Winter 2018 King RanchÂŽ Institute for Ranch Management 1
From the Director Dr. Clay P. Mathis Director & Robert J. Kleberg, Jr. & Helen C. Kleberg Endowed Chair
“Contribution Margin: A Valuable Decision Making Tool”
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was recently asked to make a presentation about the key drivers of profitability for a commercial cow-calf enterprise. As I considered the topic, I took pause because the profit equation is really so simple: Revenue - Expenses = Profit. Beyond this equation, what really drives profit? Profit is a function of the decisions made by management; and the professional with the best tools and knowledge has the advantage. In the context of a cow-calf enterprise, we recognize the complexity of the biological system where inputs and outputs are interconnected. Managers interested in maximizing profit must optimize weaning rate and weaning weight, as well as major expenses of feed, labor, and depreciation. However, there is no silver bullet or prescription that is most effective at accomplishing the perfect balance because of the vast differences in resources and goals from one ranching operation to the next. Understanding the relationship between variable cost, fixed cost, and the number of cows is very important to making management decisions that sustainably increase net income. Fixed costs (equipment and building depreciation, property taxes, interest payments, etc.) are present regardless of the number of cows on the ranch. Labor is also considered a fixed cost for most established cow-calf enterprises. On the other hand, variable costs change with the level of production or number of cows. These include purchased feed, freight, medicine, veterinary services, etc. Fixed cost generally comprises 60 to 70% of total expenses to a cow-calf enterprise. As producing cows in the operation increases, fixed cost per cow decreases. Maximizing producing cow numbers within the confines of excellent natural resource stewardship typically yields the greatest net income. Consider a 100-cow operation that generates $1,050/cow in revenue and has $1,000/ cow in expenses. The net income of the operation is as follows: • $1,050/cow revenue - $1,000/ cow expenses = $50/cow net income • $50/cow net income x 100 cows = $5,000/year net income Now an example of an enterprise with 60% fixed costs: • 60% x $1,000/cow expenses = $600/cow fixed cost • 40% x $1,000/cow expenses = $400/cow variable cost How much net income would the enterprise make if there were 101 cows (an addition of 1 cow)? The answer is an extra $650, totaling $5,650/year net income
continued on page 10 2 King Ranch® Institute for Ranch Management Winter 2018
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 http://krirm.tamuk.edu 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 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
Photo by JoAnne Meeker
In this Issue Winter 2018 Volume 13, Issue 3
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On the Cover “No Matter the Weather” By: Tim Cox www.timcox.com
Grazing Management Lectureship Learning Objectives and Producer Experience
A Challenging Reward
Clint Richardson Grateful for Rewards of Managing Deseret Cattle and Citrus
Looking Back, Looking Forward KRIRM Class of 2018 Shares Their Experiences
Upcoming Events
Lectureships and Symposia in TX, FL, OK
Master of Science in Ranch Management
Now Accepting Applications for Fall 2018 Admission
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 Ranch® 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. Winter 2018 King Ranch® Institute for Ranch Management 3
Grazing Management Lectureship Learning Objectives and Producer Experience
Photo courtesy of Noble Research Institute, LLC
By Ashley Patterson
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correct stocking rate, adapting to current conditions while implementing a grazing plan, and monitoring the response from the grazing land and animals—all are important components of a grazing plan and according to Rob Cook of Noble Research Institute, LLC, are areas that can present challenges to a ranching operation if not implemented correctly. On March 13-16, 2018, in Ardmore, Okla., the King Ranch® Institute for Ranch Management (KRIRM) in partnership with Noble Research Institute, will hold the Richard Mifflin Kleberg, Jr. Family Lectureship on Grazing Management. The lectureship will provide participants an opportunity to learn or refresh their knowledge on the basics of ecology and grazing land management. Cook, pasture and range consultant in the producer relations program of Noble, explained that this basic understanding of principles and processes will serve as a foundation to build a sound and successful plan to meet the goals of a ranch. Taught by Cook and other highly qualified grazing land consultants, this lectureship will cover basic ecology; resource management principles; forage types and management strategies for each; applied 4 King Ranch® Institute for Ranch Management Winter 2018
grazing management; fertility and weed management; brush management; monitoring techniques; fencing demonstrations; and more. Cook explains that developing a grazing plan for a ranch is just as vital as other plans ranch managers put into place. “A proper grazing plan will allow managers to balance the animal demand with the forage production on their grazing lands,” said Cook. “This will allow them to set a proper stocking rate, which is the single most important decision a grazing land manager can make.” After the correct stocking rate is established, it is important to provide growing season rest and maintain a proper utilization rate. Cook further explained that a good grazing plan should include a detailed map that delineates all resources present, an initial grazing planner that shows the estimated number of days the pasture can be grazed, a monitoring plan, and a contingency plan for natural events like drought. “A grazing plan is just that, a plan,” he said. “Conditions change, but if there is a plan in place that addresses the goals for the animals and the grazing land, a manager can be proactive rather than reactive.”
