From the Director Dr. Clay P. Mathis Director & Robert J. Kleberg, Jr. & Helen C. Kleberg Endowed Chair
Published By KING RANCH® INSTITUTE FOR RANCH MANAGEMENT Texas A&M University-Kingsville 700 University Blvd., MSC 137 Kingsville, TX 78363 361-593-5401 361-593-5404 fax krirm@tamuk.edu krirm.tamuk.edu
Managing the Cow-Calf Business
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o you ever feel overwhelmed by the shear amount of information and technologies available to help manage your operation? You are not alone! The art of great management includes the ability to sort through all the technologies, tools, and information available and determine what matters most for achieving your unique ranch goals. Our ranch management graduate students at the King Ranch® Institute for Ranch Management spend two years training to do this well, and have the core analytical tools to merge biology of natural systems with sound business management principles and leadership skills. Last year in discussions as a faculty team, we realized the need to provide outreach to the industry through a lectureship that covered those important concepts for success in managing a cow-calf enterprise. Not everyone can set aside two years for professional development and graduate training. Thus, we partnered with the Texas and Southwestern Cattle Raisers Association and held our first Managing the Cow-Calf Business Lectureship in January 2020 in Fort Worth, Texas. Sure, ranching spans beyond cow-calf production, but the majority of our clientele are stakeholders in the cow-calf sector of the beef industry. Our KRIRM faculty team taught the day-and-a-half workshop with a relatively simple approach. We identified the core concepts in ranch, cow-calf, and business management that we felt lend to the greatest success. We purposefully chose not to delve too deeply into each concept, but presented simplistic tools for practical application. To reinforce the biological and analytical concepts taught, we provided an example ranch and used common management scenarios that included determining stocking rate, nutritional management to optimize reproductive performance, and marketing calves and cull breeding stock. Also included were scenarios on identification of fixed and variable costs, as well as managing labor, depreciation, and purchased feed cost. This learn-by-doing approach helped the attendees make sense of the most important managerial decisions in the cow-calf business. We offer training for today’s ranch managers, as well as the up and coming managers expected to take the lead in the years ahead. Consider investing in your team through such trainings to prepare them to make great decisions for your ranch when they move into a higher-level managerial role. Making this a high priority now is a strategic move that may be vitally important for the future of your operation.
Clay P. Mathis, Ph.D., Director and Robert J. Kleberg, Jr. & Helen C. Kleberg Endowed Chair Ashley Patterson, Editor
MANAGEMENT COUNCIL Chair: James H. Clement, Jr., King Ranch, Inc. Caroline Alexander Forgason, Robert J. Kleberg, Jr. & Helen C. Kleberg Foundation Gus T. Canales, A.T. Canales Ranches Dave DeLaney, King Ranch, Inc. Bob McCan, McFaddin Enterprises Erik Jacobsen, AgReserves, Inc. Neal Wilkins, Ph.D., East Foundation Mark Kossler, Turner Enteprises Hughes Abell, Llano Partners, Ltd Jim McAdams, McAdams Cattle Co. Jason Van Tassell, Sunlight Ranch Dave Hewitt, Ph.D., Caesar Kleberg Wildlife Research Institute Shad Nelson, Ph.D., Texas A&M University-Kingsville Clay P. Mathis, Ph.D., King Ranch® Institute for Ranch Management
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T E X A S A & M U N I V E R S I T Y - K I N G S V I L L E®
2 King Ranch® Institute for Ranch Management | Spring 2020
Photo by JoAnne Meeker
In this Issue Spring 2020 Volume 16, Issue 1
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The Value of Reproduction
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Upcoming Events
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Certificate in Advanced Ranch Management
On the Cover Photo Taken by Laurie Van Tassell
Historic Opportunity KRIRM grad Tom Davis is leading the charge to bring cattle back to Cibolo Creek Ranch
Service and Dedication
KRIRM welcomes three industry leaders as new members of the management council
Our Vision: We are determined to educate leaders who will make a positive difference in ranching and ensure that our hard-earned heritage is not lost. Our Mission:
The King RanchÂŽ Institute for Ranch Management teaches graduate students using a multi-disciplinary, systems approach to ranch management, and provides the highest quality lectureships and symposia to stakeholders in the ranching industry. We serve the ranching industry by empowering graduate students and outreach attendees with skills that will enable them to strategically manage complex ranching operations and successfully lead our industry. Spring 2020 | King RanchÂŽ Institute for Ranch Management 3
B By: Kindra Gordon
egin with the end in mind.” That is one of the basic tenets author Stephen Covey emphasizes in his best-selling book The 7 Habits of Highly Effective People – and it is a principle Tom Davis has focused on applying in life. Raised on a family ranch northwest of Fort Worth, Texas, Davis’s “end goal” has always been ranching, which led him to pursue an array of experiences to broaden his perspective and ranch management skills – including attending the King Ranch® Institute for Ranch Management and graduating from the program in 2016. Ultimately, his circuitous path has brought Davis to a goal he set years ago. He explains, “Building a ranch in the Big Bend area of West Texas has been my goal….the mountains get in your blood.” In 2018, Davis achieved that goal when he became ranch manager for Cibolo Creek Ranch sprawling across 30,000 acres amidst desert, prairie grass, and the Chinati and Cienega Mountains near scenic Marfa, Texas. In this role, Davis once again found himself beginning with the end in mind since Cibolo Creek Ranch, a historic ranch acquired by Texas businessman John Poindexter in the late 1980’s, was being operated for wildlife and resort services and had little existing infrastructure of fencing or water development adequate for cattle –no pens, barns, or cattle. “You have to take a macro view and work backwards,” says Davis of the exciting and historic opportunity he was presented.
Ready for the Challenge
What is today known as Cibolo Creek Ranch can be traced back to the mid 1800’s when Milton Faver established a flourishing trading business along Cibolo Creek and the Rio Grande. Faver constructed three forts, including one used as headquarters for his cattle operation, and one for a sheep and goat enterprise. By the 1880s, Faver was recognized as one of the most successful pioneers of West Texas, with more than 20,000 longhorn cattle and sizable sheep and goat herds. The ranch was bought and sold several times through the 1900’s until being purchased in the late 1980’s by John Poindexter, a Texas businessman, war veteran, and avid hunter. Working with the Texas Historical Commission, Poindexter has been dedicated to restoring the three historic forts as part of a premier ranch resort setting, as well as working with natural resource and wildlife specialists to return the grasslands and wildlife habitat to pre-pioneer condition. Learn more at cibolocreekranch.com.
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Davis’s extensive background prepared him for this cattle start-up venture. Growing up he was influenced by his grandfather operating a successful dairy. Eventually, Davis and his parents raised registered Charolais and a commercial Angus herd, as well as stockers on Texas wheatgrass. Of the experiences, Davis says, “You’re the head cowboy, vet and accountant; I learned how to do a bit of everything.” Davis continued his education at Texas Tech University and also day worked on ranches in west Texas. An internship with R.A. Brown Ranch at Throckmorton, working as a full-time welder and heavy machinery mechanic for a Lubbock-based wind energy company, and working with the horse program for two summers at a camp for children with chronic illness and special needs added to Davis’s skills and perspectives. He returned to wheat farming and developing a commercial cattle herd in north Texas, until his quest for continued learning brought him to the Institute. “I realized there’s much more to ranching than getting horseback every day; a good business background is
Cibolo Creek Ranch runs Black Angus cattle for the main herd, as well as Brangus and Corriente-Angus cross herds.
Two years after joining Cibolo Creek Ranch with the task to start a cow herd, Davis and his team can proudly say that Cibolo Creek is now a functional working ranch.
necessary,” he says. Through his KRIRM experience, Davis found one of the most beneficial aspects was the networking, especially among fellow KRIRM graduate students and being able to learn from each other’s experiences. Additionally, during his KRIRM tenure Davis had the opportunity to complete an internship with Lykes Ranch in Florida, and upon graduating moved into a position managing the quarter million acre Laureles Division of the King Ranch from 2016 to 2018.
