KRIRM 2023 Winter Newsletter

From the Director

Dr. Clay P. Mathis Director & Robert J. Kleberg, Jr. & Helen C. Kleberg Endowed Chair

Experiential Learning While Serving Ranches Through Case Studies

This year marks the 20th Anniversary of the King Ranch® Institute for Ranch Management (KRIRM). For two decades KRIRM has worked diligently to fulfill a vision established by the King Ranch Family… “We are determined to educate leaders who will make a positive difference in ranching, and ensure our hard-earned heritage is not lost.” Our number one priority has been to develop exceptional ranch managers through a Master’s of Science in Ranch Management. Strategically, we know our leverage is to first recruit exceptional students…and we have done this well! To develop these experienced graduate students, we combine classroom fundamentals in agriculture and business to complement their practical ranching and technical skills. But there is a single ingredient to this recipe for success that yields the greatest growth in our students…experiential learning through case studies. Learning by doing is the best path to mastery.

During their graduate training, each student completes at least seven case studies for partnering ranches across North America both as individuals and teams. In essence our students build their skills as they serve as consultants to partnering ranches, struggling through real issues and solving problems that matter to the success of the operations we serve. The students, with experienced faculty oversight, are accountable for the recommendations they make, which is much more motivating than any letter grade. It’s a win-win: our students hone their advanced ranch management skills and KRIRM serves the ranches to help them be more successful.

Over the years KRIRM students have completed over 130 case studies for more than 50 ranches and ag organizations. We are very proud of this service! The depth of the cases varies, but as an example we have included in this newsletter a case study Executive Summary for a project completed by 2016 KRIRM graduate Tom Davis for Spade Ranches. This particular project originated when Wesley Welch, General Manager of Spade Ranches, contacted us to describe a brush encroachment issue challenging the Renderbrook Division of Spade Ranches in West Texas. The goal was to create a multi-year prioritized plan for cost-effective brush management across the ranch.

By combining solid academic training with multiple, real-world case studies, KRIRM has been graduating some of the most effective managers in the ranching industry. We are proud of the success of our 50 alumni that currently manage 8.4 million acres across North America, and we are proud to have served more than 50 ranches during these past two decades.

700 University Blvd., MSC 137 Kingsville, TX 78363

361-593-5401

361-593-5404 fax krirm@tamuk.edu krirm.tamuk.edu

Clay P. Mathis, PhD, Director and Robert J. Kleberg, Jr. & Helen C. Kleberg Endowed Chair

Emily Stribling, Editor

MANAGEMENT COUNCIL

Chair: John Alexander, Jr., King Ranch, Inc.

Hughes Abell, Llano Partners, Ltd.

James Clement III, King Ranch, Inc.

Caroline Alexander Forgason, Robert J. Kleberg, Jr. & Helen C. Kleberg Foundation

Heath Grigg, King Ranch, Inc.

Jeff Hildebrand, Hilcorp Energy Company

Clay P. Mathis, PhD, King Ranch® Institute for Ranch Management

Jim McAdams, McAdams Cattle Co.

Bob McCan, McFaddin Enterprises

Shad Nelson, PhD, Texas A&M University-Kingsville

Clint Richardson, Deseret Cattle & Citrus

Jason Van Tassell, Sunlight Ranches

Neal Wilkins, PhD, East Foundation

4

On the Cover

Photo by Ocotillo Films

In this Issue

Winter 2023, Volume 18, Issue 3

KRIRM students have completed 130 case studies for over 50 ranches and ag organizations in the past 20 years.

Focused on long-term success by applying Wall Street strategies to ranching.

8 | Class of 2023 - Driven to Make a Difference

The Class of 2023 is ready to apply their knowledge and experience to serve the ranching industry.

11 | Case Study

Brush Management on the Renderbrook Division of Spade Ranches.

Our Mission

Sustaining our ranching heritage through education, innovation, and outreach.

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.

2 | Experiential Learning While Serving Ranches Through Case Studies

| Maddux Cattle Company

Maddux Cattle Company

Focused on long-term success by applying Wall Street strategies to ranching

By Kindra Gordon

“ We run our ranch more like a hedge fund than we do a ranch,” says John Maddux, of his family’s ranching enterprise – Maddux Cattle Company – headquartered in southwest Nebraska near Imperial.