Producer Experience
supplementation costs, improved wildlife habitat, and better forage diversity supplying better nutrition for both cattle and wildlife.
Bob McCan of McFaddin Enterprises said the key foundational component of McFaddin’s grazing plan was the concept of taking half and leaving half of the forage base. Lectureship Details Operating completely on native rangeland in the During the grazing management lectureship, attendees Gulf Coast Prairie region of south Texas near Victoria, will learn that successful grazing land managers evaluate McFaddin has been in the cattle operation since the with the big picture in mind, taking a systems view to 1800’s. McFaddin Enterprises is a multi-generational understand that each management decision made on one cattle, farming, and wildlife operation, now managed by part of the system impacts the other areas. Cook and the McCan. “We had a pretty good idea about how “A grazing plan is just that, a plan. much grazing pressure our forage base could Conditions change, but if there is a plan stand within the soil types we operate,” said McCan. in place that addresses the goals for the He further explained that starting out with animals and the grazing land, a manager a conservative stocking rate for the entire rotation that was based on the past history can be proactive rather than reactive.” of stocking rates was another important factor. Also, rotating faster during periods of high growth and slowing down during periods of slow Noble Research Institute consultants will provide firstgrowth helped build stockpiles of forage during the good class instruction in all aspects of grazing management, times. This allowed the operation to have more forage and lead a hands-on project that will allow participants available during stressful times, explained McCan. to manage the grazing of a small cattle herd to meet “Our rotation system is usually anywhere from five to different management goals. Tours to area ranches will seven pastures and one herd. Most of the paddocks are also be part of the event. from 500-750 acres in size with three to four reliable The event will be held on the Noble Research Institute water sources for each paddock,” he said. “In periods of campus in Ardmore, Okla. Registration is $500, which high growth, we move the herd every two weeks and in includes workbook materials, equipment, meals, and periods of slow growth every three weeks.” refreshments. Additional details, the complete agenda, McCan noted that the greatest benefit associated with and online registration can be found at a grazing plan is increased diversity of native species and krirm.tamuk.edu/grazing. KRIRM is proud to partner improved range condition. Those benefits, he said, lends with Noble Research Institute to offer this learning itself to multiple improvements for McFaddin in the opportunity. areas of better nutrition for cattle year round, lower feed
Left:Victoria Brafords on the native range of McFaddin Enterprises in Victoria county. Middle: Noble Research Institute pasture and range consultant Jeff Goodwin shows producers the importance of soil health to land management. Right: Noble Research Insitute main campus in Ardmore, Okla. The grazing management lectureship will be held there on March 13-16, 2018. Winter 2018 King Ranch® Institute for Ranch Management 5
A Rewarding Challenge
Commercial cows pictured on Deseret, the largest cow-calf operation in North America. Photo by Rene Jacobsen. Feature photo of Deseret Cattle and Citrus General Manager Clint Richardson. Photo by Elijah Skidmore.
