COMPETITIVE ADVANTAGE

Holding on to Your Advantage –

By Kit Pharo

In last week’s PCC Update, we discussed the need to have a competitive advantage – and how to obtain one.   This article was written for the benefit of the many PCC subscribers who already have a competitive advantage.

NOTE: If you don’t have a competitive advantage, I suggest you re-read last week’s PCC Update.   We believe having a competitive advantage will be the difference between mere survival and true success in the future of the cow-calf business.

You have a competitive advantage because you were willing to step out of the status quo herd and do a better job of running your business.   However, you will only have a competitive advantage until the majority discover they can do what you are doing.   Rest assured, this will take much longer than it should.

Eventually, though, yesterday’s Herd Quitters will become the new status quo.   If you want to maintain your competitive edge, you must continue to change with the times.   You must recognize when you are in danger of becoming the new status quo, and start looking for new advantages.   This is a never-ending challenge that I love.

Henry Ford is an excellent example of a leader who fell behind.   It has been said that Henry Ford was 20 years ahead of his competition for the first 20 years of his business – and 20 years behind the next 20 years.   During the boom years of the Model T, over two-thirds of the cars in the U.S. were Fords.

Henry did what he had to do to become the leader in the early car business – but he failed to adapt and change with the times.   For example, he thought every car should be black.   He allowed his business to stagnate under its previous success.   The same thing can happen to us if we’re not careful.    Nothing stays the same!   The key to staying ahead is to adapt to change as it is taking place.

Quote Worth Re-Quoting –

“It is not the strongest of the species that survives, nor the most intelligent that survives.   It is the one that is most adaptable to change.”   ~ Charles Darwin

“It is not necessary to change.   Survival is not mandatory.”   ~ W. Edwards Deming

Production Per Acre –

By Tim Goodnight

Shifting the focus from production per cow to production per acre has been shown to increase profitability.  It’s no secret that smaller framed cows will produce more calves and more total pounds per acre.  In addition, these lighter calves are worth more per pound.

More pounds that are worth more per pound is a win-win, right?

As simple as this concept is… status quo producers can’t seem to understand that by focusing on individual growth and weaning weights, they are limiting their profitability.  Despite the emphasis placed on growth, the status quobeef industry has not been able to increase average weaning weights over the past 15 years.   The only thing that has increased in the last 15 years is cow size.  This has led to the increased use of expensive inputs, which has had a negative impact on profitability.

So how can producers increase production per acre?  It begins with a paradigm shift.  Shifting the focus to the production and performance of the entire operation instead of the individual animal is the most important first step.  Next,you should align your operation with a program that has shown the ability to increase total production without expensive inputs.  Pharo Cattle Company has been that program for 30 years.  If you’re ready to increase your ranch’s total production and profitability, we can help.

Quote Worth Re-Quoting –

“In times of change, learners will inherit the earth – while the learned find themselves beautifully equipped to deal with a world that no longer exists.”   ~ Eric Hoffer

“Those who cannot change their minds cannot change anything.”   ~ George Bernard Shaw

Advertisement

The Learning/Doing Gap

Seth Godin

Our society separates them. Somewhere along the way, we decided that one interfered with the other.

Go to school for 8 years to become a doctor–most of that time, you’re learning about doctoring, not actually doing doctoring.

Go to work as a copywriter. Most of the time, you’re doing writing, not learning about new ways to write.

The thing we usually seek to label as ‘learning’ is actually more about ‘education’. It revolves around compliance, rankings and “will this be on the test?”

Being good at school is not the same as learning something.

One reason that we don’t incorporate doing into education is that it takes the authority away from those that would seek to lecture and instruct.

There are 56 million people in K-12 (compulsory education) in the US right now. Most of them do nothing all day but school, failing to bring real-life activity, experimentation and interaction into the things that they are being taught.

And there are more than a hundred million people going to their jobs every day in the US, but few of them read books or take lessons regularly about how to do their work better. That’s considered a distraction or, at best, inconvenient or simply wasted time.

The gap is real. It often takes a decade or more for a profession to accept and learn a new approach. It took gastroenterologists a generation before they fully accepted that most ulcers were caused by bacteria and changed their approach. It has taken our justice system more than thirty years to take a hard look at sentencing and corrections.

It could be because we’re confusing learning with education. That education (someone else is in charge and I might fail) is a power shift from doing, so I’d rather be doing, thank you very much.

What happens if the learning we do is accomplished by always engaging in it in conjunction with our doing?

And what happens if we take a hard look at our doing and spend the time to actually learn something from it?

