As cattle operations grow and become more complicated, ranchers admit they're often not very sure of their overall financial direction — until it's too late to make significant operational changes. Certainly, they often have trouble tracking where and how they're making or losing money, even on a year-to-year basis.
But over the past decade or so, new management tools and systems in financial assessment have given some ranchers added ability to chart their business progression. This approach also necessitates a new mindset — one that says a rancher doesn't have to make decisions in a vacuum.
One of the pioneers in this movement is Gerald Roise, Powers Lake, ND. He was “one of the Guinea pigs” back in the late 1980s when the concept of Integrated Resource Management (IRM) changed the way he looked at his 5,000-acre leased and owned operation.
“This was totally a new idea at that time,” says Roise. “It's been a great experience though, and we've grown with it every year since then.”
He says there was originally a tremendous amount of paperwork to do with IRM. Too burdensome, he thinks, for most ranchers. Fortunately, Roise and others testing the system were able help IRM designers pare down the paperwork into a more manageable and user-friendly package.
“After a rocky start we ended up using a combination of production records along with business records in a fashion I'd certainly never used before,” he explains. “This marriage of production records and financial numbers is what I liked about IRM.”
Roise has found nothing but benefits from the program, he says.
“This whole thing has been phenomenal for us,” he says. “It's basically turned our operation around — we were financially struggling, but things are as good today as they've ever been.”
While the IRM concept has helped ranchers like Roise and others nationwide, there has been some marked reluctance among producers to adopt such a template. Roise thinks he knows why.
“If I was going to narrow down a reason why there's not been wider participation in the IRM model, it's because ranchers are very conservative about sharing our financial situations,” he explains.
Ranchers, he knows, tend to think that their business is theirs and no one else needs to know about it.
“With IRM you need to open yourself and your books to a group of people,” he explains. “From there, the program's success is based a great deal on the confidence you place in those other people.”
Besides the traditional, beef-subjectmatter specialists, Roise has at times involved his local pastor, banker and veterinarian in his IRM committee. The committee also includes some neighbors, but not always nearby neighbors.
Roise meets formally only once each year with the committee — to evaluate the past year and make long-range projections — but the committee is always available.
“Each time I have a major management decision to make, I don't feel I have to make it myself,” he says. “I can call up the neighbor — or whoever — who's been in on the committee meeting for advice and counsel.”
The secret to making IRM work, Roise says, is that these individuals are familiar enough with his situation to make more than generic or general recommendations. What they have to say will usually be quite specific and objective.
“Sometimes you have to swallow some pride and realize you're not doing everything perfectly,” he adds.
Sometimes, too, he admits, it takes several years to make changes, even changes suggested by his committee.
“My experience is that when they pound on you about the same thing year after year, it's usually something that should become part of the scheme,” Roise says.
Roise's son is planning to take over the farm and the 150- to 250-head ranching operation over the next 18 months. His son has been physically present during the IRM process for the past two years as the generational transfer evolves.
“I hope he'll proceed with the same process,” Roise says. “I give a lot of the credit to this management team for the successes we've had. Sometimes they can see opportunities where I can't.”
One area of his operation in which he found the team IRM approach made a difference was his decision to go from “leased” cows to “owned” cows. He looks back to a time when he thought he could not afford to buy cows.
“I was in debt with land and machinery, and I just thought at the time that it was better to lease cattle,” he explains. “It took the IRM team about five years to get me out of the leased cattle and into owning them. Some of it also had to do with the cattle cycle making it advantageous to own them.”
He's also switched his cropping enterprise to 100% cash-crop alfalfa — from small grains and oilseeds, which are traditional crops in his area. This was a change the IRM team suggested after looking at the enterprise analysis of the farm.
“We found we were losing money year by year on the crops and I was making money on the alfalfa every year,” he says. “But even with that, I found I was much more willing to make changes when I had 10 other people telling me to break traditional practices and go with what makes the money.”