Clint Richardson Grateful for Rewards of Managing Deseret Cattle and Citrus By Ashley Patterson
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hen a passion is born early, cultivated by a continual desire to learn and grow, it is not surprising how far that commitment can take someone. For Clint Richardson, the passion for ranching and beef cattle production began as he worked alongside his father and older brother on cow-calf operations in eastern Colorado and central Kentucky. Today, Richardson’s passion is still strong for the stewardship of land, livestock, and natural resources as the general manager of Deseret Cattle and Citrus in Saint Cloud, Fla. Richardson’s path to general manager of one of the largest and most diverse ranches in North America involved dedication, vision, and hard work. Running 45,000 cows makes Deseret the largest cow-calf enterprise in the country. In addition to overseeing the cattle operations and 85 employees, Richardson manages a variety of enterprises on the ranch including wildlife, sod, shell, and timber. The challenging—but rewarding—work of stewardship 6 King Ranch® Institute for Ranch Management Winter 2018
was a driving force behind Richardson’s desire to dedicate his career to the ranching life. After graduating from University of Kentucky with a Bachelor of Science in Animal Science in 1998, he began his first job with Deseret as a cowboy. Over time, he moved through the ranks, with each new position shifting the size and complexities of his responsibilities.
Education and Experience Key to Success
For five years, Richardson worked at Deseret as a foreman in heifer development and the purebred unit, and in 2005 decided to pursue his ranch management master’s degree at the King Ranch® Institute for Ranch Management (KRIRM). During the two-year program, Richardson said he learned to balance his technical, leadership, and analytical abilities while also sharpening his skills in range management, finance, accounting, economics, and leadership. The systems-approach to
ranch management was key to his education and growth. “You learn to take a systems approach to problem solving,” explained Richardson, “and find the leverage points to make changes to effectively move the business forward.” After graduating from KRIRM with a Master of Science in Ranch Management in 2007, Richardson returned to Deseret in the role of commercial cattle area manager for two years. From 2009-2015, Richardson was the manager of Triangle Ranches in the Rolling Plains of Texas before becoming general manager of the Central Ranches region for Deseret Ranches. This position included oversight of three Deseret-owned ranches: Navasota Ranch, Triangle Ranch, and Sooner Cattle Company. “These experiences were invaluable in my preparation in becoming the general manager at Deseret Cattle and Citrus,” said Richardson. “I learned how to manage in diverse environments and maintain profitability through challenges such as severe drought, and market volatility”. Richardson has held the role of general manager of Deseret Cattle and Citrus since June 2017. From his experiences beginning with his first job as a cowboy, Richardson noted how he learned that being a ranch manager involves a balanced approach. This approach must focus on the customer, business, natural resources, and people development.
Richardson’s path to general manager of one of the largest and most diverse ranches in North America involved dedication, vision, and hard work.
The Challenges of Managing Land and Livestock
A key component in the role of a ranch manager is how successfully one can adapt and deal with change. And ranching is certainly an ever-changing and evolving industry. Richardson believes that a skilled ranch manager has a team of equally talented and dedicated individuals to help manage effectively during times of change. “It’s important to develop relationships with industry experts, other successful ranchers, and university professors to ensure sound, science-based decisions,” advised Richardson. Richardson noted that a challenge he faces is finding the key leverage points that will impact the system to enhance overall efficiency and improve profitability. He believes a highly qualified ranch manager can tackle such a challenge and others with the ability to align with the vision and mission of the ranch owner; demonstrate a high degree of emotional maturity; effectively develop people, and develop and execute strategy. In his role of general manager, those pieces all come together as he is responsible for the financial, production, and safety performances of all ranch operations. The operations include cattle, natural resources, properties, and other business enterprises. Richardson completes those duties all with a long-term vision, outstanding community partnering, excellent team-building and consistent talent development skills.
The Reward
As challenging as the position and career sounds, Richardson is grateful for the ultimate reward of working in a dynamic business that includes natural resources, cattle, wildlife, horses, and high caliber people. “It is enjoyable to work with a great team and deliver excellent results,” said Richardson. “It is also great to see employees who appreciate their work and want to reach their potential.” And perhaps the best part of all is the chance to raise a family on the ranch. Richardson and his wife, Debra, are raising their four children—Kathryn, Nathan, Allison, and Dallin—among a beautiful ranching community, instilling the same respect and devotion to the land and livestock as Richardson learned. “The beauty and serenity of the ranch and community make it a great place to raise a family.”
Fall 2017 weaning at Deseret. Photo by Rene Jacobsen. Winter 2018 King Ranch® Institute for Ranch Management 7
Looking Back, Looking Forward The graduating class of 2018 from left to right: Justin Staley, Candace Weeda, and Hank Willemsma. Feature Photo: Candace Weeda’s family ranch in southern Iowa.
