KRIRM 2024 Winter Newsletter

Winter 2024 Volume 19, Issue 3

In this Issue

Winter 2024, Volume 19, Issue 3

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Published By

H.R. Smith Ranch Affords Management Opportunities for KRIRM Students KRIRM student teams led four management projects on the ranch this fall

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Class of 2024 - Ready to Apply New Knowledge

The Class of 2024 reflects on their experiences at KRIRM and shares goals for the future

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20th Annual Symposium Highlights

Highlights from the 2023 Holt Cat® Sypmosium on Excellence in Ranch Management −Drought Recovery and High Cattle Prices: Making the Right Decisions Now

Education & Innovation

Will Record High Prices = Record High Profitability?

The Impact of Giving

700 University Blvd., MSC 137 Kingsville, TX 78363 361-593-5401 361-593-5404 fax krirm@tamuk.edu krirm.tamuk.edu

Rick Machen, PhD, Interim Director and Paul C. Genho Endowed Chair in Ranch Management Emily Stribling, Editor

How annual and estate gifts benefit KRIRM students and the ranching industry

MANAGEMENT COUNCIL

On the Cover KRIRM Graduate Hank Willemsma works cattle on the Beaverhead Ranch Division of the Matador Ranch in Dillon, Montana. Hank holds the position of Ranch Manger and oversees day-to-day operations.

Photo by Ocotillo Films

Our Mission

Our Vision

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

We are determined to educate leaders who will make a positive difference in ranching and ensure that our hardearned heritage is not lost.

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Chair: John Alexander, Jr., King Ranch, Inc. James Clement III, Beggs Cattle Company Caroline Alexander Forgason, Robert J. Kleberg, Jr. & Helen C. Kleberg Foundation Heath Grigg, King Ranch, Inc. Jeff Hildebrand, Hilcorp Energy Company Rick Machen, 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, Ag Reserves Jason Van Tassell, Sunlight Ranches Neal Wilkins, PhD, East Foundation

From the Director Dr. Rick Machen Interim Director & Paul C. Genho Endowed Chair in Ranch Management

H.R. Smith Ranch Affords Management Opportunities for KRIRM Students

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description of the generous gift of the H.R. Smith Ranch from the Mary Carrol Gregory estate to KRIRM was the content of this column in the Spring 2023 newsletter. A foundational tenet of the gift agreement was that the ranch be used to develop and train students. The core of our graduate curriculum is experiential learning via real-world case studies.

True to the gift agreement intention and in support of core curriculum, KRIRM student teams led four management projects on the ranch this fall. Among the numerous projects in the KRIRM library, these are unique; students are approaching these as owners rather than consultants.

The possibility of a foreign animal disease appearing on U.S. soil is real, perhaps more so for south Texas than most other states. Former Southwest Airlines CEO Howard Putnam offered this sage observation: “When the time to perform arrives, the time to prepare has long passed.” With these realities in mind, a student team has prepared a biosecurity plan for the ranch. Hopefully, we never have to enact the plan, but, according to Mr. Putnam, waiting until it is needed is not responsible management.

Typical for this part of the state, much of the ranch is covered with a dense canopy of mesquite, huisache, and south Texas mixed brush species. Some of the densities preclude favorable habitat for either wildlife or livestock and as such compromise ranch productivity.

Proprietary decision-making technology now affords a comprehensive study of brush density and soil type/range site interactions to facilitate development of a ranch-wide strategic brush management plan. A second team of students was tasked with assembly of a strategic and prioritized brush management plan involving use of the LandVisor™ technology developed by Corteva Agriscience™. The question they were tasked to answer: Where does investment in brush management (with both wildlife and livestock habitat in mind) likely have the most favorable ROI? The Blacklands pastures are separated from the majority of the ranch by a county road and have historically been managed separately.

Partition fences and water infrastructure suffer from years of deferred maintenance, resulting in ununiform grazing distribution by cattle. So, with the thought of CapEx expenditures in mind, a third project evaluated how best to invest in infrastructure (water and fence) to improve grazing distribution and livestock gathering on the Blackland pastures.

Continued on page 13

Winter 2024 | King Ranch® Institute for Ranch Management 3

CLASS OF 2024 – READY TO APPLY NEW

Knowledge

The Class of 2024 reflects on their experiences at KRIRM and shares goals for the future.