As the fourth generation of Madduxes to operate and manage the large cow/calf and yearling operation across 45,000 acres of deeded and leased land, Maddux brings a unique Wall Street perspective to the ranching table.

Raised in Nebraska with a passion for the family’s cattle operation, John’s parents Jack and Carol encouraged him to further his education and learn more about business and finance. To that end, he spent 15 years away earning an MBA at The University of Chicago and then working for Goldman Sachs – in Chicago and New York City – in investment banking specializing in bonds.

“It was a different kind of environment and a very intense experience working on a trading desk, but I enjoyed it,” says Maddux, who returned to Nebraska in 1998. Today, he and wife Julia along with their two sons, Taylor and Tomas, and a team of ranch staff are shepherding the 136-year-old family business into the future – and Maddux has had an opportunity to apply his Wall Street experiences to that effort.

Maddux notes, “What I learned and brought back ironically wasn’t necessarily new, as much as lessons I already learned from my grandparents and parents.” He continues, “The basic

fundamentals of our business and the way we operate were already on our ranch, but the experiences that I gathered on Wall Street put an exclamation point on our approach to ranch management when I came back.”

FOCUSED ON EFFICIENCY

Maddux credits the three generations before him for their foundational roles in establishing, growing and maintaining the ranch. This includes Taylor and Clara Maddux who homesteaded the original ranch in 1886 eleven miles north of Wauneta, Neb.; Glen and Eva Maddux – John’s grandparents; and his parents Carol and the late Jack Maddux. John shares that his mom Carol is still an important contributor to ranch discussions and decisions today.

Taylor and Clara Maddux homesteaded the original ranch in 1886.

Maddux Cattle Company’s core business enterprises include 2,500 cows, as well as grazing and marketing 5,000 to 6,000 yearlings every year. The yearling operation spans grazing arrangements in Nebraska, Wyoming and several other states, while the cowherd is primarily based in Nebraska. Maddux cows are unique in that a five-breed composite population of “Maternalizers” were developed in order to capitalize on benefits of hybrid vigor and to emphasize maternal traits. The composite includes: 3/8 Red Angus, 1/4 Tarentaise, 1/8 Red Poll, 1/8 South Devon, and 1/8 Devon.

Maddux says Maternalizer females are well suited for their Western Nebraska environment and production system. The cows are smaller framed and easy fleshing, with desirable udders. Maddux’s focus is on cows that can be maintained through yearround grazing with minimal – if any – supplemental feed and the ability to deliver low birth weight calves without assistance.

With those fundamentals in place, Maddux believes the rest of the business boils down to a financial mindset.

FINANCIAL STRATEGIES

Among his strategies are six core principles that were emphasized at Goldman Sachs, and Maddux is now applying to ranch management.

Focus on Cost of Capital. Maddux tells, “At Goldman Sachs we had billions of dollars’ worth of securities that we were carrying, and it was all done with leverage. As a result, there was an intense focus to make sure everything we purchased had to return the cost of capital plus something.” He adds, “My dad and grandparents knew this lesson, but my Wall Street experience reinforced this to me – that every dollar on the ranch has to bring back a premium over the cost of capital.”

Examine Capital Structure. “The ranching business is not one that can support a tremendous amount of debt,” notes Maddux. Thus, he strives to regularly evaluate if the ranch has a manageable amount of debt to equity. As well, he says, “Being from the bond business, I’m always focused on aggressively managing our fixed rate versus variable rate financing.” Doing so he points out, helps a business avoid being subject to rising interest rates like what is currently occurring.

Seek Diversification. “One of the important aspects of portfolio management is diversification,” says Maddux, who explains that having assets that offset the movement in other assets is key to this strategy. He notes that a traditional ranch like his parents and grandparents ran had basic assets of land and cattle. But today, ranch managers have opportunities to diversify with a mix of financial assets along with livestock and land. Maddux points to PRF (Pasture, Range & Forage)

Insurance as one example, and says, “PRF insurance is more of an investment than it is insurance. It is based on the weather, which makes it a wonderful diversifier [to offset traditional ranch assets] in a portfolio.”