KRIRM Class of 2018 Shares Their Experiences By Kindra Gordon nterest in bettering their skills in ranch management —from accounting and finance to communication and human resource management —are among reasons the three students in the King Ranch® Institute for Ranch Management’s (KRIRM) Class of 2018 say they were drawn to the program. In May 2018, Candace Weeda, Hank Willemsma and Justin Staley will graduate from the master’s program and embark on new journeys within the industry. Each came to the institute with diverse experiences. Willemsma and Staley, natives of New Mexico and Idaho respectively with backgrounds in cattle and horses, have worked on large ranches in Texas, Wyoming, Montana, Idaho, Oregon and Utah. Weeda, an Iowa native, grew up on a family crop and cattle operation, has studied agriculture internationally, and worked for the National Cattlemen’s Beef Association (NCBA) in Denver producing the television show NCBA’s Cattlemen to Cattlemen. Even with those extensive experiences, all three agree the drive to enhance their leadership and management skills led them to the KRIRM program. “I wanted to know the complexities of accounting, finance and marketing and apply them to ranch management,” says Willemsma of enhancing his skills to prepare for the future. He notes that with a bachelor’s degree in animal science, KRIRM courses have broadened his experience. “I liked the institute’s real-world ranching component,” says Weeda. She considered several
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different programs for her master’s, including pursuing a MBA, but ultimately decided KRIRM was the most well-rounded and something she “couldn’t get anywhere else.” Weeda says she gained from the wildlife component in the curriculum, as well as the business aspects. She also appreciates having the opportunity to “learn from the best.” Staley counts an accounting seminar with Stan Bevers, as well as the Managerial Accounting for Ranchers lectureship hosted by KRIRM as two course highlights that helped him gain the finance skills he was seeking. Staley adds, “I came to the institute so that I would be more capable of managing all facets of ranches, and I will be [more capable] upon graduating.”
Networks gained
Opportunities to connect with beef industry leaders have also been beneficial to these three individuals. Attending the top industry conventions and trade shows has “provided opportunities to get involved with industry issues and meet key people making the decisions,” explains Willemsma. Similarly, Staley says, “Networking with new people, whether that was on campus, lectureships, symposia, conventions or ranch tours. There are good people everywhere, and I feel fortunate to have been able to have met several in my time while at the institute.” Weeda concurs, saying, “We wouldn’t have had
exposure to ranch managers with a lifetime of experience anywhere else.” She counts listening to Joe Leathers, Dave DeLaney, Burke Teichert and Bob McCan among her highlights. As well, Weeda values the opportunity she’s had to learn from fellow students and individuals enrolled in the KRIRM Excellence in Ag Leadership program. And to reinforce the benefits of networking, Weeda says, “I’ve learned it is more important to know the right questions to ask. You don’t have to be an expert on every topic if you have a network of people you can call on to help provide answers.”
Enhanced Skills
In preparing for the next steps in his career, Staley says he appreciates the new critical thinking skills he learned, which will better facilitate the process of analyzing problems and identifying opportunities. He adds, “Working on real working ranch projects for quality people, has been very valuable. These projects have proven to be very applicable to managing ranches… There has been something to learn from each of them that can be applied to any management position.” Staley also values KRIRM’s efforts to help students more fully understand people/employees and identifying methods to better work with them. Staley says, “I believe one of the great things about the institute is the focus on personal and leadership development, which for me will contribute to enhancing my future abilities to manage people.” Staley says he appreciates that the KRIRM program isn’t solely focused on academics, and is instead “development-based.” He concludes, “I am a benefactor of that.” Willemsma credits his experiences at the institute for helping him gain human resource skills as well. He shares that the KRIRM program focuses on “developing you as a person.” He adds, “It’s not about what you know. You have to be able to handle a crew and communicate with them. You need to understand how
you make people care [about their job and the ranch.]” Weeda adds that a foundational point for her in the KRIRM program came during a presentation on generational transfer by Dick Wittman. She realized, “It isn’t about cows and grass. It’s about the people and setting businesses up to be successful, especially from one generation to the next. As a leader, my role is to help facilitate that conversation.” She adds that through the networking opportunities and observations she’s made as a KRIRM student she recognizes, “the really good managers are excellent with people. And, they truly care about their people too.”
