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5 key factors toward ranch profitability

Bruce Hakutizwi for Progressive Cattleman Published on 10 October 2018
beef cows in pasture

Many ranchers struggle to remain profitable. After all, cattle are an agricultural commodity, so prices fluctuate based on national or global supply and demand. While these prices naturally fluctuate, the cost of fuel and equipment tends to steadily rise over time.

In fact, they’ve historically risen faster than the cattle market. The commodities produced, price of land and other variables all have an impact on the financial health of a ranch. As a result, gross income can vary tremendously.

The U.S. Farm Income Outlook, published in December 2016, offers some key insights on the ranch market:

  • Income and asset values have declined since 2014, although the decline has been relatively slow and overall levels are still positive.

  • The cost of operating a farm or ranch has been declining slowly in recent years as technology has improved efficiencies and controlled the cost of fuel and other supplies.

So, whether you are a long-time ranch owner or thinking of buying a ranch, understanding the most important indicators of ranch profitability is essential.

Cattle price and health

Buyers often pay too much for cattle, buy poor-quality livestock or an unfortunate mix of both. Do your research and develop relationships with professionals you trust. A weaning calf can be worth from $250 to $400. Considering calf mortality, breeding issues and herd replacement, the owner can gross $190 to $340 per breeding cow annually.

Ranch size

The size of the range and sources of income play a huge factor in profitability. Small ranches often struggle financially if there are no other income sources beyond cattle. It’s often much less costly to increase the number of people, animals or crops that a ranch can support – the “carrying capacity” of the land – by adding fence and managing grazing. Be informed. Information about the land potential in most U.S. counties is available at local Natural Resources Conservation Service (NRCS) offices.

Overhead costs

Managing overhead by not overbuying equipment, not buying the wrong equipment and keeping a lean staff can significantly improve profitability. It isn’t necessary to buy all new trailers, tractors, ATVs and other equipment. Evaluate every purchase to determine if it is really needed. Can equipment be bought secondhand, borrowed or rented? The cost of hired labor is another factor that is often overlooked. Review important industry resources with updates, such as this University of Nebraska – Lincoln article.

Grazing or feeding

Many ranch owners achieve financial gains by grazing more and feeding less. According to Burke Teichert, a consultant and speaker in the ranch industry, “There are very few situations where grazing more and feeding less won’t be more profitable. This may mean you begin to graze former hay land.” Teichert contends that he’s been involved with examples where thousands of acres of hay land have been transformed into pasture.

Analyzing and utilizing technology

Innovations in ranching technology can help manage cattle, forage measurements, soil health, wildlife tracking, ranch efficiency and sustainability. Researching and testing new technologies can improve your bottom line, but tracking and analyzing how they actually improve your overall operations and profitability is essential.

If you’re a ranch owner that is struggling with small profit margins, or an entrepreneur considering buying a ranch, it’s essential that you are well-informed about every aspect of what it takes to run a successful ranch today.  end mark

Bruce Hakutizwi is the U.S. and international manager of BusinessesForSale.com, a global online marketplace for buying and selling small- and medium-sized businesses.

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PHOTO: There are few situations where grazing more, and feeding less, doesn't pay off in the long run. Staff photo.

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