When police departments invest time in studying their numbers and investigating new approaches, they discover that efficacy and productivity goes up, safety improves and so does job satisfaction.

When science students devise and operate their own lab tests, their understanding of the work dramatically improves.

Education (the compliance-based system that all of us went through) is undergoing a massive shift, as big as the ones that have hit the other industries that have been rebuilt by the connection and leverage the internet brings. And yet, too much of the new work is simply coming up with a slightly more efficient way to deliver lectures plus tests.

I see this every day. People show up at Akimbo expecting lifetime access to secret videos, instead of the hard but useful work of engagement.

The alternative? Learning. Learning that embraces doing. The doing of speaking up, reviewing and be reviewed. The learning of relevant projects and peer engagement. Learning and doing together, at the same time, each producing the other.

If you want to learn marketing, do marketing. If you want to do marketing, it helps to learn marketing.

That same symmetric property applies to just about everything we care about.

To quote the ancient rockers, “We don’t need no… education.”

But we could probably benefit from some learning.

In the middle of all this doing, this constant doing, we might benefit from learning to do it better.

Woe is Me – By Kit Pharo

I skim through many beef publications on a daily basis.   Within the last two weeks, I have read the following statements in various online and printed publications.

• The average age of farmers and ranchers in America has been increasing drastically over the past 30 years.
• From 2002 to 2015, the cost to produce a weaned calf more than doubled from $400 to $875 per cow.
• The average net farm/ranch income was negative for 2018.
• Farm bankruptcies in some states were up 60% in 2018.
• Calf losses this spring were well above average because of snow, cold and wind.
• The USDA reported that since 2013 there has been more than a 50% reduction in net farm income.
• Total farm income decreased $9.1 billion in 2018.
• Total farm debt increased $410 billion in 2018.
• Delayed corn planting will have a negative effect on feeder cattle prices.
• Net income has been dropping due to circumstances out of farmers’ and ranchers’ control – dropping commodity prices, increasing input costs, machinery purchase costs and repairs and inclement weather.

These statements don’t paint a pretty picture, do they?   They leave little room for hope – especially for those who are struggling to make a decent living in the cow-calf business.   It’s easy to understand why some producers are throwing their hands up in despair, thinking, “Woe is me.   What can I do?”   Most are doing nothing – which just makes matters worse.

I believe all but one of the above statements are true.   The last statement, however, is FALSE!   It will make producers feel a little better about the situation they are in – but it will discourage them from taking any appropriate action.   Truth be known, very little is totally out of our control.   We just like to think things are out of our control because we’re afraid to think or look outside the box (paradigm) we have put ourselves in.

At the risk of upsetting more subscribers, I am going to do my best to challenge you to look and to think outside the box you have put yourself in.   We have all put ourselves in a box of some sort.   Our actions and our success are limited by the box we have put ourselves in.   Thinking outside your box will probably go against conventional thinking – but I want you to understand that it is possible to create a very profitable, enjoyable and sustainable business.   I want you to understand that it is possible to create a very bright and prosperous future for the next generation.

In last week’s “The Next Generation” article, I asked, “What do you need to do to adapt to the changes that are taking place in the cow-calf business?”   I went on to say, “If you have been paying attention, you already know the answer to that question.   The real question is… do you have enough courage to break away from the status quo, herd-mentality way of thinking so you can make the right decisions?”   Herein lies the problem for most people.

Let me begin by admitting we have no control over the weather.   However, we do have the ability to plan for most weather-related events and situations.   With a good grazing system and a good drought plan, we can decide when to turn our cows into cash to conserve our grass.   As Bud Williams once said, “You will never go broke having too much money or too much grass – but going broke is easy if you have too many cattle at the wrong time.”   We have the ability to take control of these situations.

Hundreds of cow-calf producers lose an inordinate number of calves every year while calving.   To add insult to injury, these same producers work harder than anyone else trying to save those calves.   Apparently, they do not realize they have control of when they turn their bulls out.   There are very few environments in which winter calving makes sense.   Why do wild ruminates wait until May to have their babies?   Why are all calves born with a summer hair coat?   There is nothing more enjoyable and profitable than calving on green grass.

I am also willing to admit we have very little control over the markets and the prices we receive.   The only way to take control of the prices you receive is to get out of the commodity business and sell a product like grass-finished beef directly to the consumer.   Several PCC customers have been very successful at doing this.