Career Paths
Upon graduation, Staley, Weeda and Willemsma are all focused on putting their skills into action within the industry. Weeda is exploring opportunities in South Texas and says, “My goal is to work for a ranching outfit that is a good place for me to learn, while I also provide value for them. Somewhere I can grow.” She is interested in gaining more skills related to range management, while offering her own assets of communication, marketing and public relations. Staley is interested in joining a management team on a cow-calf and or stocker operation, and says he looks forward to a “position that will allow me to utilize my education to make sound decisions and to help move an operation forward to better accomplish the mission and vision of the business.” He and his wife Crystal also desire an opportunity that will allow their young family to be involved in the day-to-day ranch work. Willemsma and his wife Winona are Montana bound. Willemsma completed his internship with Matador Ranch during the summer of 2017 (see sidebar for details) and has accepted the assistant manager position at the Beaverhead Division of the Matador Ranch based in Dillon, Mont.
Student Internships >Justin Staley interned with Beef Northwest in Boardman, Oregon, working primarily with their cattle feeding division and shadowing managers and production personnel. While there, he also worked through an analysis project evaluating an opportunity for the company. >Hank Willemsma interned with Matador Ranch, in Montana and Texas ranch locations. Willemsma had the opportunity to conduct a brush control cost-analysis and also observe different managers and their interactions with employees. >Candace Weeda, interned in Colorado with Brett Gray Ranch, a 50,000-acre property managed by the Nature Conservancy and Round River Resource Management. Weeda helped with their stocker mob grazing system and developed a policies and procedures manual for ranch employees, many of whom are short-duration interns or apprentices.
Hank Willemsma pictured in Montana during his internship with Matador Ranch.
Winter 2018 King Ranch® Institute for Ranch Management 9
From the Director, continued.....
for 101 cows. That is a 13% increase in net income for the enterprise by simply adding one producing unit. Could
that be true? It is in this example because fixed costs of the operation do not change with the number of cows, therefore the contribution of the additional cow to net income is revenue minus variable costs: • $1,050/cow revenue - $400/cow variable cost = $650 extra net income by adding 1 cow The revenue generated by a cow above variable cost is called “Contribution Margin.” Understanding contribution margin is key to decision making that drives profitability. This is especially true when understanding how much you can really afford to spend to keep cows in the herd during periods of drought or reduced forage supply. Since the fixed costs remain
regardless of the number of cows, the destocking decision should consider the contribution margin of the cow(s) you would potentially sell. In this same hypothetical scenario, if forage supply dictated a need to reduce the cowherd from 100 to 99 cows, consider that 100th cow worth $650 in contribution margin. It is cost effective to maintain her through a drought for less than $650 in additional variable costs if she will yield average calf revenue. Extrapolating these numbers to a 1,000cow operation paints the picture more clearly. I encourage you to crunch your own numbers and determine the current contribution margin of a cow on your operation. This is a great tool for decision making, and an approach that no student graduates from KRIRM without mastering.
Upcoming Events January 10-12, 2018
GIS Technology for Ranchers Kingsville, TX
February 22-23, 2018
Application of Advanced Genetic Technology in Beef Cattle Kissimmee, FL
March 13-16, 2018
Richard Mifflin Kleberg, Jr. Family Lectureship on Grazing Management Ardmore, OK
May 14-16, 2018
Richard Mifflin Kleberg, Jr. Family Lectureship on Equine Management Kingsville, TX
Visit krirm.tamuk.edu, or follow us on Facebook, Twitter, and Instagram for more information about our program and upcoming events. 10 King Ranch® Institute for Ranch Management Winter 2018
Winter 2018 King RanchÂŽ Institute for Ranch Management 11
700 University Blvd, MSC 137 Kingsville, TX 78363
Event and Program Testimonials “The King Ranch® Institute for Ranch Management offers a tremendous program for people of all ages to engage in learning about ranching. Highly recommended!” --James Holmes; Executive Director; Cherokee Ranch and Castle Foundation
“Thank you very much for your passion for learning and teaching, and generally pursuing excellence in ranching.” --Guy Cumbie; Owner/Operator, Bar C Bar Ranch