Testing New Futures

Testing New Futures

Holistic Ranch Management More Than Grass

Dan Miller
By  Dan Miller , Progressive Farmer Senior Editor

“No. You missed that,” Scott Johnson says, correcting a caller. He and his wife, Jean, were traversing a part of eastern Colorado on one end of a long-distance struggle with cell service. The caller had entirely missed the point Scott made about holistic management. It is much more than grass.

The template of holistic management laid over the Johnson family’s Flying Diamond Ranch, Scott explains, is a collaboration of moving parts. It considers the harsh seasons of Colorado’s semiarid eastern plains and the sustainability of the ranch’s composite Angus herd. It is management of predatory coyotes, of spring calving and scrutiny of meat markets. Most of all, it is family — this one taking its first steps into a sixth generation with five grandchildren, four born in 11 months.

“Do you follow my way of thinking?” Scott asks. “If our ROI [return on investment] is great, but someone is maimed, we wouldn’t be real proud [of our performance]. We will give up profit for safety or harmony,” he says. “The focus is on the whole. If we’re not getting along as a family, if we’re not safe, then the rest of this really doesn’t matter,” he explains. “It’s its entirety. Its wholeness. Its balance. Not perfection. But, bottom line, [we are] profit-oriented. Business is business.”

The Flying Diamond’s clean and highly viewable website uses six words to articulate holistic management: “Ranching with family. Working with nature.”

BORN ON A CATTLE DRIVE

Flying Diamond is 112 years in the making. Charlie Collins, Scott’s great-grandfather, fell in love with the land when, as a teen in the late 1800s, he trailed cattle near the banks of Big Sandy Creek on a drive from Mexico to Montana. By 1907, Collins had moved his family from Kansas to Kit Carson, where the ranch is still headquartered today.

The ranch is dominated by a shortgrass and sand sage landscape. Thick riparian areas border the Big Sandy and Horse creeks, tributaries of the Arkansas River. Culls are based on a female’s ability to wean a calf every year beginning at age 2 and succeed in 13 inches of precipitation and temperatures running the scale from below zero to above 100ËšF.

The cattle winter on corn circles in Kansas and Nebraska. “We like to rest our pastures during the winter. It’s healthier for our grass to have the cattle off and let it rest, and get a little more growth,” Jean says. Scott adds, “Having cattle on cornstalks, our day-to-day chores slow down a little bit in the winter. We can give family a little breather.”

Flying Diamond is an operation run by a family of type A personalities, Scott allows. “We’re not real chitchatters. We socialize. We have good times. We want to maintain excellent family relations. But, we’re not sitting around drinking a lot of coffee.”

GENERATIONS MANAGE TOGETHER

Scott and Jean anchor the Flying Diamond’s fourth generation. Their four adult children represent its fifth. Ownership is based on a meritocracy. The more a family member contributes, the more they own.

Jen Livsey, married to Jay, is the oldest. She is a Princeton University undergraduate and the first female graduate from the King Ranch Institute for Ranch Management. She recently opened Eastco Group, a livestock and drought insurance business. Jen oversees the rotational-grazing plan and analyzes purchase and lease opportunities.

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Will and Lauren Johnson live full-time on the ranch. A Marine Corps veteran, Will is CEO of Flying Diamond Ranches Inc.

Myles Johnson and his wife, Katie, live in Idalia, Colorado, where Myles is the K through 12 superintendent of schools. Myles is the ranch’s administrative officer, managing compliance, meetings and corporate records. Katie is a certified public accountant and manages the ranch books.

Charlie Johnson and his wife, Kaitlin, live in Kit Carson. He is chief operating officer (COO) of Flying Diamond Ranches Inc. He partners with Jen in livestock and drought insurance.