Manage Risk. Maddux notes, “At Goldman Sachs we were active risk managers in the bond market, and I’d say similarly ranching is a risky business. We do need to take some risks, because we want to have outsized returns on occasion.” But along with that, he emphasizes it is essential to have a written plan that gives “permission to act.” He explains, “Having that plan is super important because when you get caught up in the market your plan will help you act and allow you to pull the trigger at a time when human nature says, ‘Why would I do that because the market has been going straight up?’ But having that plan takes the emotion and human nature of questioning ‘What if I’m wrong?’ out of the decision.”

Additionally, Maddux cautions against lack of action. He

John, his wife, Julia, and their two sons, Taylor and Tomas, are the fourth and fifth generation of Maddux’s operating the ranch.

notes, “Doing nothing and passively waiting for something to happen is not riskless. Don’t let fear of the future cause inertia to drive your risk management strategy.”

Recognize Depreciation. “Cows are a very strange capital asset,” Maddux points out, and explains that as a cow is developed and brought into the herd she appreciates until she is 6-years-old, and then there is a very rapid depreciation after that point – with depreciation considered the second highest expense in raising a cow. So, Maddux has developed a strategy to take advantage of this timeline and minimize depreciation. Maddux Cattle Company focuses on low-cost, forage-based heifer development, with almost all heifers returning to the herd as breds. Maddux says, “This allows us to build a large volume of functional running age cows.” Consequently, in April a cow sale is held offering 5- and 6-year-old cows from the herd.

Maddux says, “This ensures we are selling that cow at her optimum value right before she depreciates in a huge way.” Combined with bringing in heifers at a low-cost, Maddux believes this strategy eliminates depreciation within his cowherd on the ranch balance sheet.

Cultivate Culture Within Your Team. Maddux says, “I have learned the power of culture from shared values among the people on our ranch team.” He recognizes the “tribal knowledge,” pride, and team effort that emerges when people genuinely enjoy their role and the pursuit of contributing toward the business goals, rather than solely viewing their job as trading time for money. Maddux credits the three generations before him for fostering a team approach and building the Maddux ranch “culture.”

Similarly, while at Goldman Sachs, Maddux valued the culture that was established and epitomized by the guidance of senior partner, Gus Levy, who was known for saying, “Boys, we want to be long-term greedy.” Throughout his ranch tenure, Maddux has strived to keep this watch phrase top-of-mind because it captures the family’s long-term intentions to encompass the importance of integrity and valuing customer relationships over short term profits.

Maddux shares, “The idea of short term versus long term is applicable to us and one we live by every day.” He notes that ranchers can’t cut corners for short term gains in range management, cattle nutrition, or their relationships with people be it employees, colleagues or customers.

Ultimately, Maddux credits people as a key ingredient to any business’ success, and strives to recruit, train and retain employees as a long-term investment. Maddux concludes, “Having a ranch where employees have a strong sense of purpose and culture in order to help pass that culture on to others is truly the definition of riding for the brand.”

“Having a ranch where employees have a strong sense of purpose and culture in order to help pass that culture on to others is truly the definition of riding for the brand.”

John Maddux, Maddux Cattle Company

Employees and family at a Maddux Cattle Company picnic.

Driving cows back to the ranch in spring.

MORE ABOUT MADDUX CATTLE COMPANY

Replacement heifers and cows are bred to calve in April and May on native range, and graze through summer and early fall with calves at side. Come fall, calves are weaned from first calf heifers and backgrounded or winter grazed, while mature cowcalf pairs are winter grazed on leased cornstalks from November through mid-March. These lactating females are supplemented. Pairs are then driven back to the ranch roughly one month prior to calving and 11-month-old calves are weaned.

With this system, the Maddux’s dry cows and most calves have year-round grazing with no hay or supplement fed. Some strategic protein supplementation is used for first-calf heifers pre-calving and pre-breeding.

The 11-month-old weaned steer calves graze through the spring and summer on leased acres and are marketed off grass each August as 900-pound yearlings. At weaning, nearly 100% of home raised heifers are retained for replacements, along with select bull prospects.

Home raised sires are selected by retaining composite bulls from an elite herd of Maternalizer cows with superior records. Cows are evaluated for the following traits, with the ideal cow being: 1,150 lb. mature weight, frame score 5 or less, fault free udders, docility, fertility, polled, longevity, pigment on eye and udder, solid colored, fleshing ability, calving ease, modest early growth and milk production. The primary selection criterion for replacement heifers and the cowherd is fertility. On a 70day breeding season only the cows that conceive in the first 45 days of the breeding season remain in the herd.

