Long-range weather forecasts suggest we're in for several drier than normal years. Let's hope the forecasters are wrong. But right or wrong, drought is a normal part of ranching.
It won't be drought, however, that determines whether you profit or lose. Rather, it's how you position your business relative to the drought risk and the decisions you make once the drought hits.
In drought, the negative effects of poor management are intensified. The positive effects of good management are also increased. Drought affects land, livestock, money and people. Any effective drought plan has to address each of these areas.
Land Strategies Develop and maintain a desirable, drought-resistant, ecological state. Through good management we can increase cover and the organic matter, and shift species composition to a more desirable, drought-resistant state. This won't make it rain, but it will help you take advantage of whatever rain does fall.
- Cross fence to control where and when livestock graze and increase density. Plants grow slowly during drought, which means paddocks need more rest.
- To get longer rests without increasing graze periods, you'll need more paddocks per herd. Combine herds (provided you have adequate water) or subdivide paddocks. Either will increase stock density. Increasing density will generally improve the distribution of livestock and improve the uniformity of grazing.
- Develop a long-term, secure water supply. Fencing to control grazing isn't much use without adequate water for livestock. Adequate water storage is essential drought insurance, plus it's tax deductible. Since you are likely to combine herds in a drought, adequate delivery rate from the tank to the trough is important.
Strategies For Livestock - Develop enterprises that are compatible with drought risk. In drought, when carrying capacity (forage supply) drops, you must decrease the stocking rate (forage demand) as well. Overstocking can lead to ecological deterioration of the range, poor animal performance, red ink and depressed people.
Some classes are easier to dispose of than others (e.g., stockers versus registered cattle). In drought-prone areas, locking yourself into expensive breeding animals that you can't or won't dispose of is inviting disaster.
- Have a de-stocking plan in writing. The dust and heat of the sorting gate is no place to formulate strategic plans or think through the economic and financial consequences of your decisions. Discuss and develop the policy now and put it in writing.
- Know and act on your critical dates. I'll bet there's a date on your ranch when, if it hasn't rained or if there isn't significant growth, you know you are in trouble. Even if it were to rain after that date, you'll still be short of feed.
Determine your critical date. Initiate your de-stocking plan on that date. Let everyone know what the date is and what will happen when it comes.
Being caught with cattle on hand once everyone else has started selling leads to poor prices and overstocked ranches. The sooner you react, the better the prices and the more feed you'll have left.
Sometimes we make the wrong call. A client in Kansas de-stocked 3,000 steers when the critical date passed with no rain. A week later, it rained and rained and rained. There are two types of regret he says: regret that you did, and regret that you didn't. It was frustrating to discover he'd sold too early, but he says that it was an easier mistake to live with than keeping the cattle too long into a drought.
- Never drought feed. Drought feeding is expensive. Since you don't know how long the drought will last, you could be paying for the animals several times over. Drought feeding leads to overstocking, deteriorated pastures and bankrupt ranchers.
Strategies For Money - Put yourself in control. Stay on top of the economic and financial numbers. Income is likely to increase early in the drought when you de-stock. Have a plan to manage the capital.
Later in the drought, income will plummet. You need a strategy for low-cost production. Base the extent to which your business is leveraged on the risk of drought. Producers in drought-prone areas need to operate with a higher proportion of equity.
- Have reserves. Use the good years to build equity and financial reserves. Consider diversification with off-farm investments. Make your banker a partner to your plans and keep him informed.
Beware of "free" money. Government subsidies to maintain stocking rates, purchase feed and keep people going for one more year are a major disincentive for many to develop effective alternatives. These policies have encouraged overstocking, economic peril and financial disaster.
Strategies For People Develop a positive attitude about drought. Drought is a normal part of ranching. This is a time when you need to make critical decisions on selling stock and managing the land so it doesn't deteriorate. No one can do it for you, and it won't happen on its own. It is a critical part of ranching for profit.