- (Public Value) UCANR: Promoting economic prosperity in California
When we finally received a more than two inches of rain in mid-November, I was relieved that we would finally have germination on our foothill rangelands - better late than never! Today, after two weeks of sunshine, I am indeed seeing a little green coming up through last year's dry forage. But the forecast isn't promising - as of this morning (November 30), we have no rain in our forecast here in Auburn for the next two weeks. The combination of dry weather, short days, and colder (for here, at least) temperatures indicates that we won't likely grow much grass during the month of December.
Drought planning begins with proactive strategies - a conservative stocking rate, for example, or a production calendar designed to match periods of high forage demand with rapid forage growth. One of the most important proactive strategies in our small-scale sheep operation is grazing planning. Over the years, we've trained our eyes to estimate the amount of forage we have available - measured in sheep days per acre. While our estimates are not 100 percent accurate all of the time, the simple act of looking ahead and estimating the quantity and quality of standing forage gives us a better idea of when we might need to adjust our plans.
The second element of our planning process is the idea of key dates. For me, establishing a date by which we need to make a decision forces us to actually make the decision. During the 2013-2014 drought, Glenn Nader (who preceded me as UCCE livestock and natural resources advisor in Sutter and Yuba Counties) said, "The only way you're gonna survive a drought is to make decisions." This advice, obviously, has stayed with me - indecision prolongs the pain (economic and otherwise) of drought. In our operation, we look at forage conditions, weather forecasts, and our production calendar when establishing a key date. For example, our ewes will enter the last trimester of gestation in early January. At this point, their nutritional demand will begin ramping up significantly as they approach their lambing dates. While we've saved enough dry forage to get by for the next 5-6 weeks (which we can utilize by supplementing the ewes' protein intake), late gestation will require a different strategy. A key date also requires us to think about a condition that must be met for a decision to be triggered. This December, that condition is rainfall. If we haven't received an inch of rain by December 31, and if there is no rain in the 2-week forecast on that date, we'll need to make a decision.
This brings us to the last element of our drought plan - what are our options if we're still dry on New Year's Eve? For me, these reactive strategies are far less palatable - they cost us money (as in more expenses, less revenue, or both). Here are the options that are currently on the table:
- Purchase enough hay to get the ewes through late gestation and into the beginning of lambing season.
- Look for byproduct or other alternative protein and energy sources to feed the ewes.
- Sell older ewes to reduce forage demand.
- Sell replacement ewe lambs to reduce forage demand.
- Allow body condition to decline until the forage begins to grow (which may reduce lamb survival and future reproductive success).
- Find additional rangeland pasture to graze (this would still require some supplemental nutrition).
Over the next several weeks, we'll brainstorm additional options. We'll work through the economic ramifications of each of these options. We may choose a combination - perhaps we'd sell a few sheep and purchase hay to sustain the rest of the flock. The point here is that we've given ourselves a deadline for taking action, and we'll work through the numbers associated with each decision.
In the meantime, we'll keeping hoping for rain....
October 2020 Beef Production and Targeted Grazing Webinars Now Available on YouTube!
Thank you to everyone who was able to join in one or more of our Beef Cattle and Targeted Grazing webinars during the month of October! We had great discussions on everything from managing parasites in cattle to bidding a targeted grazing job to managing pastures! I especially want to thank the Tahoe Cattlemen's Association for co-sponsoring the four cattle production sessions!
If you missed any of these webinars, or if you'd simply like to go back and review what you learned, I've loaded the videos of each session onto my YouTube channel! You can simply click the links below to watch the webinars!
An Introduction to Targeted Grazing (October 6) – learn the basics about managing targeted grazing for fuel load reduction and weed management.
Cattle Health with Dr. Gaby Maier and Dr. Becky Childers (October 15) – this webinar covers managing internal and external parasites, developing a vet-client-patient relationship, and how NOT to get fired by your veterinarian!
Beef Business Basics with Judd Tripp and JC Baser (October 20) – learn the basics of how to analyze your livestock business, and learn from the experiences of veteran Placer County ranchers.
Grazing Management Basics with Greg Lawley and Joe Fischer (October 22) – foothill ranchers discuss the art and science of managed grazing on rangeland and irrigated pasture.
The Business of Targeted Grazing with Bianca Soares (October 27) – learn about the business of targeted grazing, complete with tools for analyzing your own economic viability. The second half of this webinar features a question-and-answer session with an established targeted grazing contractor.
Beef Cattle Nutrition with Dr. Pedro Carvalho (October 29) – UC Davis/UCCE Feedlot Management Specialist Dr. Pedro Carvalho provides a basic overview of beef cattle nutrition in this final webinar.