Business is organized around communications—face-to-face, weekly conference calls and a monthly executive committee meeting. Quarterly board meetings are a newer function Kirk Samuelson, Scott’s cousin, brought to the ranch. Samuelson served as COO of Fortune 500 Kiewit Corp., in Omaha, until he retired. He and Scott are cochairmen of the board for Flying Diamond. Quarterly board meetings are formal. “Ten years ago, I was the dictator,” Scott admits. “Now, no one is comfortable with that. When we talk about family harmony, that’s not to suggest there aren’t red faces and pounding on the table.”

The board meetings are to play a role in the ranch’s vitality. “You go to workshops, and you hear horror stories,” Jean says. “Families won’t talk to each other. Ranches divide. That is a threat. How do you keep a 100-year-old ranch together for the next generation?”

The board meetings have a start-stop time and a structured agenda. They often include talks by outside experts. Assignments are given before the meeting—budgets, range management, cattle movements, fertility testing and branding, selling bulls, commodity markets and new market opportunities. “There is an element of accountability brought into the operation that we didn’t have before,” Jean says. “You are held accountable. What did you say you were going to accomplish? Did you do it?”

AGREEMENT IS KEY GOAL

Flying Diamond’s meetings are collaborative. The goal is consensus. “At the end of the day, we want to come up with a compromise we can all live with. This is a new concept for us,” Scott explains.

New is a continuing education standard. Time spent in continuing education is measurable and reported quarterly toward an annual goal of 300 hours. Safety is one component. Jean is the ranch’s safety officer. She has organized horse- and cattle-handling courses. “We specifically do safety training, communicate safety and track safety by hours per year.”

Calving runs from March through May. “We try to mimic nature,” Scott says. “We calve when the deer and the antelope and the elk calve.” Cows graze on spring grasses and not supplemental feed, and the calves generally miss late-season blizzards. Predation is better managed. Calves invite coyotes in the dark of winter. Coyotes have a wider menu in the spring, when the ranch’s wildlife also is giving birth.

“Deer and antelope spend zero dollars, and their offspring have a 50 percent survival rate,” Jen told ColoradoBIZ in a February article about Flying Diamond Ranch. The goal of the ranch, she explained, is to improve the odds of survival among the calf crop but mimic nature to lower production costs.

And here, an example of holistic management: “Our guys aren’t out in blizzards. The weather is better for the calf and better for us,” Scott says.

PATH TO PRODUCTIVITY

Cattle graze only 5% of the ranch’s ground at any one time. Nearly 200 miles of single-strand electric interior fence mark paddocks typically less than 300 acres in size. Cattle graze in some paddocks no more than three days in a growing season. Stocking rates once ran 40 acres per cow/calf unit. Today, it is 30 acres per unit. “We are able to run 30% more animals. Maybe we’ll be able to get to 20 acres per cow/calf unit with more intensive grazing,” he says.

Scott traces his land-management practice to several days spent 35 years ago with Allan Savory, the guru of grazing lands holistic management. Savory’s notion was to move cattle frequently—as bison moved themselves—by way of intensive, human-directed management.

Flying Diamond has laid out 20 miles of water pipeline with the assistance of Natural Resources Conservation Service’s Environmental Quality Incentives and Conservation Stewardship programs. Seven wells pump water to 23 stock tanks. The family has an eye to tightening its grazing practices—that cattle would graze no more than 1% of the ranch’s acreage at any one time.

Few ranches are as intense, Scott says. “Everything gets more intense the more intense we get. More monitoring, quicker moves. We are not know-it-alls. But, it can be a big benefit to the resource and a big benefit financially.”

ONE GENERATION TO THE NEXT

Holistic management is one of many parts. Flying Diamond Ranch has won its share of acclaim for this approach as the recipient of the Colorado Leopold Conservation Award and regional Environmental Stewardship Award, the latter partially sponsored by the National Cattlemen’s Foundation.

Awards recognize achievement. Flying Diamond Ranch tests new futures. Its organic cuts, for example, are finding customers in San Francisco. As a member of its advisory committee, Jean learns how the College of Agricultural Sciences at Colorado State University studies water conservation, sustainability, even urban farming. But also, meatless meat.

