling, stockers, custom grazing, terminal matings (selling all the calves and buying replacement cows), maternal matings and development of your own replacement heifers, etc.  You could also consider other animals—sheep, goats, poultry.

Farming system to include crops, rotation, no-till, cover crops, weed control, pest control. Think of this in the context of reducing and perhaps eliminating reliance on synthetic fertilizers and pest control methods.

Marketing for each crop and class of livestock and any services you may sell.

People development—classes, short courses, on farm or ranch training, reading materials, etc.

Remember, these are not my strategies.  They are yours; so make them yours.  The ideas are given as examples of things to consider.

As you work together as a management team to develop your strategies, you will come to a Shared Vision and unanimity of thought.  In the process you will develop a culture for your farm or ranch which will help you improve your soil health and the quality of the products you sell. It will help you sell those products, attract good employees, and make a contribution to the local community.

The Hard Questions Every Farm or Ranch Must Ask 

As you set your goals, knowing that you will be managing Production, Economics & Finance, Marketing, and People, and as you work on developing strategies to make your farm or ranch more profitable and regenerative, you might want to ask yourselves: “Could I continue to farm without subsidies? Or, could I continue to ranch if the price of cattle were to drop by 50%?”  

Be assured, the good farmers and ranchers would stay in business—the ones that learn to farm or ranch profitably. 

Take the Next Step With Expert Guidance 

Reach out to an Understanding Ag consultant and begin developing a clear path forward for your operation. Sometimes a new perspective, the right questions, and proven real-world experience can help you break out of old paradigms and uncover opportunities you may have never considered. Your land, your livestock, your family, and your future are worth the investment.