New Territory
Davis gained from each role, and sees quite a contrast between his King Ranch experience and his current start-up pursuit. He says, “The King Ranch spoiled me a bit because it was very structured with 150 years of cattle history.” But Davis’s affinity for reinventing, along with his grit and love for west Texas, sparked his interest in Cibolo Creek Ranch. He credits ranch owner John Poindexter for the commitment he’s made on the ranch over the last 30 years to remove and control brush and increase forage and carrying capacity. An avid quail hunting enthusiast and historian, Poindexter focused his initial efforts at Cibolo Creek Ranch on restoring the ranch facilities, creating a premier resort venue, and enhancing the rangeland habitat to accommodate wildlife and specialty hunting. With those goals met, he has turned his attention to building a cattle ranch. “It was time and the ranch was ready for cattle,” says Davis.
Before bringing cattle to the ranch, Davis had to put his financial – and fence building – skills to work. With a team of six employees, buildings, pens, roads, water, and fences were built – with fences continuing to be built today. Just two years after joining Cibolo Creek Ranch, Davis proudly shares, “It’s a traditional working ranch; we raise our own horses and use them every day.” Given the ranch’s remote location and diverse topography, Davis says sourcing cattle has been one of his biggest challenges. He explains that the ranch includes a big flat grassland base where the weather is temperate, as well as desert country and mountains. “It’s like running three ranches all in one.” They’ve chosen Black Angus for the main Cibolo herd, but also run Brangus and Corriente-Angus cross cows. The ranch is focused on spring calving only and current herd numbers give them about 550 head to market annually. Rotational grazing is being utilized, including an intense pasture system under an irrigation pivot that is used for weaning and preconditioning calves. Previously an alfalfa field, the irrigated pasture has been seeded to a Bermuda grass mix that “helps the ranch get around drought,” according to Davis. Davis is tasked with overseeing the ranch financials – and strives to know costs on everything, including each fence post and wire that is stretched. He credits the financial models for a feed program he first developed during his KRIRM internship, among the financial analysis tools he still uses. Continued on page 10
Ranch terrain includes a big flat grassland base where the weather is temperate, as well as desert country and mountains. Spring 2020 | King Ranch® Institute for Ranch Management 5
Sunlight Ranches Photo
KRIRM welcomes three industry leaders as new members of the management council
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he King Ranch® Institute for Ranch Management (KRIRM) is excited to welcome three new members to our management council in 2020. The management council is a group of men and women who use their vast experiences in the ranching industry to contribute to the wise direction of the KRIRM master’s degree, outreach, and newly established research program. Here, we recognize the three newest members of the council, Hughes Abell, Jim McAdams, and Jason Van Tassell, who will join 11 other industry professionals on the council. “Our programs are all about working smarter but having a foundation in practical experiences,” states King Ranch family member and chair of the KRIRM management council Jamey Clement, Jr. “These three cowmen have run wide-ranging and diverse operations, and I believe their advice and counsel will improve our programs and avoid mission drift.” That experience lends to each new member bringing a unique set of skills and knowledge to help lead the program into the future of the ever-changing ranching industry.
Hughes Abell
A familiar face to those involved in ranching in the Southwest, Hughes Abell will join the management council bringing along nearly 50 years of experience in ranching and leadership roles. Abell is the founder and General Partner of his family operation, Llano Partners, Ltd., with ranching, farming, and cattle feeding operations spanning Texas, New Mexico, and Florida. In addition, he actively manages private investments in oil and gas, timber, and commercial real estate. “All of us who serve on the management council bring varied experience to fulfilling the mission of the unique 6 King Ranch® Institute for Ranch Management | Spring 2020
venture that is the King Ranch® Institute for Ranch Management. Our company’s particular focus is on cow-calf operations…each with a long range emphasis on operational efficiency, long range planning, and responsible care of our natural resources,” explains Abell. His résumé of industry roles and appointments includes currently serving as First Vice President of the Texas & Southwestern Cattle Raisers Association (TSCRA) and as a director of the Texas Livestock Marketing Association, National Finance Credit Corp, and National Cattlemen’s Beef Association (NCBA). A 1972 graduate of Vanderbilt University, Abell is also a former member of the Cattlemen’s Beef Promotion and Research Board. “The most rewarding aspect of involvement in the industry has been with the TSCRA. This includes serving as Vice Chair and then Chairman of Natural Resources Committee, participating in legislative work on water issues, and most recently on reform of eminent domain laws,” says Abell. While reflecting on his roles and impact to the industry on state, national, and international levels, Abell cites the time as a great educational privilege and opportunity to serve the industry, but with an understanding that it’s not all about his accomplishments.