The Madduxes believe that within their composite cowherd, high growth and more milk are not desired because of higher maintenance and feed costs associated with higher production. Additionally, while some emphasis is given to carcass traits, selection is primarily for fitness and convenience traits over maximum production. Maddux Cattle Company’s goal is to have every cow pregnant, calve unassisted, and raise a calf albeit at a lower weaning and yearling weights than many production systems.

Also unique to Maddux Cattle Company is a strategy that does not maintain a mature bull battery, but instead will use around 200 yearling bulls exclusively at a ratio of 15 cows to 1 yearling bull. All yearling bulls are castrated immediately after use and culled to coincide with market signals. This is done primarily to minimize the costs of maintaining a large number of mature bulls, while also capturing an economic return.

Learn more about Maddux Cattle Company at madduxcattle.com

Driving yearling steers back to the ranch.

Trailing cows back to the ranch from grazing cornstalks.

Difference DRIVEN TO MAKE A CLASS OF 2023 –

By Emily Stribling

In May 2023, the next class of KRIRM graduates will earn their Master of Science in Ranch Management. The class of 2023 includes Bradley Donner, recipient of the Lee and Ramona Bass Endowed Fellowship; Caroline Wild, recipient of the Joe Marlin Hilliard Endowed Fellowship; and Tyler Woodland, recipient of the East Foundation Fellowship. These individuals will be joining the elite group of 50 other graduates who have earned this title over the past two decades.

When reflecting on his experience, Tyler Woodland states, “I have enjoyed the change in perspective that I have experienced while attending the Institute. It has been interesting to take a break from the stresses of work and focus on the bigger picture of the ranching industry.”

APPLYING CLASSROOM KNOWLEDGE TO REAL-WORLD PROBLEMS

Each year, incoming students are asked what skills they hope to gain or enhance during their time in the program. Almost unanimously, the students desire to improve their understanding of accounting and financial analysis. Caroline Wild recalled she was wanting to improve her understanding of enterprise analysis and managerial accounting noting, “Ranchers often have multiple revenue streams, and it is important to be able to confidently identify profitability and calculate key performance indicators.” Courses such as managerial accounting and managerial finance provide the opportunity to learn these skills, but what really drives home the concepts are the many real-world experiences students receive through projects and case studies. When asked what he enjoyed most about the program, Bradley Donner remarks, “The opportunity to consult on multiple projects for the largest and most complex ranches in the United States. This challenged me to participate in numerous multifaceted projects incorporating an array of disciplines allowing me to gain years of experience in a condensed timeframe.”

NETWORKING OPPORTUNITIES

All three students have appreciated learning from professionals within the industry whether it be during ranch visits, industry events or KRIRM lectureships/symposia. Wild says, “Even after hearing an explanation of the program’s structure, I was pleasantly surprised at the amount of interaction with industry experts, ranch managers and other professionals; that experience significantly sets the Institute apart from any other graduate programs I considered. The Institute gave me access to subjects and people I otherwise would not have had, unlocking

The Class of 2023 is ready to apply their knowledge and experience to serve the ranching industry.

KRIRM Class of 2023 (left to right): Caroline Wild, Tyler Woodland, and Bradley Donner.

many new opportunities.” Woodland appreciated the opportunity to discuss goals and challenges faced by current industry leaders across the country and says, “Networking with these professionals has been inspiring and enlightening.” He also notes skills such as financial analysis, strategic planning and leadership have all been enhanced, learning from fellow peers and professors as well.

INTERNSHIPS

A highlight for every KRIRM student is the opportunity to intern with a partnering ranch to help solve realworld problems they are facing. Each of the students had unique experiences in parts of the country they had not previously worked.