Farmers and ranchers cannot do much about commodity prices.   Most will whine and complain – but that does no good.   Many will blame others for their problems – but that does no good.   So, what can you do?   If what you are doing now is not working, you need to do something different.   This is as obvious as the nose on your face – but most people will not change a thing until they are forced to.   By that time, it will be too late for many.

PROFIT  =  (Production  x  Market Value)  –  Expenses

Since we have no control over the markets, we need to focus our attention on increasing production and/or decreasing expenses.   When we talk about increasing production, we are referring to production per acre – NOTper animal.   Focusing on production per animal (bragging rights) will actually decrease production and profit per acre.   The status quo beef industry has been focused on the wrong thing for the last 50 years.

I know several producers who have increased pounds and profit per acre by 50 to well over 200 percent.   That’s HUGE!   These producers have implemented proper grazing management to make the most of every ray of sunshine and drop of rain that falls on the land they control.   They also produce smaller, more efficient cows that fit their environment – instead of artificially changing the environment to fit their cows.   This allows them to increase stocking rate and production per acre.   If they can do it, why can’t you?

The average cost of producing a calf has more than doubled in the last 20 years.   That makes it very difficult for most producers to make a decent living.   In contrast, most long-time PCC customers have a cost of production that is 40 to 50 percent less than the national average.   That’s an advantage of $350 to $450 per calf!   If they can do it, why can’t you?   The easiest money you will ever make is the money you don’t spend.

The reason the average age of cow-calf producers has increased so rapidly over the last 30 years is because the next generation, for the most part, is not coming back to the farm or ranch.   The reason the next generation is not coming back is because very few cow-calf operations are profitable, enjoyable and sustainable.   The reason very few cow-calf operations are profitable, enjoyable and sustainable is because most producers are unwilling to make the necessary changes in their operation.   It is easier to say, “Woe is me,” than to think outside the box they have put themselves in.   We encourage you to choose a different route.   You can do it – and we can help!

Quote Worth Re-Quoting –

“You are responsible for your own happiness and success.”   ~ Harvey Mackay

Beef Cow Size: Industry Trends, Economics, and Implications for Grazing Wyoming Rangelands

John Derek Scasta, Dallas Mount, Blake Hauptman and Tamarah Jorns Ecosystem Science and Management University of Wyoming Extension

DOWNLOAD the PDF Here

The bigger-calf theory isn’t working right now

The solution is to sell cattle that have higher value of gain than your cost of gain.

It was an interesting week in the market. What I find even more interesting is how people can get so emotional about such things. Cattle marketing is simple math, and that should take the emotion out of things since math is fundamental and never changes.

That said, it is hard to override an old paradigm. This week the paradigms that hold onto conventional wisdom got smacked in the face.

Conventional wisdom says that it pays more to wean a bigger calf. This week I watched an auction that had a good amount of bawling calves sprinkled throughout the run of different weights. While the bigger calves did get more dollars per head, it wasn’t much more. When I calculated the value of that gain it proved what I already knew: The value of gain wasn’t all that great. From the smallest bawler to the heaviest calf, the value of gain was 45 cents.

Can you put the weight on for less than that? The value of gain between some of the other weights was less than 30 cents. I am pretty sure it’s costing more than that to put the weight on. My point is, those extra pounds were actually costing the producer money.

A commentator on the local radio was going on and on about the “rally” in eight-weights at a local sale barn this week. I pulled up the market report and those eight-weights had the lowest value of gain compared with all other weights. At that barn seven- and eight-weights were the only weights that were higher this week, and yet the eight-weights were still undervalued to the lighter feeders, and also undervalued compared with fats. So again convention wisdom got smacked. Just because they were higher didn’t mean that a person was going to profit from selling them.

I have had a few people ask me how this blog is being received by people since I talk a lot about turning cattle quicker instead of holding them and putting more weight on them. I just outlined above the math isn’t adding up by the long-held convention for adding weight to create value.

Here’s the thing, there are three components to maximizing profit, and one is turnover. If you owned a hardware store would you make more money if you were open two days a year, or 365 days a year? I have a friend who used to work in the parts department at a dealership, and he told me if a part didn’t turn over at least every 30 days they quit stocking it. I’m not saying we should trade our stocker cattle every month. What I’m saying is that we need to watch the value of the gain, and price relationships to prevent ourselves from getting cattle too big and becoming undervalued at times.

Next week is the last full week of auctions before some barns will go to their summer schedule. One thing I find interesting and am curious to see how it pans out is some barns are adding a special female sale to the schedule in the middle of summer. This typically doesn’t happen. There obviously is some interest in selling bred cows and pairs at that time, but will there be much buyer interest?