Using Holistic Management to Overcome Adversity

CONTINUED FROM PAGE 13 cost of replacements is too high for the profitability we are seeking. We really didn’t have a lot of choice about what to sell at that time. We made the best choice at the time with the knowledge we had. Now, we just need to do the same; continue to make sound choices.

One of these choices was to project our forage in a year after a flood. We were in uncharted territory. We decided to look at the land and estimate which pastures would be able to produce 100% of their normal forage (those above flood line) and which ones would be less. How much less? 90%, 80% or 50% of what they normally produced? Using our past grazing charts, we determined the 7.7 million pounds was a conservative estimate of forage potential for this year.

We know that if we are a cow/calf operation we can hold a certain number of cows. But, if we decide to hold their calves as yearlings, then we don’t have the grass to keep that same number of maternal cows. We had to figure out how many maternal cows we needed to decrease if we kept their calves over into the next year. We now know, through forage estimation exercises, that our ranch can handle 650 cow/calf pairs along with their yearlings and that 7.7 million pounds of grazeable forage is achievable after the flood on our 4,200 acres.

If we want to add extra-age breeding heifers into the operation, then we need to bring that number down again to 570 cows. This means less breeding animals. The gross profit shows us that we are more profitable using this production model then if we decided to raise 717 cow/calf pairs on that 7.7 million pounds of forage. Just for context, in an average year, the ranch produces 11–15 million pounds of forage, of which a considerable amount goes to stockpile for spring grazing or as biological capital.

When we completed our calculations, everyone felt comfortable with the numbers. We reached consensus and plugged numbers into the financial plan based on price projections for fall.

Increasing Profit Even More

In Western Canada, we have a price insurance program and we decided early in the spring to buy a policy to guarantee $2/pound for an 850-weight steer. Having a guaranteed price, which we pay a premium for, reduces risk. We looked at our financial plan for areas of improvement. Price insurance was one possibility. Disaster assistance income was another. We couldn’t count on either, but there was some optimism. We projected having the price insurance expense, even though we weren’t sure it would materialize. So we didn’t calculate any extra income at the time of financial planning. There were many things that could go right. To manage to the most concerned team member, we continued to estimate conservatively.

We also created a spreadsheet showing options that would increase our gross profit. We looked at things like increasing weaning weight or backgrounding weight, increasing daily grass gain, reducing hay/ pellet costs, increasing grazing days, increasing the yearling or cull prices, or increasing the cowherd. We used our gross profit numbers to help us calculate the outcome of these changes and the total gross profit percentage increase of being able to accomplish one or more of these options.

After running the numbers, it became clear that reducing hay costs by $5/ton yielded a 3.3% gross profit increase. Hay is 49% of our budget so that gives us a big return. We may not have a lot of control, but we can try. We also decided to look at increasing yearling prices by just one cent/ pound as that yields a 3% gross profit increase. We have a lot of control over this, and we can directly influence it. We have made significant changes already in the last seven years by strengthening our relationship with our buyers, having our own scale —being very specific about weighing conditions to address shrink on cattle. We sell them right off our place so we don’t lose on shrink that occurs through loading, shipping, and unloading. We aim for uniformity that makes our cattle more marketable. Selling from our own place also allows us the flexibility of passing on low prices and deciding to wait a week for a shift in markets although we have to be careful not to affect our relationship with the buyer.

We also avoid getting caught up in the industry standard of maximizing yearling daily gain. We aim to have more head of yearlings gaining well. We ran gross profits and find this approach to be more profitable for us.

It is hard to swallow the loss of the genetics that occurred when we sold our replacement heifers as we have been working hard on this. Finding the kind of cow that fits into our program is difficult. We look for animals that calve in May and can thrive in this environment, that can handle our tough winters and, as we found out this year, that can survive on poplar saplings and willow, in a pinch.

We even ran gross profits to see if we should cull as liberally this year. We normally cull about 80 head (10%), but wondered if maybe some of those were open due to harsh conditions. If we kept the younger ones back and sold only the old ones, how would that impact our bottom line and adjust our inventory? We did three or four scenarios of what it would take to build our inventory and that is proving to be an uphill climb. We estimate it will take us three years to become profitable again by increasing our inventory slowly. We considered buying inventory through financing, but interest is too high to meet our profitability expectations. We also can’t guarantee the grass for them right now as growing conditions are not ideal this year.

We had three days’ notice before the flood and it only took two days to completely cover the property. We did have the high ground, our flood reserve, so we opened all the gates and let them go where they could. It was in the middle of calving so fresh calves were dropping. Two weeks after the flood some of the waters receded enough that the cows split themselves in half. One herd came home, swimming through channels and chasing the grass. The other half stayed where they were. There was enough grass and regrowth to sustain them although the land was overgrazed, a necessary evil.

Some of those decisions had to be made in less than 24 hours. Some we had a little bit more time. We did consider unintended consequences as part of our planning. Price insurance is a good example. The markets were volatile with the looming pandemic. We had allocated $20,000 to buy price insurance on those cattle in our financial plan, and we predetermined that $2/pound was the number that would work for us. We confirmed with our team that when the policy hit that high, we would buy up to $20,000. Being prepared in this way meant we didn’t have to organize another team meeting. That’s the importance of doing the work ahead of time. We might get that notification on our phone while tagging calves, but we stop and lock it in, no matter what we are doing. We estimated that we have potentially increased our total income by $40-$50,000 in this single decision, because we were ready.

Without the practices of Holistic Management, I would not be in agriculture. I’ve learned through our experiences at the B-C Ranch that agriculture doesn’t have to be crisis management all the time, that people are the most important, and that agriculture can be profitable. Sometimes we do have crises, like the flood, but through it all, focusing on the relationships is the key to dealing with adversity.

You can reach Bluesette Campbell at bluesettecampbell@gmail.com