Hughes Abell
“So many individuals who have had similar opportunities to contribute have made us all more successful as individuals and an industry, and made our country the world leader in agriculture,” he says. A native of Monroe, La., Abell now calls Texas home. He and his wife, Betsy, live in Austin and are the parents of two grown children who are involved in the family ranching operation. “I hope to share our experience with the management council, and learn from others from their diverse experience in varied fields, to provide meaningful direction to the future of participants in the KRIRM program,” explains Abell.
Jim McAdams
A leader in Texas and U.S. agriculture for 30 years, Jim McAdams recognizes the significance in serving on the KRIRM management council during some of the most challenging times the industry has ever faced. McAdams, setting out early in his career with a desire to be nothing else but a rancher, looks forward to impacting the future of the industry that Jim McAdams shaped his successes. “It is not only my business but my life and I can’t think of a better way to ensure that this industry has a bright future than by serving as an advisor or mentor to those that want to make this business their life,” says McAdams. Recalling the valuable knowledge and wisdom that his mentors imparted on him in the early days of his career, McAdams is grateful for the opportunity to now share his experiences in the role of a mentor. “I feel deep gratitude to the people that have mentored me. From them I learned the value of knowledge and wisdom. I learned these things because they were willing to share what they learned from their experiences,” he explains. Today, McAdams runs his family ranch in the south eastern part of Texas and lives on a small ranch in the San Antonio area with his wife, Molly. After he graduated from Texas A&M University in 1972, he became the manager at McAdams Cattle Company, where he worked until 1990. During the next 20 years, Jim was an owner and partner on several ranches in Walker County. He later became COO of the Spade Ranch in West Texas, a ranch with 8,000 cows, sheep, horses, and an extensive commercial hunting enterprise. McAdams has provided critical and valuable leadership in the industry through his involvement in many organizations,
including serving on the board of NCBA for 15 years and as president in 2005, and serving for CattleFax as a board member and president. McAdams also worked with the Department of Agricultural Economics at Texas A&M to develop the Standard Performance Analysis (SPA) program, a standardized finance, marketing, and production performance measuring system for the beef cattle industry. “I believe I have learned more and benefitted more from serving than in any other endeavors, including my work and my formal education because of the people it has enabled me to associate with,” says McAdams. Through managing the large ranching operation at Spade Ranch to his role as partner in three feedlots, running stockers across the western United States, and managing five different registered breeds of cattle, McAdams feels that this involvement will be beneficial to the KRIRM program and students. “My life experiences have shaped how I think, how I learn and how I make decisions. I hope to contribute to the program by stimulating its participants in thinking and learning and using those skills effectively,” he says. McAdams and his wife, Molly, reside near Seguin, Texas, with their son John Kohl. Their son, Will ’04, Corps Commander 2003-2004, lives in Austin.
Jason Van Tassell
The third new member that KRIRM welcomes to the council may have the most unique perspective of the program as a 2012 graduate of KRIRM. Now, eight years later, Jason Van Tassell will have the chance to guide the decisions for a program that he says changed his life. “It is very exciting for me to be given the opportunity to serve on the management Jason Van Tassell pictured with council for KRIRM,” wife and children explains Van Tassell. “The Institute has been life-changing for me and my family, and has given us opportunities beyond the expectations we were considering before attending the program. This is truly an opportunity to give back to the Institute in appreciation for what it has given me.” Van Tassell currently manages Sunlight Ranch, a ranching operation in North Eastern Wyoming and Southern Montana. The operation consists of cow-calf, stocker and farming enterprises with the ability of producing and backgrounding approximately 10,000 head of calves annually.