By Emily Stribling In May 2024, the next class of KRIRM graduates will earn their Master of Science in Ranch Management. The class of 2024 includes Nathan Clackum, recipient of the Tio Kleberg Endowed Fellowship; Chase Crandall, recipient of the Clement Family Endowed Fellowship; and Sam Newell, recipient of the Four Sixes Ranch Endowed Fellowship. These individuals will be joining the elite group of 53 other graduates who have earned this title over the past two decades.

All three graduates agree that the camaraderie they have developed with their fellow students and the connections they continue to make in the industry are some of the most enjoyable aspects of their experience. Chase Crandall notes, “I love

spending so much time with likeminded students that share a passion for the cattle industry. Their diverse backgrounds have helped me think about things in different and better ways.”

A MINDSET SHIFT: SYSTEMS THINKING While each student began with unique goals and expectations of what they wanted to learn during their two-year master’s program, they unanimously stated one of the most valuable skills they gained was the ability to approach problems from a systems perspective. Sam Newell remarks, “[Ranching] is a complicated industry that has a vast number of variables to take into consideration when making decisions. Gaining knowledge and experience with systems thinking has been an invaluable skill I have learned through the program.”

“[Ranching] is a complicated industry that has a vast number of variables to take into consideration when making decisions. Gaining knowledge and experience with systems thinking has been an invaluable skill I have learned through the program.”

– Sam Newell

KRIRM Class of 2024 (left to right): Chase Crandall, Sam Newell, and Nathan Clackum.

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Systems thinking is a language for learning and describing how organizations and complex systems function and emphasizes the interconnected parts of a system and how oversights can lead to unintended consequences and actions that backfire. This method of thinking is prominent within the KRIRM curriculum from classwork to real-world project assignments and case studies.

Nathan Clackum credits the processes and tools of systems thinking for allowing him to more efficiently identify high-leverage points for improved efficiencies and increased profits adding, “I thought a lot about costs and returns prior to coming to the Institute, but those have now become second nature. I now consider potential unintended consequences and think about how my management decisions today will affect the future.”

INTERNSHIPS A highlight for every KRIRM student is the opportunity to intern with a partnering ranch to help solve real-world problems they are facing. Clackum remarks, “The internship fully facilitates application of the education experience. Learning from a book, lecture, or in the field is one thing, but being able to apply what you have learned in a real-world situation is invaluable.” Each student had unique experiences in parts of the country they had not previously worked.

Clackum, who has spent most of his career in Georgia, completed a broad financial and management analysis of a large cattle and wildlife operation in Texas. “I appreciated my time on the ranch as well as in the corporate office. I was able to interact with managers on the ranch, corporate accountants, secretaries, and ownership. It was a great experience and allowed full utilization of what I have learned at the Institute,” says Clackum. He remarks that his experience is similar to what most ranch mangers will do in their first 90-days of employment, making it a great learning opportunity for the future.

Crandall, a Utah native, had the opportunity to intern with Deseret Cattle and Citrus in St. Cloud, Florida, where he evaluated the ranch’s early weaning program while also having the opportunity to cowboy for the seedstock unit of the ranch.

“I thoroughly enjoyed getting to learn from such a large ranch and in a very different environment than I have been used to,” states Crandall. “It was also enjoyable to learn about the intricacies of creating an early weaning program that will successfully support the calves while simultaneously benefiting the cows that are early weaned.”

Newell, also a Utah native, interned at a world-class feedyard in Kansas where he evaluated the construction of a commodity feed barn and the impact it would have on the operation. “The internship allowed me to utilize the skills and knowledge that I had gained within the first two semesters and apply it to a real-world situation,” says Newell.

Each student enjoyed handson experience during their time at KRIRM.

WHAT’S NEXT? With two years of rigorous coursework and experience under their belts, the graduates are eager to jump back in to the workforce putting their new skills and knowledge to use. Newell adds that he is excited to use all he has learned in the program to “build good ranches into great ranches and great ranches into excellent ranches, no matter the position I have.”

When asked about future goals, Clackum notes, “I want to become part of a ranching or related business and be in an upper management role to help solve problems, improve efficiencies, and increase profits – or achieve whatever the goals of ownership are.” With Clackum’s appreciation for the importance of lifelong learning, he strives to always be improving throughout his career. “I am never satisfied with the status quo and I firmly believe that there are always areas that can be improved upon, both personally and in business.”

