FEATURES 3 4 6
Wagon Tracks
“Leadership for the Future“ By Dr. Clay P. Mathis
Congratulations, Class of 2013
KRIRM graduates reflect on their time in Kingsville By Jeff Duncan and Travis Moore
Fulfilling the KRIRM Mission
Inaugral graduates now among leadership at nation’s largest ranches By Kindra Gordon
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Published by the 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 Endowed Chair Ashley Patterson, Editor
The Future of Ranching
A successful rancher explains factors he believes will impact the future of our industry
MANAGEMENT COUNCIL
By Jay O’Brien
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. Lynn Drawe, Ph.D., Retired Director Rob & Bessie Welder Wildlife Foundation Paul C. Genho, Ph.D., AgReserves, Inc. Jack Hunt, Retired CEO King Ranch Inc. Bob McCan, McFaddin Enterprises
Cover Art: “The Storm” Jow Lowery www.joelowery.com
2 I Spring 2013 I KRIRM
“ Leadership for the Future” From the Director, Dr. Clay P. Mathis
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t has certainly been a busy spring for everyone here at the King Ranch® Institute for Ranch Management (KRIRM). As you receive this newsletter, our students will be studying hard for finals and our faculty will be working equally hard preparing those finals and wrapping up the semester. Soon after, our first year students will begin their summer internships across the country. I hope everyone’s spring has been as eventful and successful as ours here in Kingsville. As I witness the success of our students and the industry itself, it is difficult to ignore the fact that the ranching industry will see many opportunities and face great challenges in the decades to come. Texas rancher Jay O’Brien has been kind enough to offer his insight into a few of these issues (page 8). However, regardless of whether overcoming the challenges or seizing opportunities, I believe the key to success for our industry as a whole will be great leadership at all levels. It is the tenacity and thoughtful decision-making of the leadership in agriculture that has helped sustain many generations. It will be even greater leadership that will chart the course of action for the future. The road ahead will not be easy because our world is becoming more connected and complicated than ever. In fact, I read a popular press article a couple of years ago the highlighted research on the complexity of doing business in modern times. Research from Boston Consulting Group was cited showing that “complicatedness” has increased 6.7 percent, on average, annually over the last 50 years. If this pattern continues, then business management will be about 350 percent more complicated in 2033. That is a frightening thought. This magnitude of increase would call for extra layers of management and overhead costs for agriculture enterprises. In addition to this, the voting population is increasingly detached from agriculture, further complicating the challenges. So, who will lead the industry in twenty years? Currently the average rancher age is between 58 and 60, with relatively few ranchers
“As an industry, we can do more today to develop great leaders who will take the helm in future decades.” Photo by JoAnne Meeker
between the ages of 30 and 45. This could be a vicious cycle. My intent is not to paint a picture of a crumbling industry. I do not believe that to be the case. Instead, I am trying to make clear a great opportunity. As an industry, we can do more today to develop great leaders who will take the helm in future decades. In light of this opportunity, we have increased our commitment at KRIRM to leadership development through enhanced curriculum and outreach. This began with a successful new lectureship on human resource management in 2012. The lectureship was taught by Dr. Bob Milligan and focused mostly on the softer side of employee management. The lectureship has been followed by a semester-long course on organizational leadership, developed and taught by KRIRM faculty member Dr. Ryan Rhoades. This has been an excellent class for our students because it has challenged them to look deeply inside themselves as leaders. For each student, a 360-degree feedback assessment is conducted to collect perceptions of leadership attributes from their managers, peers, and direct reports in 16 leadership competencies. We use the results of the assessment to help our students identify their strengths and create an individualized self-development program. This strengthbased leadership development approach has been used successfully by other agriculture organizations. The vision of KRIRM is: We are determined to educate leaders who will make a positive difference in ranching, and ensure that our hard earned heritage is not lost. After 10 years of striving to fulfill the KRIRM vision, we continue to learn, grow, and refine our approach to developing excellent managers of ranches. I believe that great leadership development will be critical to ensuring that our hard earned heritage is not lost.