Donner, a northern Colorado native, interned at Navasota Ranch in the Trinity River Basin near Oakwood, Texas. The ranch utilizes a high-intensity, short-term grazing system and was seeking a solution to a problem concerning the reliability and quality of their stockwater system. Donner was tasked with evaluating and designing a ranch-wide stockwater system to cost-effectively meet water demand and fulfill ownership goals. He says, “this process took significant modeling, logistics, financial analysis, and engineering to design a system that would help mitigate drought and progress the ranch towards optimization.” While he enjoyed the challenge of understanding the unique characteristics of ranching in an unfamiliar climate/geographical location, he also learned a lot about managing employees and the role they play in the success of the operation. He notes, “In order to be a successful leader, you need to cultivate followers who trust in your vision and skills.”

Wild, a Maine native, interned at Wagonhound Land and Livestock in Douglas, Wyoming. Her assignment was to identify and implement a commodity management system for their on-ranch feedlot. She remarks “It was one of the most educational (and fun) job experiences that I have had.” After researching different software systems, she purchased all the equipment needed to install the software, and created an indepth how-to guide for them to use. It was a combination of a research and human resources project. Wild remarks, “Doing this project gave me the experience to see how systems thinking is useful on a working ranch.”

Woodland, who was raised in central Nevada, interned at Sooner Cattle Company near Pawhuska, Oklahoma, a subsidiary of AgReserves. The purpose of his project was to develop a financial baseline for each class of cattle in order to determine the marginal change in profitability if that class were run at full capacity. The result of his work is a model that can be utilized and adjusted in real-time for changing

input factors. The model can also be adapted for different ranches within the AgReserves system. Woodland also had the opportunity to work with employees of different units helping with daily operations. “It was a wonderful group of people to work with,” remarks Woodland. “My internship afforded me the opportunity to see the impact of a good manager, not only on the profitability and sustainability of the ranch, but on the attitude of the employees as well.”

WHAT’S NEXT?

All three are eager to put their skills and knowledge to work within the industry.

When asked about future goals, Wild notes, “I hope to provide managerial accounting and data management services to ranchers and other agricultural producers so they can keep their businesses and livelihoods strong and continue to remain a vital part of the rural landscape.”

Woodland intends to apply the financial knowledge, people management skills, and business professionalism he has refined at the Institute in the ranch management arena to improve the quality and efficiency of ranch management. “I feel that traditional cowboy culture and ranching can be combined with innovative and regenerative practices to create a work environment that is appealing to employees and sustainable to the industry,” he remarks.

Similarly, Donner desires to “play a pivotal role on a dynamic and diversified ranching enterprise where I can apply my skills and knowledge leading a team to operational success while keeping true to the roots of traditional ranching by adopting innovations which have the potential to better the ranching community, land, animals and environment.”

Each student enjoyed handson experience during their summer internship.

CASE STUDY: BRUSH MANAGEMENT ON THE RENDERBROOK DIVISION OF SPADE RANCHES

By Tom Davis, KRIRM Class of 2016

EXPERIENTIAL LEARNING THROUGH CASE STUDIES

For two decades KRIRM has worked to develop exceptional ranch managers through a Master’s of Science in Ranch Management. We combine classroom fundamentals in agriculture and business to complement their practical ranching and technical skills. No exercise has proved more impactful than experiential learning through case studies.

During their graduate training, each student completes at least seven case studies for partnering ranches across North America. Over the years KRIRM students have completed over 130 case studies for more than 50 ranches and ag organizations. The following example is a case study Executive Summary for a project completed by 2016 KRIRM graduate Tom Davis for Spade Ranches. This particular project originated when Wesley Welch, General Manager of Spade Ranches, contacted us to describe a brush encroachment issue challenging the Renderbrook Division of Spade Ranches in West Texas. The goal was to create a multiyear prioritized plan for cost-effective brush management across the ranch.

INTRODUCTION

Cow/calf production is the primary enterprise on the Renderbrook Division of Spade Ranches, with wildlife also providing income. Elevated cattle prices in recent years have enabled management to consider investing in land improvements that will increase forage production. Brush encroachment has reduced grazeable acres and beef production at the Renderbrook. As a result, Spade Ranches has partnered

with the Natural Resource Conservation Service (NRCS) in aerial spraying mesquite with herbicide. The remaining brush canopy is redberry juniper and untreated mesquite.