Crandall will be returning to his family ranch in Utah where he will begin implementing the managerial accounting and marketing principles he has learned. He also looks forward to applying a systems thinking approach to problems as they arise to better inform his decisions going forward.

Applications to the two-year master’s program are now open through March 31, 2024.

For more information, scan the QR code or visit: https://krirm.tamuk.edu/masters-program/ Winter 2024 | King Ranch® Institute for Ranch Management 5

KRIRM students appreciate learning from and networking with professionals within the industry whether it be during ranch visits, industry events or KRIRM lectureships/symposia.

Students Share Lessons Learned and Insights Gained With the exposure to diverse operations across the country, networking with professionals, and classroom learning, KRIRM students embrace the opportunity to learn more about current challenges facing the industry. They share some of the biggest challenges they have noticed and potential solutions going forward.

Nathan Clackum says, “I believe the emphasis will continue to be on financial and environmental sustainability.

Ranching is a fixed cost business and relies on scale and diversity for profit. To be successful, we must continue to work with nature, managing our inputs to produce a profit – and tell our story as we go so that others will continue to see the value that ranching brings to all of our lives, from high-quality protein production to wildlife conservation and environmental stewardship.

Chase Crandall remarks on the challenge of producing a profit as a ranch owner, “I believe that profit will always be the largest problem to the ranching industry as a whole. The key to profit will be for ranch managers to understand what their unit cost of production is, and how to best manage it. Inflation will continue to rise and expenses will generally rise faster than income. Good ranch managers must understand and manage expenses to make their businesses thrive.”

Sam Newell concludes with addressing the labor shortage in the industry, “Labor is a major issue in the livestock and ranching industry whether it’s a quality or quantity issue. Solutions I might suggest revolve around engaging and involving the younger generations, the upcoming workforce. In my opinion, the ranching industry is one of the most fulfilling industries to be a part of and many people want to be a part, they just have a hard time finding an entry point. I would also suggest to those that are in the industry already to take the time necessary to teach and encourage those that are interested. For those that are interested, get involved, come take part in the legacy that ranching has to offer.”

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20 th Annual Symposium Highlights Drought Recovery and High Cattle Prices: Making the Right Decisions Now

By Dave Delaney This past October 5th and 6th marked the 20th annual anniversary of the HOLT CAT® Symposium on Excellence in Ranch Management, as well as the 20th anniversary celebrating the founding of the King Ranch® Institute for Ranch Management. Our mission of “Sustaining our Ranching Heritage through Education, Innovation and Outreach” is embodied in a large part by the quality and timeliness of these annual events. As always, we were fortunate to have an excellent cadre of speakers this year covering a wide variety of issues of strategic importance to the cattle industry.

Our lead off speaker, Matt Makens, Makens Weather, LLC, provided some very interesting data relative to the historical “megadrought” in which we currently find ourselves. In fact, he described it as the worst multi-decadal drought on record for the Western United States. Unfortunately, although natural oscillations can give high volatility as to the frequency of drought, until the Atlantic makes natural changes lasting a couple or more decades, little change will be seen. On the bright side, however, he also indicated this change could occur between 2025 and 2035, suggesting a period coming up that will see less frequent drought periods. While changes due to El Nino are highly probable (based on NOAA CPC ENSO probabilities) and underway since August, indications are regional temperature anomalies are likely to be the fourth highest on record through this event. In addition, the Southwest, lower Midwest (as well as the entirety of Texas), and lower Southeast will likely see both wetter and cooler temperatures. The upper Midwest and Northwest will likely see cooler temperatures.