wagon WT tracks
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Above, KRIRM Class of 2013, Travis Moore (left) and Jeff Duncan
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nother year, another graduating class at the King RanchÂŽ Institute for Ranch Management (KRIRM). This May, KRIRM says goodbye and good luck to two students, Jeff Duncan and Travis Moore. These students brought two very different, but rich perspectives to the program, Duncan from the mountain west and Travis from Florida. In pursuit of their goals to become managers of large, diversified ranching operations, Duncan and Moore proved themselves to be the caliber of students KRIRM was created to develop. With the skills they brought to KRIRM, along with the knowledge they gained while a student, we have no doubt that both graduates will establish themselves as leaders of the ranching industry. We wish them the best of luck in their future endeavors. Here, Duncan and Moore tell of their personal experiences while at KRIRM.
Jeff Duncan
Well, it is hard to believe that my time at the King RanchÂŽ Institute for Ranch Management (KRIRM) is nearly over. The past two years have been an adventure that my family and I will always remember fondly. One of the most enjoyable parts of moving to Kingsville to be a part of this program has been the interesting and friendly people who we have met. From the fellow 4 I Spring 2013 I KRIRM
students and their families, to the professors and directors, to the people in the Kingsville community, we have certainly made some great, lifelong friends and have enjoyed some wonderful times together. I have also enjoyed some fantastic learning experiences through KRIRM, experiences that would not have been possible if not for this program. First of all, I have improved my technical expertise through the courses I’ve taken such as advanced range livestock production, quantitative genetics, and managerial finance. In my first year, I was enrolled in a managerial finance class in which we learned a great deal about investing and managing money. We had the opportunity to work with King Ranch management in conducting two major research projects dealing with prospective investments the ranch has considered in the past. We were fortunate to learn from the observations and opinions of King Ranch management, and understand their strategies and approaches toward investment opportunities. Another special opportunity was when Stan Bevers took the time to come to Kingsville and provide
KRIRM students a private lesson on his methods and philosophies for internal ranch accounting and the Standard Performance Analysis (SPA). We learned how to use Quickbooks with his methods to determine annual cow costs and how to financially measure key drivers of ranch profitability. Maybe the most useful learning experiences of all were the opportunities I had to grow in my leadership abilities. I had the opportunity to attend a human resources lectureship conducted by the KRIRM, an emotional intelligence short course in Austin, and a semester-long class in organizational leadership. In addition, I had several public speaking opportunities, and even assisted the Santa Gertrudis Breeders International conduct their strategic planning sessions. Through all of these processes, I met a number of remarkable people, learned about my own management styles, and gained many useful new skills. As I look to the future, I know that the past two years have been an investment that will pay huge dividends for me and my family in the years to come. I look forward to finding a management position in the mountain west in which I can help landowners preserve and enrich their land investment, adapt and change to new trends and concerns, all while helping to preserve our American ranching heritage. Years ago, I determined that I wanted to be a rancher because of my strong attachment to the land and the animals it inhabits. Today, we are seeing more and more opposition to the ranching business and lifestyle, but I believe large ranches are vital to our country in providing a healthy and tasty source of protein to today’s consumer. Ranches are also important in the preservation of our treasured landscapes and ranching heritage. I truly believe ranchers are still the original and best stewards of the land. I’m proud to be one of those people and an advocate for the industry.
