A Few Thoughts by John Nalivka – the long view
As the saying goes, your business has to survive the short run to be successful over the long run. While that is certainly true, I think there is often a tendency to get so concerned over the short run that a longer-term vision for the business is lost. Consequently, I think that in conjunction with managing for the short term, it is also appropriate to combine the short-intermediate view of your beef business with the long view.
In economics, the long term is a time period long enough that a producer has flexibility to change all of the factors of production and significantly impact costs and potentially market prices received. In other words, he can adapt to a changing business environment with significant production decisions that will permanently affect his business. Adjustments made in response to a short-term drought typically are not permanent.
With 2022 nearly upon us and bringing with it the prospect of a solid cattle market and profits to cow-calf producers not realized since 2015 (Sterling estimate), this would be a great time for ranchers to rethink their business in terms of time frame. This is particularly important as the industry and consumers are changing. Rather going through 2022 with the goal of just “making it through another year,” think longer term (10 years) and profitability on your terms. Ask questions and think about the changes you can begin making in order to make your ranching business profitable every year with or without a market rally. Take a deep dive into your financials and your current ranch resources as well as the potential to expand those resources. Think production capacity on your ranch and the potential for economies of scale to lower your per unit costs.
This may be a significant change in mindset and I don’t say that to be critical. Change can be difficult and I understand the constraints faced in ranching. However, by simply expanding your planning horizon from short-to-intermediate view to one that includes the long view, the possibilities may suddenly look quite different.
We all remember and often refer to 2014 in the cattle cycle. Cattle prices were record high following 3 years of severe drought that pushed the cattle inventory to a 50-year low. Cattlemen went to…
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