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“What worked for the past 10 years
[in the beef industry], will not work for the next ten years,”
predicts Kit Pharo, a Colorado rancher well-known for his
“out-of-the-box” opinions on the beef industry.
Specifically, Pharo says, “Cheap
grain and cheap fuel are things of the past,” and thus, he
believes the beef industry is at a tipping point which will
require traditional beef producers to make dramatic changes in
their operations.
Pharo, his wife Deanna and their
son Tyson raise commercial and registered Red Angus, Black
Angus, Hereford, and Composite cattle on their ranch in the high
desert, short-grass country near Cheyenne Wells, CO. Annual
precipitation is about 12 in. – but in the past decade of
drought, they’ve operated with much less rainfall than that.
To survive and thrive in
ranching, Pharo has focused on raising moderate sized,
low-maintenance cattle with strong maternal traits. For the past
decade he has shared his philosophies through a bimonthly
newsletter and as a speaker at beef industry conferences
throughout North America. The Pharo’s sell about 800 bulls each
year through their annual sales in April and November. Here, he
shares six philosophies that have been core to their ranch
entity’s success.
- Have a positive outlook.
Pharo has visited with many ranchers and has found that
the common denominator to success is attitude. He’s found that
what makes a profitable rancher is the fact that they “expect
to make a profit.” Of these ranchers, Pharo says, “They treat
the ranch like a business, they expect to make a profit, and
they manage accordingly – using visions and goals.”
He likens this positive attitude to business guru Peter
Drucker’s quote: ‘The best way to predict the future is to
create it.’ “That’s an awesome concept,” Pharo says.
-
Understand that production does not equal profit.
“Bigger cattle are not always profitable,” points out
Pharo. He poses the question: Can a 400 lb. calf be
profitable? The answer: It depends on the cost of production.
In many cases, a 400 lb. calf will be more profitable than a
600 lb. calf.
Pharo says, “Every farm or ranch is either production driven
or profit driven. Production-driven decisions will produce
more bragging rights, while profit-driven decisions will
produce more profit.” Thus, he encourages producers to pay
attention to what it is costing them to produce their calves
and recognize that being able to run more cows of moderate
size will almost always equal more profit.
-
Manage your expenses.
What’s the first thing most ranchers do to increase profits?
They increase production, says Pharo. But he says, “With every
increase in production, there is a cost involved. You can’t
get something for nothing.” For example, for every increase in
weaning weights there will be a cost involved. But once
producers recognize that production does not always equal
profit, Pharo says they should focus on keeping costs low.
“Producers can do a better job of increasing their profits by
controlling and reducing their expenses,” he says.
He adds, “Ben Franklin was right when he said ‘A penny saved
is a penny earned.’”
-
Use your forage resources efficiently.
Pharo says another commonality among profitable ranchers is
that they strive to make the most efficient, year-round use of
their available forage resources. This typically involves some
form of rotational grazing; matching cow size to the
environment; and matching the production cycle of the cowherd
to your available forage resources.
Most specifically, Pharo suggests that producers mimic Mother
Nature with their calving season and grazing plans. He poses
the question, When do wildlife have their babies? They match
it to the spring green up, so forages are available. That’s
what ranchers should do with timing of calving. He adds, “You
can fool Mother Nature and calve at a different time, but it’s
very costly to do.”
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Don’t just sell a commodity; sell a product.
“The commodity business is a breakeven business. To
maximize your profits you need to get out of the commodity
business and sell a product,” Pharo says.
He cites grass-fed beef as an example. “When calf prices go
down – and I believe they will go down – the price of beef in
the grocery store will stay the same. Producing and marketing
a product, instead of a commodity, insulates you from the ups
and downs of the cattle cycle.” But, he also cautions that to
produce and market a value-added product, whether it be
grass-fed or branded beef or even seedstock, will require more
thinking, more management and more marketing.
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Be willing to make the changes.
Looking ahead at the industry, Pharo says, “Those who are
quickest to adapt and change will be in the driver’s seat.
Those who are slow to adapt and change may get left behind or
run over.”
He encourages producers to challenge the management traditions
that exist on their ranches. Pharo says, “Have you ever
wondered how ranch traditions get started?” He suggests that
if you follow those traditions back to their origins, there
may no longer be a good reason for continuing to do some of
the things the way they have always been done. Instead, change
may be beneficial. He encourages ranchers to think “outside
the box,” and says, “We tend to get trapped in our own boxes.”
He concludes, “Profitable ranchers are not afraid to make the
necessary changes to keep their ranch profitable. Not many
people like change, and profitable ranchers may not either,
but they do it anyway.”
For
more about Pharo’s ranch operation and to sign-up for his
monthly newsletter, visit
www.PharoCattle.com or send an email to
Kit@PharoCattle.com. |