Given the volatility in weather patterns we’ve seen (and likely to continue to see for a few more years) our friend Burke Teichert, Ranch Consultant, gave us an excellent insight into the tools needed, and areas to manage (production, economics, marketing, people) following drought. As with any system, understanding the factors resulting in overgrazing (and recovery) are paramount in expanding our mindset to deal with drought events. Understanding of the four eco-system processes of: water, mineral/nutrient, solar, and biological (plant communities and succession) cycles will always have us looking at soil health first and foremost as an indicator of overall range condition and resilience. He also emphasized the importance of being proactive in our approach to determining the appropriate stocking rates, and the importance of full recovery, during restocking, as well as moving livestock in a timely fashion before it’s too late. Unfortunately, he also emphasized that many ranchers’ assumptions of upfront costs, considering only those associated with short term livestock returns, keep us from practicing good grazing, which is a combination of art and science, but always based on long term soil, root and plant health. It was emphasized that very few can master the timing of cattle marketing, but that excellence in range management will likely be far more rewarding over the long term. He also gave us several examples of great pasture conditions due to excellent management over several areas of the United States.

Many of us over the years have been fortunate to experience the excellent and timely market reports given by Dr. Darrell Peel, Professor of Agribusiness, Oklahoma State University, Winter 2024 | King Ranch® Institute for Ranch Management 7

and this symposium’s presentation was no exception. He reported that all classes of steer (500, 800 lb.) and fed cattle had reached, or were approaching (500 lb.), all-time record highs previously established in late 2014 and early 2015.

Furthermore, beef production, which reached an all-time high about 2 years ago, is likely to decline substantially this year and in the near term with inventory declines approaching those last seen almost ten years ago. In addition, the highest, heifer on feed numbers since 2019, as well as the highest percentage of heifer slaughter (as % of cow herd) in the last 20 years has led to the lowest retention of heifers (and a very high culling rate) in recent history. Some caution was noted in that exports seemed to be slowing somewhat in 2023, and that the potential for higher beef import numbers were possible in the next few years. Although caution was noted due to historically high prices likely this year and possibly next, rebuilding of the cow herd could be slowed due to drought recovery, finance costs and/or record prices for replacement females, producer age, feed and pasture costs, as well as producer expectations of profit due to multiple risk factors.

Closing out our Thursday speakers was Lee Leachman, CEO, Leachman Cattle of Colorado. Leachman began by giving a brief overview of the acquisition of Leachman Cattle

by URUS, and how this association will result in a “pull through” that will eventually be developed for beef herds. He also shared many of the partnerships and how the big data in their Leachman database based on 1.4 million animals (30,000 annually) allows them to combine this data with over 95,000 SNPS (performed by Zoetis) to potentially develop genomically enhance EBV’s on 27 phenotypic traits and over ten indexes at various states of production. Looking ahead, Leachman saw more coordinated supply chains, as well as advanced reproductive technologies for specialized maternal and terminal lines. He closed his talk with comparisons to progress made in the pork and poultry industries through breeding and how elite commercial herds would do the same for our industry.

Dr. Jason Sawyer, Chief Science Officer, East Foundation, led our speakers off on Friday morning by questioning whether producers could capitalize on the cattle cycle through countercyclical marketing. Dr. Sawyer provided a graph of the three expansion and contraction phases of the industry which have occurred since 1990. He emphasized that while the nadir of cow inventory is a leading indicator of cyclical highs, he also pointed out that exogenous shocks, drought, and producer behavior itself also contributed. As he indicated “it’s often easy to say but hard to do.” Counter Cyclical management is especially complicated by the individual producers goals such as long term profit maximization, stability of net income, and maintenance of cash flows. These are often mitigated by the realities of fixed costs and the relationship that not always do higher prices yield higher profits. He also pointed out that 8 King Ranch® Institute for Ranch Management | Winter 2024

the necessity to manage inventory with capacity and cost could yield a “U-Shaped” cost function whereby fixed costs are diluted but variable cost increase (think not preparing for drought). Academic studies have shown few examples of excess profits from countercyclical strategies unless there is potential for additional capacity or one has perfect foresight as to pricing! He also pointed out the asset replacement problem, as addition and removal are separate decisions and can result in oscillating inventory if best signals and strategies are not implemented. Dr. Sawyer closed with emphasizing the East Foundation Ranching Purpose, as well as how ranch business and operational reports are used to maintain a trajectory from historic->transitional->well managed-> optimized.

Our second speaker on Friday was John Maddux, Owner and Manager, Maddux Cattle Co., who gave a unique perspective on his investments in the cattle industry based on his vast experience, education, and knowledge of the financial sector.

