A recent Ranching For Profit School graduate sent me a link to MSN Careers. It had a list of the top 10 “dead-end jobs.” Number one on the list was Farmers and Ranchers. The author concluded that large farms would get bigger and that smaller, independent family farms, that didn’t rely on off-farm income, might soon be a thing of the past.
Why can the big guys make farming and ranching work, whereas the little guys seem to have problems? When you think about it, the little guy, who seems to be willing to subsidize the farm with off-farm income, should have an advantage over the corporation, whose motive is profit. For the corporation, the farm must cash flow and yield an annual profit. The little guy tends to be satisfied if the dollars in equal the dollars out. So if the little guy is willing to break even and the big guy is demanding a profit, why isn’t the little guy winning?
One obvious reason is scale. The big guys have economies of scale. Their equipment and labor costs are spread over more units. They are also able to buy in bulk to secure discounts and sell truckloads at a time to ensure top dollar. The big guys get a disproportionate share of farm program subsidies. The little guy is willing to subsidize himself with cheap labor and off-farm income. But none of these differences are THE reason the big guys are more profitable. The biggest reason they make more profit is that they demand a profit.
The little guy tends to run the farm or ranch as efficiently as he can, pinching pennies and hoping there will be something left at the end of the year. The big guy starts with the end in mind, establishing a target for profit, then determines the enterprises required and the strategies needed to achieve the target.
The big guys own a business. The little guy owns a job. A little guy willing to build his ranch into a business can make a good profit and he doesn’t always have to be big to do it. The little guy unwilling to make this transition, well, that just might be a dead-end job.