Developing a strategic management plan can help a ranch operation adapt to the challenging times facing today’s beef industry.
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A strategic plan includes a vision of a ranch’s goals, strategies and techniques to measure the progress. Vision can include grazing plans, along with breeding and marketing programs.
During challenging and volatile times, some ranchers tend to take a defensive stance instead of making offensive management decisions.
"In fact, I think it’s a time to get fairly aggressive at defining where you want to be five years from now in your business," Dunn said.
Most ranchers are good operational decision makers, whether they’re making fencing or bull selection decisions.
However, Dunn said, ranchers need to also be thinking strategically about where the industry is going and its impact on them.
"Choosing a crossbreeding system that can optimize hybrid vigor over a straight breeding system is an example of strategic planning," Dunn said. "Another example would be including heat-tolerant breeds in areas such as South Texas."
Management strategies can range from determining a ranch’s breeding system to managing risks. From fuel to fertilizer to fencing, high input costs present some of the greatest challenges for ranchers. A strategic plan should include strategies for managing these risks.
Dunn said input costs for items such as fuel are increasing at double-digit rates.
"It’s really kind of sobering. I don’t think any of the input costs are going to go down," he said. "Five-dollar-a-bushel corn and $100-a-barrel oil will be the new benchmarks on which everything else will be based. We just need to get used to that and figure out how to manage in that. We still have great consumer demand for beef, and there is great opportunity."
John Malazzo, owner of John Malazzo Farms in Caldwell, raises commercial cattle and purebred Brahman and Hereford cattle. He focuses on raising F1 replacement heifers.
Malazzo is taking strategic steps to adapt his ranching operation to today’s challenges.
For example, he said, he can’t justify the cost of fertilizing all of his pastures and hay fields. This year he will only fertilize hay fields.
He acknowledged he will have to increase weed spraying costs in pastures that aren’t fertilized. Malazzo said he also plans to reduce some equipment debt and work to grow more pounds of beef per cow.
"I’m going to try to expand my market — find more people that will look at my F1 heifers as a replacement source," he said.
Managing risks also can include obtaining pasture insurance against drought. Utilizing commodity markets using puts and options is an inexpensive way for ranchers to lock in profits, Dunn noted.
Another strategy to managing marketing risks can be as simple as a rancher contacting last year’s buyer. The rancher can learn how the cattle performed and how he can better produce a commodity for that buyer.
Finally, ranchers should measure their progress.
The business tool Dunn recommended for measuring progress is the balanced scorecard. It’s a simple, Web-based tool that measures progress toward a vision with financial, livestock, family and natural resource perspectives. It can be found at http://krirm.tamuk.edu. Click on the library link, then the publications link. The balanced scorecard is listed under "ranch management."
"It’s time to keep your chin up and aggressively learn about a new and changing business. Consumer demand for beef is great and very strong, and we have a lot to look forward to. But it’s going to be very challenging," Dunn said.
• E-mail Beverly Moseley at beverly.moseley@theeagle.com.
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