Making Money with Cattle

How do you become a millionaire in the cattle industry? It’s easy, you start with ten million dollars and work your way down. An old joke but true for so many getting into the cattle business. I see it all the time. People take their life’s savings and buy a ranch. Then they end up selling it because they’re operating at a loss.

I can’t guarantee you will make a profit in your ranching operation, but as a ranching business writer and consultant, I can tell you how to keep from spending money on unnecessary things.

I recently re-read many of my articles published in this newspaper, and the most expensive thing I have recommended to readers was making fourteen paddocks or pastures. And that can be done with electric fencing. Not too expensive. Many of my fellow consultants have their clients doing all kinds of expensive things that sure do cut into profit.

For example, here is a question I sometimes ask. “Would you sell fewer cattle if you could make more profit?” What kind of question is that you ask? Seems like a fair number of ranchers prefer to sell more cattle and make less profit than to sell fewer cattle and make more profit. At least that’s the way they run their cattle operations.

Profit comes in many ways. If you fatten more animals and sell them for more money than your expenses, you will make a profit. On the other hand, if you sell lots of cattle at a loss, you make no profit. And if you take that same herd of animals that you made a profit on and reduce expenses, you can make even more money.

What if you could keep from selling cattle at an auction for a loss. Would you make a profit? It depends on your expenses.

Peter Drucker summed it up well. “Profit is not a cause but a result.” Let’s assume that two ranchers have the same number of acres, the same number and breed of cattle and sell at the same auction house. If Rancher A overgrazes his land by not having enough pastures to rotate cattle and ends up feeding hay all summer and winter, he is less likely to make as much money as Rancher B. Rancher B rotates her animals, doesn’t feed hay, and keeps a healthy pasture for the animals to eat on a regular basis.

As a result of her actions, Rancher B made a profit. Rancher A could do the exact same thing and his profits might not be the same, but their profits could be much closer, or he might even do better. It depends on the individual’s management style and ability to learn and adapt. Ranchers make decisions every day. These decisions may sound like a cause, but they are the result of many things.

The rancher that feeds hay to cattle all year round could make a greater profit by not making hay, but rather having the cattle graze that grass. He wouldn’t spend money on fuel to power trucks, tractors, and machinery. He’d have no expenses for moving the hay, no waste when feeding the hay and happier cattle are likely to gain more weight. It’s a management choice. Even if the rancher has free land to make hay, there is still a cost involved in the haying operation. And then the rancher would need to examine whether selling the hay elsewhere would make more money than feeding it to his/her animals.

If the only reason the land is overgrazed is because there are too many animals on the land, it makes sense to raise fewer animals to sell so that the profit can be greater.

“A small profit is better than a big loss.” Common Sense When small steps in changing from conventional agriculture to organic/regenerative agriculture can end up saving money, why wouldn’t a rancher make the change? If you could treat parasites and save money by using natural methods instead of chemical methods, why wouldn’t you? If you could grow more grass with organic methods than by using expensive fertilizers, why wouldn’t you?

With these questions, I leave you with a few more thoughts.

“A business without a path to profit isn’t a business, it’s a hobby.” Jason Fried and the “IRS”.

“Profit is the payment you get when you take advantage of change.” Joseph A. Schumpter “Many receive advice. Only the wise profit from it.”

David E. Will is a rancher