“It sounds like science fiction to us, but maybe it’s something that’s coming,” says Jean, not setting aside opportunity perhaps born of a petri dish. The future does not discourage Flying Diamond Ranch. “We’re bullish on agriculture,” Scott says.

The Flying Diamond Ranch evolves and grows and shifts for a time beyond Scott and Jean, and perhaps beyond Jen, Will, Myles and Charles—from today to a time for five grandchildren: Collins, Sofia, Clint, Stella and Henry, growing up among the hills of Colorado’s plain.

One generation builds on another. “We think,” Scott says, “that future is pretty bright.”

Why Water Freezes

Water density changes with temperature. Its densest at 2°c (meaning cold water sinks) just until before it freezes at which point again its density changes and becomes less dense and freezes at the top (ice floats).

On a water tank where the water is being heated by the ground; the warm water will circulate by it self to the top because is less dense than the water exposed to the cold wind.

When this system stops working is when the water exposed to the cold outside air is being cooled at a faster rate than the ground heating effect which means 2 things, your hole in the ground is not big enough or the surface of water exposed to the cold is to large.

Hence why most insulate the top and only allow a small square for cows to stick their heads in to drink.

Check this site out. There is more information and Ideas here that will help with the Freezing Water Issue.

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Livestock handling techniques all about reward training

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Ed Fryer
Ed Fryer on horseback inspecting yearling heifers along a fence in the fall at a Montana ranch with typical rangeland in background.

Livestock handling is all about animal behavior, according to Ed Fryer, who has managed Castle Mountain Ranch near White Sulpher Springs, Mont., since 1998 with his wife, Bev.

Ed and Bev are now mostly retired, and their eldest son, David, now manages the ranch.

Through the years, Ed and David became well known and well respected for low-stress livestock handling techniques.

In fact, for several years, they volunteered to demonstrate their techniques as part of the Beef Quality Assurance (BQA) program in Montana.

“The goal was to demonstrate simple low-stress solutions to common livestock handling tasks,” Ed Fryer said.

That portion of the program always received undivided attention and was well received by those in attendance.

“Humans, horses, cattle – it’s all animal behavior – and we’re no different than they are,” he said.

The basis of all animal training is reward training.

“It is about incentivizing a positive response somehow. It’s as simple as giving your dog a treat for doing the right thing,” he said. “With training horses, it is a system of pressure and release. You apply subtle pressure to get a response, followed by prompt release of pressure when you get even the slightest response in the desired direction. And it’s the same with cattle.”

Part of low-stress cattle handling is having a calm approach, letting the cow do the work, and setting up situations where both the handler and the cow have a high probability of succeeding.

One important concept that Fryer always brought up when they were conducting their BQA training was that there is a cumulative effect.

“If we do a poor job of handling a particular cow, the cow is going to remember what she got away with the first time,” he said.

When ranchers handle cattle consistently, cows begin to accumulate a body of learned behavior in either a positive or negative direction.

“It is up to us to set that direction in our favor. Everybody wins by doing it right,” he said.

There are certain situations that are difficult for cattle, and ranchers can take the time to evaluate the situation and make facility or other modifications to reduce difficult challenges. In these cases, it is okay to move the target.

“All we’re trying to promote (to livestock handlers) is to use our heads, realizing sometimes slowing down one facet can speed up the whole project, and to learn to set up situations where we have a very high probability of succeeding,” he said. “We have to make sure we’re in the right spot and are able to adjust our position quickly enough.”

One example Fryer gives shows the difficulty of moving heifers into a calving shed if the heifers perceive a scary situation with the layout.

“The layout was such that we had to put all the cattle through a back door with a shadowy dark spot that they really didn’t like to go into,” he said.

The crew built a simple lane on the opposite end of the shed to eliminate the need to go through that shadow.

“All we did was switch up the approach to the shed with some very simple construction,” he said. “It didn’t take us but two afternoons and a little bit of materials to switch it 180 degrees, and now one person can quite easily get a cow into the shed with almost zero stress.”

Fryer learned a lot about cattle handling as a crew member on a remote cattle ranch.