Continued on page 10 Spring 2020 | King Ranch® Institute for Ranch Management 7
By: Jason Sawyer, PhD and Rick Machen, PhD
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n cow-calf operations, reproductive rate is the foundational productive function of the enterprise. Obviously, if cows do not become pregnant, then no calves are produced for revenue generation the following year. Revenue from culled cows is not a result of production; it is the liquidation of an asset that must be replaced (usually at a higher price), if production is to continue. Pregnant cows must successfully produce a live calf, and live calves must be weaned and sold before production revenue is generated. It is intuitive that improvements in reproductive success, or the prevention of reproductive failure, drive cow-calf enterprise productivity. Profitability, however, is not solely driven by gross revenue or productivity. The incremental costs of increasing production must be considered if managers are to successfully allocate resources to increase profitability. In other words, improving reproductive rate at all costs is not likely to be a solution. The optimum level of additional investment to support improved reproductive rate (or mitigate loss) depends on many factors, and the relationship of expenditure to improved production may be complex. However, identifying the potential value of improved reproductive success is an important benchmark by which management decisions can be evaluated for feasibility. In this article, we describe one
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method of evaluating the value of reproduction to facilitate decision-making.
Change in Expected Revenue
A straightforward way to estimate the value of increasing pregnancy rate is to project the value of additional calves produced. Increasing pregnancy rate by one percentage unit doesn’t result in one more calf weaned and sold, due to expected losses between pregnancy determination and weaning. Average values of gestational loss and preweaning losses are 3 to 4 % each, although these will vary considerably among operations. So, for every cow pregnant, we may expect to wean 0.93 calves. A 1% change in pregnancy rate (one more cow bred out of 100) therefore results in 0.93% increase in the number of calves weaned. If each calf weaned has an average value of $700, then increasing pregnancy rate 1% (one more cow bred per hundred) results in a $6.51 per cow exposed increase in expected production revenue ($700/calf X 0.93 calves weaned/100 cows).
Applying the value
When considering strategies to increase pregnancy rate (or prevent losses), managers make projections about the effect of the strategy on pregnancy rate (the production function)
and its cost. For example, a nutritional strategy to increase body condition score (BCS) of cows might be applied to improve pregnancy rate. Using data from Figure 1, increasing BCS from 3 to 4 results in a 17.5% increase in pregnancy; increasing from 4 to 5 results in a 12% improvement, and from 5 to 6 only a 5% improvement. Based on the estimate above, each 1 percentage-unit change is worth $6.51; therefore, the value of changing body condition score from 3 to 4 is $6.51 X 17.5, or $114 per cow. Increasing from 4 to 5 is worth $78 per cow, but from 5 to 6 is only worth $32 per cow. If a strategic feeding program is available to achieve these changes in cow condition at a cost per cow lower than the expected value, it is likely to be a profitable decision. Preventing loss of body condition prior to or during the breeding season can be valued similarly. A strategy to prevent cows that are marginal from losing body condition has the same value as improving condition in thin cows, assuming the same effects on pregnancy rate. Another example is the prevention of pregnancy losses – what is it worth to prevent a loss in pregnancy rate, perhaps due to a disease outbreak? In this case, managers should consider the magnitude of impact of the disease on pregnancy rates, coupled with the risk of such an outbreak occurring. Let’s suppose pregnancy rates might be reduced by 40% due to a reproductive disease. However, based on local or historical occurrence rates, this might only happen once every 40 years. This suggests a 2.5% chance of the disease occurring in any given year; the impact (-40% pregnancy) is only 2.5% likely. The combined rate (2.5% X -40%) is -1%. Using the value of reproduction derived above, this is an expected annual loss of $6.51 per cow. Preventive measures such as vaccines that cost less than this amount are considered a good investment.
