In managing through the recent drought covering much of cow country, I hear a lot of discussion around questions like: “How many cows ‘can’ we keep?”; “How much hay do we have on hand?”; “How much hay can we afford to buy?”. These questions are not very helpful. They miss the larger point. In looking at a situation it is much more useful to ask “What should I do”, rather than “What can I do?”. When we put the known information on the table and get our team around it the conversation can change.
For example, in making decisions around drought management, relevant information will include:
• What is the current condition of our grazing land?
• What are these animals worth in today’s market?
• What is the feed we have on hand worth today?
• What will be our costs to get these animals to the next grazing season?
• How does this fit with our mission/vision?
• What is our projected gross margin for this coming year?
With this information on the table, the decision of what should we do will become clearer. Here is an example for discussion. The numbers are made up so, when figuring for your operation use prices for your region:
Little stockpile feed remains and cows will need to be on full feed from October through April using approximately 3.5 tons of hay. Hay is worth $250/ton so it will take $875 just in hay to get a cow till next spring, bred cows are worth $1,400 today, projected GM (Gross Margin) for these cows next year will be negative $200. Part of our stated vision is to run a profitable business that provides quality of life for owners.
First let me be clear, I’m not suggesting the above scenario is yours or that the decisions that are best for your ranch business are the same for this example business. I am suggesting that a deeper discussion should take place considering the facts.
If this ranch only considered “What can I do?” then the ranch likely has the capital position to buy feed (or feed hay on hand) to get to next spring. If this ranch asks “What should we do?” then there are a host of possibilities. There would have been even more possibilities if this discussion would have taken place in June. For this operation, by mid-June, it was already apparent that this was going to be an exceptionally dry season. However, here we are today. The only thing that matters now is what you do next.