“The most proficient crew members became mentors to the younger crew members, with coaching often very blunt and direct,” he said.

That coaching, along with exposure to more modern horsemanship methods that were becoming popular in the ’70s, helped Fryer develop many skills that proved useful to him in years to come – and not only with livestock.

Fryer gives two examples of his mentors’ “blunt direction” that helped set the course for future professional development.

The first occurred while Fryer was a teen-ager on a summer branding crew for a “tough” cowboy outfit.

Yearlings were “mixed up” in the pasture, so the cowboys held the cattle up in a corner so the boss could sort them into their respective groups.

“I was assigned as a herd holder to assist in keeping the cattle together. My horse was barely trained, just like everybody else’s horse. I got bucked off a couple of times and I started complaining to the boss about the horse,” he said. “The boss finally told me to ‘shut up and make sure I was doing my job to the best of my ability, and the horse part would take care of itself.’ It worked, and I never forgot about it.”

Another example occurred while Fryer was in his early 20s.

Fryer and another young cowboy named George were sent out from a cow camp to search for calves, along with Sam, an older cowboy approaching 60-years-old.

It was winter, bitter cold, with a foot of snow on the ground.

“We had to ride several miles into rough country and look for some calves, weaned calves that a hunter had reported seeing,” he recalled.

The cowboys found the calves and started back to camp.

“We came to this little creek about 18 inches wide, two feet deep, drifted over with snow, and the calves didn’t want to cross it,” he said.

While the creek was invisible to the eye, both the calves and the horses knew it was there.

“You can hear the water gurgling down there and it was one of those oxbow-type creeks, so we had them trapped in one of the oxbows. These calves would not cross,” he said.

Fryer and George decided they needed to make a track for the calves to follow.

“We rode our horses back and forth across (the creek) two or three times, while Sam guarded the narrow entrance and watched,” he said. “The calves were not trying to get away, so we younger fellows were thinking that we had better just rope them and drag them across. But there were too many calves and we knew we couldn’t rope them all.”

Meanwhile, Sam said to the young cowboys, “You want to smoke?”

Since we had spent some years on the same crew, he knew we didn’t smoke.

“Sam looked at us in a direct and unmistakable way and said, ‘You guys would be a hell of a lot better hands if you at least had to stop and smoke once in a while,’” he said.

Meanwhile, the sun was sinking, and Fryer and George were getting nervous.

“George and I were tightening our cinches getting ready to rope, and while all this is going on, the calves are standing there watching us.” he said. “We had no choice but to sit on our horses and talk while Sam was smoking. Finally, those calves must have decided they were going to have to go somewhere, because all of a sudden, they just turned around and hopped across the creek and headed out towards where we wanted them to go all along.”

That taught Fryer a lot about low-stress cattle handling.

“We did not need to rope and drag them across. We just presented the option in a different way to get them to do what we wanted them to do,” he said. “Eventually, those calves decided, all on their own, that our horse tracks didn’t look so bad. They just followed our horses’ tracks, hopped across the little creek and away they went.”

That stuck in Fryer’s mind and he began to build on his cowboy skills.

Fryer has spent a lifetime on ranches in Montana and Wyoming, and he believes low-stress cattle handling is a way of handling cattle that leads to success for both cattle and hands.

10 Best Management Practices for Running a Profitable Ranch

Some folks purchase rural land for pleasure as much as for profit. Motivated by a dream of running a hunting operation, raising cattle or having their own place to roam, they may forget that the land can help to pay for itself.

Do first things first. Most people never accomplish their goals because they focus on what they know how to do, what they like to do, what’s easiest and what’s urgent. – Danny Klinefelter (Texas A&M University agricultural economist)

“Most people ranch or farm because they love growing things, they love animals, they love being outside, or they love being independent,” says Danny Klinefelter, an AgTexas Farm Credit board member and Texas A&M University agricultural economist. “Not as many enjoy the financial, marketing and people management sides of the business. But these days, that’s where you need to focus.”

