A few years ago I spoke to a group of ranchers in Paris, TX. I asked them to list the things that determined their profit. They made a long list that included low prices, high costs, production, government, environmentalists, weather and interest rates.
When I told them they had left the most important factor off the list, somebody shouted, “luck.” It got a good laugh, but it missed the point. The most important thing affecting your profit is management. That means the most important thing affecting your profit is you.
That's the good news. After all, you can't make it rain, and as an individual, you can't change government policy or change commodity prices. What you can do is make decisions that position your business and steer it through the economic, political, social and biological environment we all face.
It is always rewarding to meet with our Ranching for Profit Executive Link members. While no two businesses are the same and each faces different challenges, these members share a common belief: They are responsible for their success.
This might seem obvious, but it is a unique mindset in our industry. Too often, when ranchers meet to discuss issues, they blame hard times and business failure on the issue. We blame low prices, the government, weather, environmentalists, packers, hobby ranchers, the folks or the kids. But it isn't any of these that determine our success or failure.
Of course, all of these things certainly influence profit. But the situation is not nearly as important as what we do about it.
For example, low prices during the trough of the cattle cycle spell big trouble for some ranchers. For others, it's a period of tremendous opportunity. It isn't the cattle cycle that causes ranchers to make or lose money; it's what we do about it.
Even in drought, it isn't the drought that causes ranchers to lose money as much as what they do about it. For proof, all you have to do is recognize that some ranchers survive drought in better shape than others.
Why? Could it be that their grazing practices resulted in higher soil organic matter and surface residue, increasing the effectiveness of the rain that did fall? Their management may have resulted in more desirable species that tend to use water more efficiently.
They probably selected enterprises that matched the drought risk of their environment, had a plan for de-stocking and recognized and responded to the warning signs of drought early rather than late. They probably had a plan to conserve the capital from drought-induced stock sales to buy back when the time was right.
Maybe that's why when Cleve, a Ranching for Profit alumnus in East Texas, called me a few years ago during a severe drought, his first words were, “I'm having my best year ever.”
If the situation were the critical factor determining our success or failure, everyone would make about the same profit or loss as his neighbor. I look at a lot of financial figures for ranches across North America, and I know that's not the case. Management not only makes a difference, it makes the difference when you are ranching for profit.