John Nalivka: A Few Thoughts – on measuring for economic outcomes

It’s no surprise to anyone who knows me or my business that I am a numbers guy.  Generally, anyone who analyzes markets, the industry, or tracks ranch budgets is a numbers person.  That all goes without saying.  But the numbers are a tool, albeit necessary tool, that are combined with experience and industry knowledge to feed the analysis and arrive at conclusions or opinions.  I have advocated for years in working with ranchers that analyzing decisions requires quantifying what occurs on the ranch including operating budgets and performance data.   I firmly believe that most change requires measurement. 

I was recently attending a meeting and the topic of trading carbon credits came up.  That discussion quickly led to the question of how do you measure carbon emissions.  That measurement is crucial to the entire topic of carbon trading.  Well, I guess the more accurate statement is that, it should be crucial.  It’s kind of like using the futures market as a hedging tool.  Saying what you think the breakeven is on a pen of cattle won’t quite cut it.  The same with that methane produced on the ranch.  But, aside from measuring methane production or reduction for carbon credits, I think there is a much larger issue.

That larger issue is getting cattle off the planet.  I would ask the simple question – do we really think this is about carbon credits to reduce methane production and positively affect climate change over the next 50 years?  I might suggest that this carbon counting which is ill defined may be one more regulatory hurdle akin to Federal lands grazing management plans with somewhat undefinable outcomes but are ridden with regulations.  I would submit that there are much more productive ways to spend time – analyzing financial results, perhaps?  

I would bet that you, your dad, your grandfather or perhaps even your great-grandfather who put the ranch together and kept it economically viable for the first 100 years knew a little about sustainability.  And furthermore, I bet the same people knew that sustainability wasn’t dependent on counting cow farts, but rather be a good steward of the land and making sound decisions about efficiently producing beef.  Speaking of production efficiency, in 2022, the U.S. beef industry will produce 4 billion more pounds of beef (a record) than in 1975 with 40 million less cattle. I wonder how much less methane the industry is producing with those cows!