Klinefelter offers ten best management practices that can be especially helpful for new ag operators and rural landowners.

“These are things that any producer can do, but that 95 percent of producers don’t,” says Klinefelter, who is also a farm management expert with Texas AgriLife Extension. “If you’re looking for ways to get better, this list would be a good place to start.”

 

1. Match costs with revenues. (Book)

Too many producers treat costs and earnings separately. Focus on managing the margin between costs and revenue by looking a few months ahead. Cattle producers, for instance, can lock in the price of future inputs such as feed, and then use the cattle futures market to protect their selling risk.

“Too often, farmers and ranchers wait to get a better deal,” Klinefelter says. “If you lock in a profit, it’s hard to go broke.”

2. Play “What if?” . (Website)

Don’t limit yourself to considering most-likely outcomes. Plan for the worst. Start with the four Ds—what if someone dies or becomes disabled, what if there’s a divorce, or what if a key player departs?

Klinefelter uses insurance to illustrate the need for contingency planning. If you take off a hay crop every year for extra income, you might be able to ride out a drought. But if you produce hay and cattle in a drought-prone region, you may want to consider weighing the cost of Pasture, Rangeland and Forage Insurance against the cost of  purchasing hay for feed.

“You might hate to pay the premium, but look at what could go wrong and ask yourself if you can afford it,” Klinefelter says.

3. Stay on top of your business. (Book)

“Successful managers monitor and analyze their performance,” Klinefelter says. “They’re more likely to spot problems and opportunities before it’s too late. Business problems are like cancer—they eat away at profits. But if you spot them early, they’re often treatable.”

For example, many ag operators take last year’s cash-flow budget and adjust it for next year.

“Usually, lenders won’t settle for this,” Klinefelter says. “They know that ranchers and farmers consistently overestimate projected earnings.”

Each month, check projections against current cash flow. If this month proves worse than projected, you may need to adjust your expenditures.

4. Establish priorities—the 80:20 rule. (Book)

The 80:20 rule says that 80 percent of what we accomplish is produced by 20 percent of what we do.

“Do first things first,” Klinefelter says. “Most people never accomplish their goals because they focus on what they know how to do, what they like to do, what’s easiest and what’s urgent.”

For example, if you operate a hunting ranch and prefer the hands-on work of building feeders and maintaining deer blinds over marketing, it might pay to hire a marketing professional to promote the business.

profitable ranch advice

5. Conduct autopsies.

Evaluate key decisions to avoid repeating mistakes. What went well and what went poorly? What did you overlook, and which assumptions led you wrong? What did you learn?

Consider the rancher who raises purebred cattle for potential embryo and breeding stock sales. If that business model is too labor- or input-intensive, it may be time to switch to a more traditional cow-calf business model.

6. Do little things better—the 5 percent rule.

“Studies show that the most sustained success comes from doing 20 things 5 percent better, rather than doing one thing 100 percent better,” Klinefelter says. “Also, the most profitable producers tend to be only about 5 percent better than average farmers in terms of costs, production or marketing.”

He uses wheat to illustrate how little things add up. Assume the seasonal average wheat price was $7 a bushel. Others waited for prices to hit $8, but that never happened. You locked in a sure thing by forward-contracting for $7.35, just 5 percent higher than the average price.

7. Benchmark your performance.

“Most producers have no clue how they stack up against their competition,” Klinefelter says. “They think they’re average or a little above—but it’s not possible for everyone to be average or above. How do you stack up against the top 25 percent?”

Consider, for instance, that you raise cattle, and your calves have a lower average birthrate than those on similar operations. Find out how others have improved survival rates in their herds.

profitable-ranch-advice-cows

8. Analyze what to stop doing.

“Successful managers spend as much time analyzing what they need to stop doing as they do evaluating new opportunities,” Klinefelter says. Such analysis can lead to shedding assets, enterprises, people, land leases or unnecessary practices.

He cites the case of a family that produced milo and cotton crops that were only marginally profitable. They generated more profits buying calves and putting them on winter wheat in November, and selling them each spring.