While his personal model is much too complex for this writer to fully comprehend and translate as a model for this limited article, he has developed a model driven by cow generation interval and strong price signals to encourage expansion to time cyclical prices (3-4 years) to avoid lower price effects on the overall herd. Maddux feels that producers should invest in themselves with a flexible marketing alternative that takes into account those factors such as drought in order to maximize income. He has a unique approach of marketing more replacements at their highest and peak value (i.e. younger, and less mature cows) which he feels allows his operation to maximize economic throughput in order to maximize return to fixed costs. Mr. Maddux also spoke as to his approach in re-investing windfall profits as they occur. While his model might not be for everyone, he certainly brings an incredible amount of foresight and understanding of long-term economic principles to his highly profitable ranching operation.

The Institute was very appreciative for the participation of our third speaker on Friday, Mr. Robert Hodgen, President and CEO, King Ranch, Inc. Mr. Hodgen shared many of his experiences as well as an overview of King Ranch, Inc. current operations and his view of issues of importance as well as King Ranch strategies for the future. These included how to further create value for the King Ranch brand, as well as updating the Mission, Vision, and Values of the company. Included in this focus is a deep dive into each Business Unit’s goals and strategies in 2024 to evaluate how King Ranch is positioned for return on invested capital and other strategic goals company wide. Mr. Hodgen also assured the audience that the company will continue their external focus in a supporting role in developing industry policy as part of their overall industry leadership position. Mr. Hodgen also provided a deeper dive into the King Ranch’s view as to the beef industry value chain today and provided some impressive examples of how other entities and brands had positioned themselves to take further

advantage of profitability within the beef industry supply chain. He ended his talk with an example of how King Ranch is evaluating the lifetime value of a yearling replacement heifer (as well as value of a heifer vs. a mature cow as part of the strategic decisions facing beef producers), having built a whole herd financial model to determine IRR and NPV calculations from various strategies. This model is also attempting to develop a deeper understanding of the performance drivers that increase or decrease value for the commercial and registered herds. The Institute greatly appreciates Mr. Hodgens participation and comments, as without the initial and ongoing support of this company and their shareholders and friends the ongoing success of the King Ranch® Institute for Ranch Management would not be possible!

Our final speaker of the symposium was Dr. Trey Patterson, President and CEO, Padlock Ranch Co. His topic of “Building Strategy for 2024 and Beyond” was certainly apropos for this event, as well as being very enlightening as to how this was being done for such an iconic enterprise.

He did a great job of showing how land values are on the rise (i.e., pasture is expensive!) at the same time consumer concerns such as animal welfare, promotion of lower emissions (carbon footprint), affordability, and a host of other items are at the forefront of potential future demand.

As he stated, generational change is apace and we know for sure that weather, markets, and socio-economic challenges are not going away. First and foremost, he emphasized that vision and strategy (why we exist, how we behave, what we do, how we succeed, and what is important) are paramount

to the survival of ownership and family. A balance of profit, liquidity, risk tolerance and growth, must all be considered in developing their purpose of which people, natural resources, financial excellence, community and family emblem are all of importance. Resiliency and strategic planning also come into play as a practical manner in the ongoing success of this family operation, and that engagement of family/directors, and continuous improvement are mandatory. On a practical basis, Trey pointed out that profit is generated through reduction of overhead and operating costs, while still increasing the marginal return per unit of production. He also emphasized that improvement must be made throughout the operation.

This includes evaluation of capital improvement/replacement budgets, based on optimal economic life, frugality, and actual ROI (need vs. want). In addition, allocations of fixed vs. variable cost considerations are made in all scenarios. Examples for Padlock have included: stocking studies (optimization of range), mix of livestock (yearlings, extended grazing, heifer development), range vs. feed yard (growing calves), adding value to cull cows, marketing diversification and value for calves, and other sources of diversification have and will be considered to the extent possible. Trey closed with the necessity for a systems thinking approach, as understanding cause and effect relationships and drivers, as well as leverage points (not always the most obvious) are first and foremost in making good decisions.

In closing we’d like to thank all of our friends and supporters who make this symposium possible through their past and ongoing donations and sponsorship!