Other considerations
The expected revenue model provides a reasonable frame for decision making and is relatively easy to estimate. Other factors should be considered when holding these projections
Participants at the January 2020 lectureship on Managing the Cow-Calf Business learned, among other topics, how to project the value of additional calves to facilitate decision-making.
up to actual accounting data. First, as pregnancy rate decreases, current year cash flow from cull cows increases while cash flow from calves is not affected, but may be affected the following year. If all open females are culled and subsequently replaced, calf revenue in the following year may not be decreased, although expenditure for replacements will be increased. While the method of revenue estimation is a reasonable approach, it may not match directly with cash flows. Additionally, due to the often-negative swap on cull cows (book value higher than market value), using cash accounting only does not fully reflect the true impact of lowered production rates. A full managerial accounting analysis can be conducted to derive the true total cost/benefit of changing reproduction rate, but relies on accurate managerial accounting frameworks. The estimated revenue method can be used in the absence of this information.
Summary
Managers are often motivated (rightly so) to cut cash expense, but due to lags in cash flows may not realize the potential benefits of investing in inputs that improve pregnancy rate. Reproduction is the primary driver of productivity, and a method to estimate its value to the business can enhance decision making and improve the bottom line.
Figure 1: Relationship between body condition score in cows from the Northern Plains (Bowman and Sowell, 1998) and S. Texas (Wikse, 1995). Average values are used for calculations.
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Historic Opportunity, continued from page 5
“We want to make sure every move is the right one, and the ranch can [generate revenue to] pay for it,” Davis says. One revenue generator that has been a huge asset to Cibolo Creek Ranch is wildlife hunting of elk, mule deer, Barbary sheep, and blue quail. Davis, who has a dual role as wildlife manager for the ranch, says that the cattle and wildlife on the ranch “co-exist perfectly” because they typically don’t compete for the same type of vegetation. And in regard to quail hunting, Davis believes the cattle have enhanced the quail habitat. Looking to the future, Davis recognizes Cibolo Creek Ranch’s cattle entity still has many opportunities ahead. He
looks forward to continuing to build uniformity within their cowherds and calves and evaluating opportunities to expand. In addition to his manager role at Cibolo Creek Ranch, Davis is assisting Poindexter with establishment of a Black Angus herd at a large ranch property he purchased near New Kent, Virginia, known as Cumberland Plantation. On his own time, Davis also offers financial consulting for ranches in the desert southwest, and enjoys ranch life with his wife Alex and son J. Fred, 4, and daughter Eleanor, 2.
Upcoming Events Service and Dedication, continued from page 7
August 10-13, 2020 John B. Armstrong Lectureship on Systems Thinking in Ranching Kingsville, TX
September 18-19, 2020 Managing Farm and Ranch Employees Kingsville, Texas JoAnne Meeker Photo
Prior to coming into this role at Sunlight, Van Tassell was a Livestock Manager for the historic Parker Ranch in Hawaii. While in this role, he served on the Hawaii Cattleman’s Council and the Hawaii Cattle Producers Co-op. Jason and his wife, Laurie, have four children: Laney, Macey, Cache, and Texie. Van Tassell says that he works closely with ranch ownership, unit managers, and employees as they strive to enhance the resources of the ranch and preserve the integrity and honesty that Sunlight Ranch was built upon. Looking at this next role in his career, Van Tassell reflects back on how the industry shaped him. He believes this is a chance to him to pay it forward and continue the tradition of ranching. “It reminds me of those who have gone before to clear the trail, lay the foundations, ask the difficult questions and set the standards for others to follow and build upon.”
Connect with us online at http://krirm.tamuk.edu and on social media for our news and event information!
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Spring 2020 | King RanchÂŽ Institute for Ranch Management 11
700 University Blvd, MSC 137 Kingsville, TX 78363
Save the Date!
17th Annual HOLT CATÂŽ Symposium on Excellence in Ranch Management in partnership with
The Future of the Wildlife Enterprise Applying New Knowledge & Tools
October 29-30, 2020
http://krirm.tamuk.edu/symposium
Kingsville, Texas
361-593-5401