2021 has been an interesting year for ranchers to say the least. A pandemic year caused the world to appear crazy and in “lockdown” while, those of us in rural communities, were dumbfounded about what this means to us. Quite frankly, most ranchers just put their heads down and went to work doing what ranchers know best to do…work hard, buckle down, and make sure the food hits the table.
Then we get hit with a drought situation. Droughts are common and part of the business we operate in, but never easy. The good thing is ranchers and farmers in Western Canada are tough, resilient, and know how to deal with this type of thing. This year, the challenge was that the drought was widespread. North, South, East, and West hay and forage yields were percentages of normal, and grain yields were decimated by La Nina dry conditions, causing barley to rise from $4/bu to over $9/bu inside of a year.
So, this has happened, how do we now reposition our ranches and ourselves, refortify, and move on?
A few years ago, I decided to get my MBA to find ways to connect modern business with the good old ranch education I had growing up. To tell you the truth, the MBA was a hill of beans compared to the “life-lessons” of spring storms at calving wiping out a portion of calf crops, or droughts cutting grazing capacities, or markets moving up and down over 20 per cent on any given year. An MBA doesn’t prepare you for any of that. Ranchers are in the toughest business around and don’t get near the respect for the ability to weather these kinds of challenges and stresses. I wonder how the CEOs of today’s multinational corporations would make out in the economic storms our ranchers face every year battling weather and volatility of the commodity markets!
I was reminded recently of this life lesson from a book by the late great Sherm Ewing, a family friend, called The Range…
Some advice to a young fellow
I say young man, I want to talk with you a minute. Get up and dust. Don’t wait for something to turn up. Go at it and turn it up. Put the harness on and pull, no matter if the belly band chafes or the hames don’t fit; pull, you’ll soon get hardened to it. A collar spot here and there won’t hurt long anyway. Don’t try to begin where the old man left off. If you do, you’ll quit where he began.
Get into the deal yourself, do as the old man did. If you cannot afford a thing, don’t buy until you can. The old gentleman did that way, and that is how he got a credit.
A credit young fellow is worth more dollars than you can ever earn. No matter about money, get a credit and maintain it. It is the best asset anyone ever had.
Keep your appointments and be on time. Take time to think things out. Don’t be stingy but be prudent. Don’t get pessimistic. Shut your mouth and keep your eyes open. If a neighbour goes wrong, don’t doubt the integrity of the neighbour over on the other corner.
Pessimism is a mountain that darkens the view. It is the obstruction to your vision, that makes it look so. Pull, and keep your faith in God and humanity. This world is just what we make it.
Opportunity is on all sides for the man who pulls steadily all the time, no matter what his station in life may be.
Isn’t that a great piece of advice? Let’s look at how else we can reset our focus.
Taking a lesson from that MBA, let’s try to incorporate one of the tools we used as a way to rebuild from a very devastating year of drought and tight financial conditions. The old SWOT analysis.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Take a piece of paper or a white board and draw four quadrants with each of those headings in each quadrant. This is one of the best things you can do in your operation. Think both macro (global implications) and micro (related to your business, your family, and your local community) when building this matrix.
What are you uniquely designed to do? What do you do well? From an industry standpoint, cattle numbers are the lowest they have been since the 1980s. Demand for beef is at the highest level ever, and beef cutouts have never been higher than this year. Exports are 10% higher than pre-Covid levels. Consumers during Covid lockdowns learned how to cook, learned they liked beef, and were willing to spend an extra dollar on it, and our industry survived a whole year and a half of restaurants being shut down. Isn’t that something to celebrate? Our industry has many strengths.
Now write down your strengths. What are you uniquely good at? What about the other people involved in your operation? What are their strengths? What resources do you have on your ranch that will set you up for success? How can you take advantage of these strengths?
What is holding you back from profitability? One of the problems I see in the industry is that we often rank ourselves by how many cows we own. Judging ourselves by the number of cows we own pushes us to maximization not optimization, as this drought has brought to our attention. In a drought, too many cows is dangerous. Bred cattle can be illiquid and often gravitate towards meat prices. Meanwhile yearlings are at attractive levels. Can you incorporate a mixture of yearlings along with your bred cattle, which are liquid and an easy way to increase or decrease numbers during dry or wet years?
How much debt do you have? Can you service your debt in an off year?
What about overheads? Do all your profits get eaten up in overhead expenses? Ranches from my experience are between $.50/head/day and over $2/head/day in overhead expenses, yet when we custom rent grass or custom feed we don’t include overheads in our rates. This is where ranchers lose money and don’t realize why, when they don’t factor in overheads.
This is the most important of the categories where we assess how our strengths can become business opportunities. What are trends we see in our urban friends or our local community that are demands not being filled? If we are doing the same as everyone else in our community, following trends, we are likely not filling the unfilled need of opportunity. Look for holes to fill!
We can’t get better than the average pricing if we are producing industry average product. Sometimes we need to go against the grain of what the industry is producing or recommending! Produce something of quality, but different, and market it! We need to make a hand-built Ferrari, not a mass produced Ford Festiva if we want above average pricing.
“Opportunity is on all sides for the [person] who pulls steadily all the time, no matter what [their] station in life may be.”
This is not where we let pessimism, fear or worry obstruct our goals and dreams. This is where we calculate which hurdles we will have to jump and how high those hurdles will be. Yes, we have Vegans, cow emission sniffers, alternative land uses infringing on our operations. This is where we compartmentalize these threats. Quantify their impact. Instead of losing sleep about the threats, let’s identify them! Manage them! You will soon realize they are just a river to cross or a small challenge to overcome and not worth the stress we put on them in terms of losing sleep. Putting stresses on paper can often be a way to let these “threats” go and realize they are nothing more than speed bumps that can be managed. Success is not made in getting the highest prices every year, but in managing the losses in the down years. This is the biggest lesson of my career.
To my fellow cattlemen, it has been a tough year. I feel it in the people I talk to. We are feeling unappreciated and unloved sometimes. I encourage everyone to be sure you have a network of friends that you can laugh about the tough times with. This is how we get through tough times. Not too many people get to stare at open skies and wide-open fields the way ranchers do, so relish those moments with your family and friends and remember that the tough side of our business is only that, and doesn’t shape us. “Opportunity is on all sides for the [person] who pulls steadily all the time, no matter what [their] station in life may be.”
Reset and ranch on my friends.