Scenes From Symposium October 5-6, 2023

The KRIRM social and prime rib dinner, with beef provided

by STxBeef, recognized 18 individuals who received their Texas Farm Credit Certificate in Advanced Ranch Management. Pictured l to r: Sam Thurwalker -Texas Farm Credit, Chase Crandall, Sam Newell, Hal Thompson, Arville Rachel, Jr, Elizabeth Wright, Connor Coleman, Nathan Clackum, and Timothy Gilbert. Ten others received their certificates but were unable to attend in person.

Attendees enjoyed an industry tradeshow and time to network and socialize.

Winter 2024 | King Ranch® Institute for Ranch Management 9

Education & Innovation Will Record High Prices = Record High Profitability?

By Seb Killpack, Nathan Clackum, and Rick Machen, PhD Excitement continues to build within the beef industry, spurred by higher prices for every class of cattle. After almost a decade of lower prices and more recently drought plaguing the central and western US, positive news is welcome. Escalating prices spawn recollection of market conditions in 2014/2015, when five-weight steers topped $300/cwt and fed cattle marked a record high $172/cwt. The cow/calf sector experienced record high profits during this two-year span. Fed cattle have surpassed the previous record by over $10/cwt and feeders are closing in on a new record high price. The looming question is: Will record high profitability again accompany record high prices? The answer to this question will be influenced by factors discussed below.

Cost of Capital. Interest rates have risen sharply since 2014.

The Federal Funds Effective Rate (FRED) for most of 2014 was 0.09%; the September 2023 rate was 5.33%, a 59-fold increase. The Federal Funds Effective Rate influences operating loan rates but is immune to regional volatility and borrowerspecific interest rates. The cost of capital (and hence unit cost of production) has increased significantly over the past decade.

Health of the Economy. The consumer price index has risen 29.6% from 2014 to 2023; according to the Federal Reserve Bank in St. Louis, average salary in the US has risen 13% during the same period. The cost of living is outpacing wages and consumer budgets are tightening. This affects the industry in 2 ways. First, the average consumer is experiencing a tighter budget. Contrast the current scenario with 2014; low interest 10 King Ranch® Institute for Ranch Management | Winter 2024

rates and minimal inflation encouraged consumer spending and expansion of the economy as beef prices were rising. Market dynamics will encourage expansion of the cowherd, retention of heifers, reduction of feeder cattle inventory, and rising cattle prices, all while consumer purchasing power is decreasing.

Drought. Since 2020, the central and western US has experienced significant drought, causing destocking and liquidation of cowherds. According to the November 16 US Drought Monitor, almost 50% of the country remains in moderate drought. Widespread drought has driven cow inventories to the lowest number since 1962. Drought relief and pasture recovery will be primary drivers of cowherd rebuilding.

Beef Cow Inventory. Cow inventory is a function of heifer retention and cow slaughter. Feedlot inventory estimates published by USDA in the latest quarter report suggest that over 40% of the cattle on feed are heifers. Historical evidence indicates herd expansion via heifer retention does not occur until heifer contribution to the fed cattle mix drops below 37%. As a result of drought-forced stocking rate reductions, the older and less productive cows have been culled, resulting in a relatively young cowherd. Culling young productive cows with greater reproductive efficiency will have a larger impact on feeder cattle inventory per cow removed from the herd. As soil moisture and pasture conditions improve, cow harvest and beef production there from will decline, encouraging higher beef prices.

Consumer Demand. The ultimate driver of beef price is consumer demand. Despite higher prices (especially compared to competing animal proteins), beef demand remains strong.

Year-over-year per capita consumption is expected to drop 2%, but in the face of shrinking domestic supply, the small reduction is not expected to impact prices. Strength of the US dollar is reducing beef exports and encouraging imports, both of which increase beef availably to US consumers. Imports will predominately be lean beef for grinding and inclusion in further processed products. For this discussion, it is assumed imports will not significantly hinder domestic beef prices.

Cattle Price vs. Enterprise Profitability. According to basic economic theory, steady demand combined with shrinking supply translates into higher prices and an optimistic future for beef. New record high prices are the talk across the industry, but will cow/calf enterprise profitability follow a parallel track?

Answering this question requires comparison of current prices to the record high prices experienced in 2014 and 2015.

As a result of drought-forced stocking rate reductions, the older and less productive cows have been culled, resulting in a relatively young cowherd.