Managing redberry juniper is expensive, but can be cost effective if planned strategically. The strategic approach requires brush management in multiple phases prioritized by cost effectiveness. Soil type and juniper density/canopy cover influence the cost effectiveness of each phase. Spade Ranch management was interested in utilizing current technology to plan a cost-effective brush management program on the 120,000-acre Renderbrook Division located south of Colorado City, Texas in Coke, Mitchell, and Sterling counties.

The purpose of this project was to: 1) Determine the ideal treatment methods for juniper and mesquite on Renderbrook; 2) Forecast financial outcomes of the ecological responses to each treatment method; and, 3) Create a brush management plan for Renderbrook by prioritizing regions of the ranch for treatment based on forecasted financial return.

PROJECT APPROACH

Developing a comprehensive brush management plan for Renderbrook and forecasting its implications required several assumptions. Assumptions were established via ArcGis software, NRCS data, and financial data from Spade Ranch. Data were analyzed using a Microsoft Excel model tailored for the various recommended quantitative brush management inputs.

Prioritization. Prioritization involved ground level observations paired with GIS software output to identify the most productive soils with a brush canopy greater than 20%. The ranch was divided into multiple tracts that were ranked on Internal Rate of Return (IRR). Ranked tracts were grouped by priority so highest return tracts would be treated first. Each priority grouping had an approximate cost equivalent to the expected annual brush management budget for Renderbrook ($250,000).

Mapping. Developing maps to complete the brush program analysis required several steps, the majority of which involved use of GIS software. This software facilitated compiling ranch boundary shape files and soil layers, as well as classifying soil production potential and woody cover.

Brush Management Budgeting. Brush treatments evaluated had been used on the Renderbrook. Grubbing costs per acre accounted for operator fee, fuel, equipment maintenance and depreciation, and interest. Herbicide and prescribed fire treatment costs were extrapolated from budgets for 60,000 acres treated on the Renderbrook in the past five years. Prescribed fire costs usually range from $4 to $7/acre and herbicide cost/ acre was estimated for both airplane and helicopter application.

Forecasting Revenue. Cost effectiveness of the project depends on the forage response resulting from brush management. A juniper canopy coverage of at least 30% results in a 70% decline in forage production from its potential. Thus, clearing a 30% juniper canopy will significantly increase forage production and revenue per acre. Financial statements with Renderbrook average net income/animal unit (AU) were used to forecast additional net income associated with brush management. Maximum brush treatment/removal without negatively affecting Renderbrook wildlife habitat is approximately 60%. Treatments recommendations optimize cow/calf production without negatively impacting habitat and wildlife enterprise income.

Financial Model. A Microsoft Excel model was created to evaluate financial ramifications of brush management. The model projected a 15 and 30-year cash flow for the investment. To calculate the 30-year Net Present Value (NPV) and Internal Rate of Return (IRR) per AU, the financial model included Renderbrook annual cow and heifer costs. Assumptions included: 90% pregnancy, 2% annual cow death loss, 90% weaning rate as a function of pregnant cows, 556 lb. weaning weight, $175/cwt calf price, $75/cwt cull cow price, 1% annual revenue escalator, 2% annual cost escalator, and 5% discount rate.

These assumptions were used to project future net incomes resulting

from the 30-year brush management investment. The financial model also included a stocking rate consideration to determine the additional AU resulting from brush removal. The model incorporated treatment area, potential forage production, % canopy coverage, forage required/AU, and a forage utilization coefficient. Total treatment costs were estimated by accounting for acres treated, grubbing hours/acre, prescribed fire cost/acre, and herbicide cost/acre. The initial investment for the project was entered as a cash flow zero, along with the purchase of additional AU.

RESULTS AND RECOMMENDATIONS

Results reflect the potential monetary gain achieved by adding animal units. Other benefits may include improved livestock gathers, increased edge habitat for wildlife, and drought mitigation. The financial model shows the projected costs and gains realized from implementing the proposed brush management. Implementing the plan will require nine years to treat all nine priority areas. There are 30 tracts of land prioritized by IRR and the time sensitive implications of their canopies (Tables 1 and 2). Priorities one through four involve 11 tracts (15,050 juniper-infested acres) that should be treated by grubbing (Figure 1). Priorities five through nine are the remaining 19 tracts totaling 30,048 acres (Figure 2). These tracts are mesquite-infested and should initially be treated with herbicide followed by prescribed fire on a four-year rotation.