Travis Moore
I feel extremely blessed for my opportunity to attend KRIRM. I believe it has provided me with the necessary skills to accomplish my lifelong dream of becoming the manager of a diversified ranching operation. In the everchanging and volatile business world we now operate in, KRIRM has done as much as possible to provide the essential tools for me to succeed in profitably managing the assets of a ranch. The majority of a KRIRM student’s time is spent in lecture and working on class projects like any other graduate student. However, the variety of classes
we take (accounting, finance, ruminant nutrition, range management, wildlife habitat, genetics, systems thinking, etc.), summer internship opportunities, a lectureship series, and high student expectations (which students become aware of through Dr. Lukefahr’s statistics class) are what set the KRIRM program apart from the others. This well-rounded education, coupled with multiple projects and an internship, is intended to increase both the knowledge base of the student and their ability to manage multiple tasks within the shortand long-term. Dr. McCuistion’s range class provided a good example of how professors challenge students in order to prepare them for managing large, diversified ranches. Her class combines old fashioned lecture, a literature review, reading academic articles on a weekly basis, building a ranch management plan complete with financial statements, and presenting these plans and findings to the class. One of the more unique aspects developed by KRIRM is its lectureship series. Due to industry and other professional contacts, KRIRM is able to bring experts on campus to conduct intensive, face-to-face, hands-on training sessions. In addition, there are also instances where we were able to interact more closely with those individuals. Examples include: 1) discussing stocker strategies and building budgets with Dr. Ted McCollum, 2) accounting principles and a QuickBooks workshop with Stan Bevers, and 3) case studies each spring with Jack Hunt. These experiences have contributed greatly to my ability to make decisions, evaluate options, and adapt to changing circumstances. One of the greater learning experiences for me while at KRIRM were the real world projects conducted with King Ranch personnel. Each fall and spring semester we evaluated a project that King Ranch had identified as areas for potential financial or production improvement. They provided the background information and we conducted the research and developed models, business plans, and final recommendations for each project. Upon conclusion of each project, presentations were made, which we presented to King Ranch management in a board room environment. As my family and I prepare to wrap up our time in Kingsville and at KRIRM, we look forward to taking the information, resources, and knowledge we have gained and applying them to assist in accomplishing the goals of our next endeavor. We are excited about where God has placed us at this point in our lives along with the opportunities and challenges awaiting us. KRIRM I Spring 2013 I 5
A herd of cattle on Deseret Cattle and Citrus where KRIRM graduate David Genho is employed.
By Kindra Gordon
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t has been 10 years since the King Ranch® Institute for Ranch Management (KRIRM) was established in 2003. The birth of KRIRM coincided with commemorating the 150th Anniversary of King Ranch. While KRIRM’s foundation lies in the strong ranching history of the past, the program’s purpose is focused on developing ranch industry leaders for the future. In the fall of 2004, KRIRM accepted its first two students into the two-year master’s degree in ranch management program. Matt Etheredge and David Genho proudly became KRIRM’s inaugural graduates in 2006. Etheredge and Genho—like many KRIRM graduates since them—are now fulfilling the KRIRM mission, which states: We aspire to be a focal point for the training of graduate students in a unique and multidisciplinary, systems approach to ranch management. We want to teach our students how to manage ranches, but we also want to teach them how to progressively think their way through to success and innovation for the industry. Upon graduation, Genho joined Deseret Cattle and Citrus, a ranch he grew up with while his father, Paul Genho, served as manager from 1981 through 1998. Seven years after graduating from KRIRM, Genho manages cattle development and support services for the ranch, which is located in Florida and encompasses 300,000 acres. Etheredge has remained in his native state of Texas and worked with Spade Ranches and then Edwards Ranches after graduating from KRIRM. In 2011 he joined French Land & Cattle, which is a commercial cow-calf operation headquartered in Midland, Texas, and comprises five ranch properties across the state. 6 I Spring 2013 I KRIRM
Practical Preparation
In reflecting upon his KRIRM education and experiences, Etheredge appreciated the personalized and practical format. “KRIRM evaluated my passion for ranching, work experience, and scholastic background and created a personalized curriculum that challenged, taught and inspired a new way of thinking,” he explained. Today, Etheredge said he particularly values the organizational skills he developed while at KRIRM, as well as the emphasis that was placed on taking a dynamic approach to management and problem solving. While enrolled at KRIRM, Etheredge had the opportunity to apply these principles through case studies that were assigned each semester. “A ranch manager would present his specific ranch problem, and I went on-site and developed alternatives to address those issues,” said Etheredge.“It was challenging, but I valued that we were working on real problems and offering real solutions”. He conducted case studies for a ranch in Nebraska, as well as Texas ranches including the King Ranch, where he developed a pasture scorecard for manager Dave DeLaney. In his role with French Land & Cattle today, Etheredge continues to address real-world challenges, most notably the drought. He acknowledges there is no way to control drought, but his past ranch experiences and training have emphasized the importance of being proactive. Etheredge said his drought plan includes drought insurance, utilizing early weaning and destocking older cows from the herd. “We are trying to keep our herd as productive and efficient as possible; we run stockers when and where we can. My KRIRM