Note that calf prices rose through the first three quarters of 2014, plateaued from October 2014 through June of 2015, then began to decline. By 2016, calf prices had returned to pre2014 levels. Calf prices in 2023 are on track and parallel with 2014-15. However, when adjusted for a decade of inflation (maroon adjusted lines), it is obvious that appreciably higher record highs will be required to yield the same purchasing power of 2014-15. To have similar economic impact, the

Comparison of current to previous prices requires adjustment for inflation. In Figures 1 and 2 for 2014 and 2015 respectively, a black line represents USDA-NASS reported 500-pound calf prices for 2014, the maroon line is the 2014 prices multiplied by an escalator of 29.6% (CPI, 2014 vs. 2023) to account for inflation, and the grey line represents 2023 year-to-date 500-pound calf prices from the same USDA-NASS database.

Figure 1. 2014, 2014 CPI adjusted, and 2023 calf prices 450 400 350

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inflation-adjusted record high calf prices this go-round will need to approach $400/cwt. Admittedly, in addition to inflation, there are other factors that dictate profitability (fixed costs, reproductive performance, weaning weight, unit cost of production, etc.). The point: calf prices that simply surpass the 2014-15 record highs will likely not yield record cow/calf enterprise profitability.

Cow/calf producers have relatively little control over market price, but are solely responsible for cowherd production and the associated costs. Low cost producers who optimize production have been, and will continue to be, best positioned to benefit from record high prices.

Record high calf prices experienced almost a decade ago were driven by consumer demand for beef. Similar to current conditions, the drought that ended in 2012 had reduced beef cow inventory, cow slaughter, and concomitantly lean beef for grinding. Strong domestic demand for ground beef (approximately 50% of domestic beef consumption is ground beef ) resulted in the disproportionate grinding of chucks and rounds from fed cattle, driving fed cattle prices to record highs. High fed cattle prices pulled feeder cattle prices higher.

As previously mentioned, the period of record high calf prices was relatively short lived; at most, producers captured record high prices for two calf crops. Heifer retention began in 2013, prior to the rise in calf prices. Most of the heifers retained in 2013 calved in 2016 and contributed to the feeder cattle supply. In contrast for this cycle, heifer retention has yet to commence suggesting calf prices should plateau higher rather than peak and decline as they did in 2015. If forage conditions improve and heifer retention begins in 2024, the earliest boost to domestic feeder cattle inventory would occur in 2026.

Profitability is defined as total income (price x units) minus total cost of production. Calf price is but one part of the profitability equation. Price discovery (the culmination of the marketing process) is readily apparent; determination of unit cost of production is more laborious. Independent of unit cost of production, the suitability of market price is difficult to assess.

Cow/calf producers have relatively little control over market price, but are solely responsible for cowherd production and the associated costs. Low cost producers who optimize production have been, and will continue to be, best positioned to benefit from record high prices. For those exceptional managers, record high calf prices will result in record annual profits.

Figure 2. 2015, 2015 CPI adjusted, and 2023 calf prices 450 400 350

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Application of Advanced Genetic Technology in Beef Cattle February 23-24, 2024 || Fort Worth, TX & Online

Genetic technology in the beef industry changes so rapidly, it becomes a fulltime task for producers to keep up. In this workshop, participants will revisit basic genetic principles and be introduced to the new technology. Beef cattle genetics experts will teach the use of new tools and how to apply advanced genetic technologies in the real world of seedstock and commercial cattle production.

Scan the QR code or visit krirm.tamuk.edu/genetic-technology to register.

Event Sponsored by:

H.R. Smith Ranch Affords Management Opportunities for KRIRM Students, Continued...

Finally, managing a ranch business requires a constant focus on fixed costs. The ability to spread fixed costs across more than one ranch enterprise contributes to enterprise profitability and ranch sustainability.

Consequently, diversification of enterprises is employed by savvy ranch owners/managers. In south Texas, wildlife enterprises often generate more revenue annually per acre than livestock. Knowledge of wildlife populations is a prerequisite to sustainable management of those populations. The fourth student team was tasked with surveying the resident wildlife and developing a management plan.

Many of the cooperating ranch management challenges students tackle involve confidential information and as such cannot be openly discussed. For the first time, students will be afforded the opportunity to present management decisions from the perspective of ownership. If you are interested in outcomes of these projects, catch the students at one of our upcoming outreach education events or cattleman’s convention.