Years one through four. With the current annual brush management budget, completing all 11 tracts in the top four priorities will involve grubbing the proposed 15,050 acres of mid-grass prairies in approximately four years. The 30-year cash flow (Table 3) shows that completing priority areas one through four results in a 7% IRR with a NPV of $660,363 after an initial two-year cash flow suspension associated with the delayed forage response following grubbing. The additional forage will support an extra 346 AU by year six. Each additional AU is projected to have a 30-year NPV of $1,906. The projected NPV is $44/acre across the 15,050 acres grubbed. The positive 30-year NPV provides confidence in the potential for improved profitability through strategic brush treatment. Breakeven AU for the project were calculated at 246 assuming a 5% discount rate. Priority five has a higher IRR than priority four, but priority four is ranked higher because

Net Present Value (NPV): a capital budgeting tool for calculating the long-term profitability of a project using estimated future discounted cash flows.

Internal Rate of Return (IRR): a calculation that reflects the rate of return required to generate a positive NPV.

redberry juniper grows more aggressively than mesquite and in five years the IRR rank of these tracts will likely change.

Years five through nine. If priorities one through four are completed in the first four years, management should focus on treating mesquite in priorities five through nine with herbicide over the following five-year period. Every four years a prescribed fire should be implemented as follow-up treatment for sprayed tracts to minimize mesquite re-growth and to promote more palatable tobosagrass regrowth. The forecasted 30-year cash flows (Table 4) for treating priorities five through nine reveals an NPV of $556,229, IRR of 6%, and a $19 NPV/acre. The invasive nature of mesquite and tobosagrass communities alone justify implementation of an aggressive brush management program in priority areas five through nine. The additional AU forecasted from treatment with herbicide and fire is 399, with a breakeven of 299 AU assuming a 5% discount rate.

Overall, treatment of priorities one through nine requires a total initial investment of $2,245,875 over nine years. The resulting NPV of implementing treatment on priorities one through nine over the course of 30 years is $905,864, with an

IRR of 6% and payback period less than 17 years.

Recommendation 1. Grub the juniper encroachment in tracts one through 11 (priorities one through four) as soon as capital is available. Treatment of these tracts yields an estimated 30year NPV of $44/acre and an IRR of 7%.

Recommendation 2. Following the treatment of priorities one through four, priority areas five through nine should be treated. The invasive capabilities of mesquite and tobosagrass communities alone are reason to implement an aggressive brush management program in priority areas five through nine. Treating all priority areas results in an estimated NPV of $19/acre over 30 years and an IRR of 6%.

Recommendation 3. To maintain 30-year treatment efficacy, implement a seven-year burn rotation on juniper-grubbed pastures and four-year burn rotation on areas with herbicidetreated mesquite. The burn rotation on the areas treated for mesquite will also keep the invasive tobosagrass in a more palatable vegetative stage.

TABLES AND FIGURES

Table 1. Prioritization of Renderbrook juniper-invaded tracts for grubbing and follow-up prescribed fire based on Internal Rate of Return

aTract number indicates the location on the map in Figure 1 bDetermined from total acres sprayed in each tract cPriorities require an initial investment of approximately $250,000 dCalculated over 30 years

120,000-acre Renderbrook Division; Spade Ranches

one through four

Figure 1. Grubbing map (shown in yellow) and juniper canopy coverage (shown in green) of 11 Renderbrook tracts in priorities

aTract number indicates the location on the map in Figure 2

bDetermined from total acres sprayed in each tract

cPriorities require an initial investment of approximately $250,000

dCalculated over 30 years

aAdditional animal units resulting from brush treatments

bRevenue from calf sales (escalated 1% annually)

cExpenses from cow/calf production and brush treatments (escalated 2% annually)

dFirst investment in grubbing priority one and capitalizing heifers

eIllustrates a 16.1-year payback period

Table 2. Prioritization of Renderbrook mesquite-invaded tracts based on Internal Rate of Return (IRR) when treated with a combination of herbicide and follow-up prescribed fire

Figure 2. Renderbrook mesquite-infested tracts (priorities five through nine) to be treated with herbicide and prescribed fire follow-up

Table 3. Thirty-year cash flows and Net Present Value (NPV) associated with additional animal units facilitated by grubbing of Renderbrook juniper-infested rangeland (priorities one through four)