“These brothers decided to lease their cropland to other farmers and focus on what they did best—raising cattle. It made a huge difference,” he says.

9. Use accrual-adjusted income to evaluate profitability.

“Cash-basis accounting is great for simplicity and tax management, but it’s a poor way to measure true profitability,” Klinefelter says. “Cash-basis often lags accrual-adjusted accounting by two to three years in recognizing profit downturns and upturns. By then, it’s too late to respond.”

You don’t need an accrual accounting system, however; simply prepare balance sheets that reflect the beginning and end of the period for which you’re measuring income. Include inventories, accounts receivable, prepaid expenses, accounts payable and accrued expenses.

10. Learn from the E-myth principle. (Book)

The E-Myth” a book by Michael Gerber, talks about how many people believe they can succeed as entrepreneurs, when in reality most small businesses fail. Gerber maintains that most business owners begin with a fatal assumption—that if you understand the technical side of your business, you understand how to run the entire business.

Klinefelter suggests you apply this lesson to ranching, by learning about other players that affect your operation—employees, buyers, suppliers and funding sources.

“Find the top three things that most frustrate each of these groups in dealing with a business like yours. If you can reduce those frustrations, you can become the supplier, customer, employer, borrower or tenant of choice,” he says. For example, ag lenders such as Farm Credit like to hear from customers when changes occur—don’t wait until the end of the year to contact them.

Do you manage a ranch or farm? Share your tips for running a successful business in the comments section.


This article appears in the fall 2016 issue of Texas LAND magazine and was provided by Farm Credit Bank of Texas. Visit www.landmagazines.com to read more and subscribe to future issues of both LAND magazine and Texas LAND magazine.

5 Keys to Quality Cattle

by Dave Pratt

Here are the keys to producing quality (high gross margin) cattle, or any species of livestock for that matter:

  1. Fit the enterprise to the resource. It doesn’t matter how productive your cows are if you shouldn’t have cows. You can cram a square peg in a round hole, but it is expensive, exhausting and unsustainable.
  2. Fit the production schedule to the environment. Why don’t elk in Montana calve in March? It’s because nature’s production cycle is in synch with the seasonal availability of forage and because photoperiod has a big effect on the seasonal fertility of ALL grazing animals. This isn’t to say that everyone should be calving in late May or June. But being able to reduce hay feeding by $200-$300 per cow probably adds more value to most ranches than the extra $100 you might get for the calf weaned by the cow that consumed all that hay.
  3. Find animals that fit the environment. Hot and humid or cold and dry, subtropical or temperate, prairie, mountain or desert, a cow that works in one environment may not be suited to another. That goes for the production schedule too. A cow selected to be productive in a March-April calving program may not be fit for a May-June calving program.
  4. Hit depreciation head on. For most producers the biggest cost of keeping a cow isn’t feed, rent, or labor. It’s depreciation. We rarely even think of depreciation as a cost of keeping a cow, let alone the biggest cost! In a typical herd, depreciation averages $250-$350 per cow per year. That’s $250-$350 ON EVERY COW EVERY YEAR! Many Ranching For Profit grads have drastically reduced depreciation in their herds. Some have even eliminated it. In my mind’s eye, cattle that don’t depreciate are quality cattle.
  5. Come up with a replacement strategy that works. Most cow/calf producers have no idea of the REAL cost of raising their own replacements. The gross margin of a productive cow is almost always at least a couple hundred dollars higher than the gross margin of H1’s or H2’s on the same ranch. There are alternatives to raising your own replacement heifers. You can contract with someone else to raise them, buy them, or buy older, depreciated cows as your replacements. It is a breakthrough for some producers to realize that they don’t need replacement heifers. It’s not heifers they need to replace, it’s cows. That paradigm shift opens the door to several profitable opportunities.

These five principles can help you improve the economic efficiency of any kind of livestock. Please share with me and ProfitTips readers the principles you’ve found essential to producing quality (high gross margin) livestock.