Like most ranchers, we welcome the opportunity to discuss what’s going on at the ranch.

For the first time, students will be afforded the opportunity to present management decisions from the perspective of ownership.

Winter 2024 | King Ranch® Institute for Ranch Management 13

THE IMPACT OF

Giving

By Anne Brady Thurwalker It has been an amazing year as the King Ranch® Institute for Ranch Management (KRIRM) celebrated its 20th year of educating the next generation of world-class ranch managers.

Looking back over the course of that time, the impact the Institute has had on the ranching industry is easy to see.

KRIRM students have gone on to manage some of the largest ranches in our country and have made substantial contributions to the industry in many ways. From the time they arrive on campus, students put their trust in KRIRM to help them advance their career goals and impart knowledge they wouldn’t otherwise receive. What they experience is a unique partnership bridging academia and real-world application.

It is a model that, 20 years later, is still crucial to preserving ranching culture and leading the industry to discover and implement new and effective management techniques as the landscape of our country continues to change.

KRIRM faculty and students receive the first load of American Red heifers at the H.R. Smith Ranch in November.

HOW ANNUAL AND ESTATE GIFTS BENEFIT KRIRM STUDENTS AND THE RANCHING INDUSTRY Gifts given to KRIRM through Annual Giving or Estate Planning have direct and significant impacts on graduate students and their time at the Institute. With additional resources, KRIRM faculty have the ability to provide access to industry professionals through additional workshops and courses, tours and travel opportunities, and meetings that enhance programmatic learning. An example is the Financial Accounting Class offered through the Harvard Business School that was made available to students due to a gift from an individual donor. Through collaborative partnerships with outside resources, KRIRM students graduate as high-

level ranch professionals who have the skills and expertise to manage the complexities of modern-day ranching operations.

Last year King Ranch® Institute for Ranch Management became the benefactor of the H.R. Smith Ranch that was gifted to the Texas A&M Univeristy-Kingsville Foundation through the estate of Mary Carrol Gregory. The opportunities this gift provides for students to reinforce and develop management techniques while supporting research and outreach efforts, is unprecedented and sets the Institute further apart from other ranch management programs.

TO SUPPORT GRADUATE STUDENTS AND KRIRM, SCAN THE QR CODE Your gifts directly impact student success, outreach efforts, and programmatic opportunities!

14 King Ranch® Institute for Ranch Management | Winter 2024

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! Please consider making KRIRM part of your philanthropic commitments.

Learn more at: krirm.tamuk.edu/giving or contact our office 361-593-5401.

These aren’t your typical cowboys...

Cowboy + Businessman = KRIRM Graduate

Master of Science in Ranch Management Be part of the legacy at the premier Master of Science in Ranch Management program in the world. Through a systems approach to ranch management, our program prepares experienced ranchers to manage diverse and complex ranching operations as progressive leaders. Applications to the two-year master’s program are now open through March 31, 2024. Selected candidates will receive scholarships between $96,000-$108,000 during the two-year 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 tours

53 KRIRM alumni collectively manage: • 9 million acres of ranchland and wildlife habitat • 190,000 head of breeding cows • 850 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: Connect with us online for the latest news http://krirm.tamuk.edu/masters-program or call Fall361-593-5401 2022 | King Ranch® Institute for Ranch Management 15 and updates on the KRIRM program!

700 University Blvd, MSC 137 Kingsville, TX 78363

Continuing Education in Ranch Management 2024 Event Schedule || Events Available in Person & Online!

All events count toward the TFC Certificate in Advanced Ranch Management

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 Application of Advanced Genetic Technology in Beef Cattle February 23-24, 2024 || Fort Worth, TX & Online Managing the Cow-Calf Business Lectureship April 12-13, 2024 || Denver, CO & Online

Managing Farm and Ranch Employees Lectureship September 20-21, 2024 || Kingsville, TX & Online HOLT CAT® Symposium on Excellence in Ranch Management November 7-8, 2024 || Kingsville, TX & Online

John B. Armstrong Lectureship on Systems Thinking August 12-14, 2024 || Kingsville, TX

Connect with us online for the latest news and updates on the KRIRM program!

King Ranch® Institute for Ranch Management || Kingsville, TX || krirm.tamuk.edu || 361-593-5401