120,000-acre Renderbrook Division; Spade Ranches

Table 4. Thirty-year cash flows and Net Present Value (NPV) associated with additional animal units facilitated by herbicide and prescribed fire treatment of Renderbrook mesquite infested rangeland (priorities five through nine)

aAdditional animal units resulting from brush treatments

bRevenue from calf sales and a 1% escalator

cExpenses from cow/calf production and brush treatments using a 2% escalator embedded in discount rate

dFirst investment in herbicide and prescribed fire for priority 5 and capitalizing heifers

eIllustrates a 16.4-year payback period

King Ranch® Institute for Ranch Management CELEBRATES 20 YEARS IN 2023!

This year the King Ranch® Institute for Ranch Management (KRIRM) will celebrate its 20th year of educating the next generation of ranch managers. When KRIRM was founded, the industry had a need for high-level ranch professionals who had the skills and expertise to manage the complexities of modern-day ranching operations. That need still exists today. Our industry faces a constant barrage of new challenges every year and KRIRM continues to prepare the brightest minds to meet these challenges head on by finding real-world solutions to make a positive impact on the ranching industry at local, state, and national levels.

Over the last 20 years, KRIRM has graduated 50 alumni who manage over 8.4 million acres of ranchland and wildlife habitat. Our graduates are progressive leaders and exceptional managers at some of the most diverse ranches in the country, but they are also sought out as industry experts who provide a unique perspective. As we look toward the next 20 years, it is exciting to think about 50 or more new alumni using their professional knowledge to shape the ranching industry in our country and ensure that our heritage is not lost. Their influence on this way of life that we love is vital to successful ranching operations and the legacy we leave for future generations.

KRIRM is on a mission, and we will continue to sustain our ranching heritage through education, innovation, and outreach for the next 20 years and beyond! Learn more at: krirm.tamuk.edu

Master of Science in Ranch Management

Be part of the legacy at the only Master of Science in Ranch Management program in the world. Through a systems approach to ranch management, our program prepares mature students to manage diverse and complex ranching operations as progressive leaders. Applications to the two-year master’s program are now open through March 31, 2023. Selected candidates will receive scholarships between $96,000-$108,000 during the twoyear enrollment in the program.

Education and network through:

• Service-learning projects & case studies

• KRIRM lectureships & symposia

• Ranch management workshops

• Industry trade shows

• Summer internship

• Ranch visits

50 KRIRM alumni collectively manage:

• 8.4 million acres of ranchland and wildlife habitat

• 167,000 head of breeding cows

• 694 employees

“Attending the King Ranch® Institute has built confidence and strength in a diversity of skills that I have been able to apply through my career. KRIRM has been the foundation of a network of peers and successful mentors that have helped further my career.”

Jeremy Gingerich, KRIRM Class of 2012, Director of Ranch Operations, Turner Ranches

Learn more and apply today at: http://krirm.tamuk.edu/masters-program or call 361-593-5401

700 University Blvd, MSC 137 Kingsville, TX 78363

Learning Opportunities for Ranchers

Successful Operations RequireWorld-Class Training for Ranch Employees

It is more crucial than ever that ranch employees have the tools they need for successful ranching operations. Our unique approach to continued education in ranch management means we provide multiple opportunities throughout the year for hands-on, applied learning that fits into a professional schedule and covers a wide-range of industry specific topics. Register and view more information at: krirm.tamuk.edu/outreach

W.B. “Dub” Yarborough Lectureship on Real Estate Law for Ranchers

January 5-6, 2023 || Kingsville, TX & Online

Gus T. Canales Lectureship on Prescribed Burning

March 13-16, 2023 || Kingsville, TX & Online

Managing the Cow-Calf Business Lectureship

April 14-15, 2023 || Fort Worth, TX & Online

Richard Mifflin Kleberg, Jr. Family Lectureship on Equine Management

May 15-17, 2023 || Kingsville, TX & Online

B.K. "Kley" Johnson Lectureship on Brush Management

September 22-23, 2023 || Kingsville, TX & Online

HOLT CAT® Symposium on Excellence in Ranch Management

October 5-6 2023 || Kingsville, TX & Online

All events count toward the TFC Certificate in Advanced Ranch Management