And be sure to check out my Sheep Stuff Ewe Should Knowpodcast with fellow shepherd Ryan Mahoney – available on Spotify and Apple Podcasts! While our focus is on sheep, we cover topics of interest to most livestock producers!
If you have any questions, or ideas about future webinar or workshop topics, you can always contact me at firstname.lastname@example.org or at (530) 889-7385.
Be sure to check out our upcoming webinars on cattle production and targeted grazing - we have a great line-up of speakers and topics!
Tuesday, October 6 (6pm) - Introduction to Targeted Grazing
This webinar will provide an overview of targeted grazing, including grazing management, picking the right grazer for the job, livestock management, and customer relations. Cost: $10. Click here to register!
Thursday, October 15 (6pm) - Cattle Health – From Parasite Management to Vaccination Programs
With Dr. Gaby Maier (UCD School of Veterinary Medicine Beef Extension Specialist) and Dr. Becky Childers (Large Animal Veterinarian). Learn about controlling external and internal parasites, developing a vaccination program for your herd, and the importance of establishing a working relationship with your veterinarian. FREE! Sponsored by Tahoe Cattlemen's Association. Click here to register!
Tuesday, October 20 (6pm) - Beef Business Basics
With Dan Macon, UC Cooperative Extension; Judd Tripp, Placer County Rancher; and JC Baser, Placer County Rancher. This webinar will focus on basic economic analysis for new and existing ranching businesses. Our rancher panel will share their experiences operating successful foothill ranching enterprises. FREE! Sponsored by Tahoe Cattlemen's Association. Click here to register!
Thursday, October 22 (6pm) - The Basics of Grazing Management
With Dan Macon, UC Cooperative Extension; Greg Lawley, Placer County Rancher; Joe Fischer, Placer/Nevada County Rancher. Well-managed grazing can improve pasture productivity and cattle health. Learn the basics of grazing management and hear from ranchers who use these practices every day. FREE! Sponsored by Tahoe Cattlemen's Association. Click here to register!
Tuesday, October 27 (6pm) - The Business of Targeted Grazing
Join Dan Macon and a panel of targeted grazing contractors to learn about the ins and outs of building a targeted grazing business. Cost: $10. Click here to register!
Thursday, October 29 (6pm) - Beef Cattle Nutrition
With Dr. Pedro Carvalho, UC Davis Feedlot Management Extension Specialist. Learn basic information about beef cattle nutrition, from grazing to ration formulation. FREE! Sponsored by Tahoe Cattlemen's Association. Click here to register!
Once you've registered for each webinar, you'll receive a Zoom link that will allow you to participate. We'll also post videos of each webinar on the Ranching in the Sierra Foothills YouTube Channel.
Over the last several months, I've had several conversations with ranchers about capital expenditures – purchases of durable, relatively expensive assets. I suppose many of us in agriculture think about equipment – trucks, trailers, tractors, ATVs (at least that seems to be what those of us in the livestock business consider). We might also consider handling equipment – corrals and chutes, for example – or breeding animals. And most of us (myself included) have a limited amount of capital with which to work. How do we figure out our priorities?
First, I think it's helpful to define a capital purchase. Unlike an operating expense (feed, for example), a capital purchase exchanges one asset (cash, generally) for another. Capital purchases are included on our balance sheet; operating expenses show up on our profit and loss statement. Obviously, there are costs to owning an asset. If we borrow money to purchase a truck, the interest payment is an expense. So is the annual depreciation. But the truck (or the breeding cows, or handling equipment) are assets of our business.
As business owners, why would we make a capital purchase? From my perspective, a capital purchase plan must be tied back to the specific needs of the business. What are the weak links in terms of business profitability? A capital purchase should address these weak links. For example, if we know we need to reduce our overhead costs (and as a reminder, overheads are land-related and labor-related in a livestock business), then equipment that makes our labor more efficient may be justified. If we know our gross margins (revenue minus direct expenses) are positive, then perhaps we need to think about expanding our productive capacity (e.g., buying more breeding animals). Or said another way, if we know we need to expand our business, and we have a limited amount of capital to invest, will reducing our overhead address the key challenge, or should we buy more livestock? These are critical questions!
We should also think about the source of funds for the purchase. Are we going to use the profits from our business? Our personal savings? Are we going to borrow money? If we use our personal savings, we should formalize a plan to pay back this investment – after all, the business is borrowing money from outside the business (even if that money is ours). If we are going to formally borrow money from a bank or other source, what are terms? Is collateral required? What is the interest rate?
