Now that I have your attention. I have considered writing a book by this title. It would either be a best seller among the ranching community or get me committed to a mental institution.
However, if you observe carefully, anytime two ranchers get together the conversation always turns to one or both of the same topics–cattle prices and rain. They then usually dismiss the situation with an “oh well, we don’t have any control over either of them”. I say malarkey! You can control both of them. Now I’m really ready for the nut house, right?
No, here is what I am actually trying to say. On any ranch I might own, the only cow close to the place would be the one that the wife milks in the morning. I would run steers and flexibility is the reason.
To expand on this: First of all there is total flexibility in matching each year’s annual forage crop with the appropriate animal numbers as described in parts I through VI of this series. Furthermore, there is much greater marketing flexibility. Let me explain.
After I completed my forage inventory and knew how many head days of grazing that I have available, I would check to see if I could place an effective hedge on the cattle using the futures and/or options markets as will be explained later in another series of articles.
Even if I could place an effective hedge, I would still not be ready to rush out and buy cattle. Instead, I’d call some of my less astute friends (that have probably already used all their grass), inform them as to what I had available, and inquire as to what they would be willing to pay for a pasturage arrangement.
I would then choose the most profitable alternative—own and hedge or take in pasture cattle. Note that by using this process I have, in effect, established almost total control over both prices and rain. I may not “get rich” but at least I have insured that my profits are maximized (or losses minimized) each and every year consistent with sound long-term range resource conservation.
Dr Jimmy T (Gunny) LaBaume [send him mail] is President and CEO of Land & Livestock International, Inc.