curriculum that students can tailor to their interests and needs. For himself he said, “I already had a good animal science foundation, and the KRIRM curriculum allowed me to focus on other things such as wildlife management and business principles.” Looking forward, Genho hopes KRIRM continues to include and emphasize human resource training in its curriculum. While he still works with cattle in his ranch role, he also spends as much as half of his time on people issues and employee development. Both Genho and Etheredge also identify legal issues, regulations and property rights as topics current and future KRIRM students must be well versed in as they Etheredge working cattle at French Land & Cattle prepare for the ranch industry’s future needs. experiences gave me the ability to look at the big picture, When asked to offer advice to future KRIRM students look forward and be proactive.” or prospective ranch managers, Genho shared this For the future, Etheredge hopes the ranch industry guidance, “Make sure you have a passion for ranch as a whole works together to be proactive, particularly management; it’s not easy. Second, be humble and with regard to lobbying for agriculture. Whether it be willing to learn. Come with an open mind and work working to repeal estate taxes on Capitol Hill or working hard. I think there will be ample opportunities in the to help the public hear more of the positive examples of future.” what ranchers do to care for the land and livestock. Of those opportunities, Genho predicts the next “We need to take a proactive stance, instead of the great leap for the cattle industry will be in the use ranching industry finding itself being reactive,” said of technology and biotechnology. “I see technology Etheredge. being better used for the production of cattle as the next frontier for the beef industry over the next 30 Impactful Opportunities years,” he said. “I think it will move us away from the As Genho reflects upon his KRIRM experiences, he black cow or red cow mentality. And I think it will be counts the opportunity to learn from other respected today’s 16 to 20-somethings who lead us down that ranch leaders, such as Bob McCann and several path because they’ve grown up with technology. They others including his father who was a catalyst in the are the ones who will apply what it has to offer to the development of the KRIRM program, as the most beef industry for impactful part of the program. raising cattle and “They recognized the importance of developing improving post young leadership in the industry,” said Genho. “Several harvest product ranchers took time with Matt and I, whether sitting at development and the dinner table or with them in the pickup truck. Those palatability.” were valuable learning opportunities. The small class size Genho is bullish made that possible.” on the future, Etheredge also valued those one-on-one opportunities. and concluded, He said, “Being exposed to a pioneer like Paul Genho at “With the world’s a Sunday lunch or evening meal where he’d talk about population what was on his mind was a great experience.” growth, the Additionally, Genho said he was impacted by the offagricultural campus experiences and the flexibility of the curriculum. marketplace He noted that the short courses, lectureships and will demand industry involvement that KRIRM students were—and technology, and I still are— exposed to is integral to building the industry’s believe agriculture future leadership. will attract the best Genho pictured with his youngest As well, Genho appreciated the flexible KRIRM and brightest kids.” son, Mason, on Deseret. KRIRM I Spring 2013 I 7
Santa Gertrudis cattle grazing on King Ranch.
Photos courtesy of King Ranch
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s the King RanchŽ Institute for Ranch Management (KRIRM) celebrates its 10-Year Anniversary, it is easy to see how KRIRM has laid the foundation for educating the next generation of ranch managers. Through the curriculum, faculty, and students, KRIRM has positioned itself as the focal point for educating ranch managers who will progressively lead our industry into the future. Recognizing the challenges and opportunities of the future, and how to capitalize on them, is critical for both KRIRM and the ranching industry itself. Jay O’Brien, a successful rancher from the Texas Panhandle, gives us a glimpse into factors he believes will significantly impact ranching in the future. By Jay O’Brien The great thing about the future of ranching is that the foundation of the future will still be the conversion of the renewable grass resource into high quality protein. Doing this efficiently, weathering market and climatic changes, and determining the most profitable livestock 8 I Spring 2013 I KRIRM
will determine the degree of success or failure of the ranching segment of the enterprise, just as it has in the past. In the future, ranching will require a better understanding of how the genetics of the livestock produced meet the consumer demand. A cattleman, for example, will breed to produce a higher red meat cutout of a specific quality and will be compensated against the ability to produce according to contractual specifications. The specifications will not be for a breed, but for the beef produced. The industry should already be doing this, but economics will eventually force ranchers to focus on the end product. Ranchers will respond rapidly when market signals are given. Ranchland in most cases is not well suited for anything else, which means we have already suffered the encroachment from everything except development. In the past decade we have lost land to buyers who have erroneously thought grazing would negatively affect their recreational goals. Future ranchers will benefit from recreation-focused landowners as they realize that proper
the rancher’s job. Ranchers fortunate enough to have an abundance of water will see excess water as an income source.
