Investing in the future: Tips, thoughts on ranch management options
February 7, 2014
This week I attended the CattleFax market outlook at the NCBA convention in Nashville, and I was commenting to the person next to me that it would be fun to be a market analyst this year. In a nutshell, there were positive forecasts in beef exports, domestic demand, weather outlook, favorable feed price forecasts, and a very upbeat outlook for cow-calf producers. Conservative projections are for $150 to $300 per pair, depending on how some forecasts play out. After a couple decades of projected losses to very small profit margins, outlooks suggest that cow-calf producers can breathe a collective sigh, and enjoy a couple profitable years.
As a rancher myself, we all tend to not dwell on success or favorable reports. The question quickly becomes "how do I manage for the coming years?" Here are a few thoughts about management options.
1) Take steps to prepare for increased variability. Weather and market patterns over the last four years both point toward the notion that variability will continue to increase. Larger fluctuations in precipitation patterns, regional weather patterns, and even market volatility. Developing a ranch plan that can better absorb some of that volatility may be a good investment. Examples would be developing a stocker/yearling segment to more rapidly react to changes in forage production and market opportunities. Developing a source for supplemental hay or feed may be another option
2) Further refining your marketing plan. The next several years may be an opportunity to consider retaining ownership of a portion of the steer crop, developing a bred heifer program, as well as developing a better understanding of minimizing market risk to the operation by investigating opportunities with RMA programs, as well as futures and options programs. As our export markets continue to develop, our industry inherently becomes more responsive to worldwide markets and trade relationships. These changes all suggest that markets will remain volatile.
3) Improving utilization and efficiency of the ranch. One way to better absorb weather volatility is to further develop grazing and forage production infrastructure within the ranch. Cross fences, water development, irrigation improvements, and even cattle feeding facilities are good investments that will help to weather long-term variability
4) Addressing deferred maintenance issues. Often, during long periods of operational losses or low profit margins, many beef operations absorb the lean years my postponing repairs and improvements to the ranch. The next few years may be an opportunity to evaluate handling and feeding facilities. As the average age of our producers continues to increase, safety for both the animals as well as operators becomes important.
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Hopefully some of these ideas spur some thought. While the industry outlook appears favorable, we all have the tendency to focus on future planning opportunities. Focusing on the ability to handle future volatility will be important long term planning.
Steve Paisley is an Extension Beef Cattle Specialist with the University of Wyoming.