If you're like me, you probably like shiny paint and new equipment. When I visit larger operations, I find myself envious of their sheep handling equipment. I would love to have a portable commercially-built sheep handling system, for example. But if I think about the function of a handling system (rather than the object – or the brand name), I can come up with alternatives to this large expenditure. For example, our current handling system is comprised of a home-built wooden alley and Bud Box set-up, with t-posts and wire panels for holding pens. For us, this system does everything a factory-built set-up will do, at a fraction of the cost. The function of a set of corrals is to facilitate easy sorting and handling. Building our own system has allowed us to invest our capital elsewhere.
Examining the function of a specific piece of equipment is also related to the bottlenecks in our operations. For example, when we started in the sheep business, we had a small, bumper-pull stock trailer. I could hall 12-15 mature ewes at a time (depending on whether they were newly shorn or in full fleece). As our flock grew, we began to realize that we were spending much more time hauling livestock from ranch to ranch. In this case, we ultimately made two investments: a larger stock trailer (that more than doubled our capacity) and a border collie (which allowed us to safely herd our sheep to some of the places we'd been hauling them previously).
Sometimes, one purchase requires another. For example, when we installed our K-Line irrigation system, we also had to buy an ATV to move water. In other words, the $9,000 we spent on irrigation improvements required an additional $3,500 purchase of a used ATV. We've considered buying a double-deck stock trailer, which would require also buying a loading ramp and always loading from facilities that we can reach with a truck and trailer. Like our border collies, the ATV has multiple benefits. At the moment, we can't justify adding a double-deck trailer.
Once we've decided what our capital purchase priorities are, there are several ways we can evaluate the financial implications of these investments. For new businesses (1-3 years), I think a simple payback period is an important analysis. To use this tool, we divide the total cost of the purchase by the annual positive change in profit (either through increased revenue, decreased expense, or a combination of the two). Here's an example:
- Purchase Price = $4,000
- Operating Costs (fuel, maintenance, depreciation) = $400/yr
- Labor Savings (irrigation, fencing, etc.) = $1,400/yr
- Net Income Change = +$1,000/yr
- Payback Period = $4,000 ÷ $1,000 = 4 years
All of this is a rather long-winded way of saying that capital purchases require a plan – just like every other aspect of our ranch businesses. We need to have a clear understanding of where the economic weak links in our business may be (e.g., overhead expenses vs. productive capacity vs. improving gross margins). We need to think about the function that we need accomplish rather than the object we think we need. We need to think about the entire investment required. And finally, we need to think about the financial and cash flow implications of making the purchase.
As some may know, I've been doing a weekly podcast called "Sheep Stuff You Should Know" with my friend and fellow sheep producer, Ryan Mahoney. We started the project as an excuse to talk regularly about livestock during the initial COVID-19 shelter-at-home order, but it's turned into a great opportunity to explore topics that interest both of us. Since we started, we've talked about economic benchmarks, livestock guardian dogs, genetic selection, and our favorite lamb dishes. We've interviewed Ryan's grandfather, legendary sheepman Dick Emigh - and Dr. Fred Groverman, the dean of Shropshire sheep breeders in the U.S. But our conversation about value-added marketing several weeks ago has really stayed with me. We were talking about how each of us evaluate new marketing opportunities, and about the importance of budgeting and economic analysis. Ryan said, "It's easy to project your revenue on paper - we all like to think that all of our lambs [or calves, for that matter] will be top quality. But no matter what size operation you have, you'll always have tail enders - those lambs that simply don't grow. To be realistic, our budgets need to acknowledge this fact."
Since this conversation several weeks ago, I've been thinking about our tail enders. There are always a handful of lambs that simply don't perform - maybe they were challenged with health issues as lambs, perhaps they were more susceptible to internal parasites like barberpole worms or coccidia. In talking with cow-calf producers, this seems to be a common issue. We all have animals that simply fail to thrive for one reason or another.
For me, this suggests I need to examine my management and my genetic selection. I need to keep better records - do my tail enders come from the same ewes every year? From the same rams? This year, I'll go back through my lambing records and note the dams of these tail end lambs. I'll also take a look at our weaning procedures - are there things we can do when we separate lambs from ewes that will reduce stress and maintain productivity.
In the meantime, I need to sell these lambs. We market most of our lambs shortly after weaning (typically at a premium), but I always hang on to these poorer performing lambs in the hopes that maybe I can turn them around. That means that I've got a handful of poor doers now that I've spent money and time on - perhaps not the best investment I could have made. Maybe I need to rethink my market timing. Maybe these tail end lambs - and our cull ewes - should go to the sale at weaning.
I'm curious - how do you deal with your tail enders? Do you have any? If you do, what is YOUR marketing strategy? I hope you'll share your thoughts in the comments!
And if you're interested in our Sheep Stuff podcast, here's the link!