Interest rate
The cost of money has always been a factor, and cheap money has escalated land prices beyond the ability of a livestock enterprise to carry the debt. Future ranchers will continue to manage around cheap and expensive money, recognizing its impact on asset values as well as operating costs. In the future, high costs of money may put downward pressure on land prices.
Texas A&M University-Kingsville College of Agriculture, Natural Resources and Human Sciences photo of cowboy on horseback.
grazing is beneficial to the land and put their property back into production. The future of ranching should not depend on the government. In the past decade we have expanded subsidies from the government past the traditionally less expensive state and federal leases. I honestly can’t predict whether ranchers will continue to build their dependence on government handouts, but use of governmental programs will be important if they are available. There are numerous non-ranching factors that will continue to impact the profitability of ranchers. Ranchers sometimes like to think of these factors as new; however, they are just more pronounced than they have been in the past.
Recreation and Romance or Psychological Return on Investment (PRR)
The commodity, PRR, has escalated in importance to ranch values. Its value will fluctuate drastically according to the economy and various social forces. Successful ranchers will have to manage to benefit from PRR and to protect against loss of this benefit. Some ranchers will work with PRR owners, managing their livestock operations, while others will lease resources to PRR customers whether the lease is hunting, fishing or tranquil enjoyment. Since PRR leasing can often be worth a multiple of income from the grass, PRR demand should be as important to ranchers as beef demand. Ranching romance or recreation is not part of human nature—
Water
Both surface and subsurface water is being drained from ranches, and grass cannot be converted to protein without adequate water. This is nothing new. In the 19th century, ranchers tied up land by controlling the water. Water will continue to be an essential component, and protecting that water will be a larger part of
A group of Santa Gertrudis bulls in front of the Main House at King Ranch. KRIRM I Spring 2013 I 9
Commit to Lifelong Learning
Upcoming Events
PRR from ranching is not essential for human health and has no intrinsic value. The generation who grew up watching westerns or hunting and fishing with older family members is growing older. The next generation of folks who can afford to own land is likely to have never been to a ranch or farm. Land owners who want to continue drawing on PRR income or PRR values to their land must invest in selling the dream of rural life, including hunting and pastoral pleasures. If not, land prices may return to what they are worth for protein production or development. In addition, short-term gains can be devastating to the recreational segment of the land’s value. Disturbing the vista or adding noise or light pollution can drastically impact recreational and pastoral value. Selling wind leases, transmission line right of ways or small industrial sites can devalue large acres. The successful rancher of the future will be constantly protecting all of the aspects of land value.
Expansion and Growth August 12-15, 2013
John B. Armstrong Lectureship on Systems Thinking
September 20-21, 2013
B.K. “Kley” Johnson Lectureship on Current Ranching Issues: Managerial Accounting
October 24-25, 2013
Holt Cat® Symposium on Excellence in Ranch Management
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For the future of ranching to be positive, there has to be the opportunity for expansion and growth. Successful ranchers will be innovative in expanding and growing. Opportunities will come from families who cannot keep their land due to high inheritance taxes, from families who want to keep their land for emotional reasons but don’t have management ability, and from absentee investors who need management. The percentage of land managed by other than the owners may not change substantially; however, stewardship of the land will gain in importance relative to the cash paid. If income produced from protein production becomes a lesser percentage of the cost of the land, then the other factors determining the value of the land will be given more weight. The successful rancher of the future will be an even better steward of the land and will be able to grow by fully recognizing and meeting all of the needs of the landowner. This rancher will have a greater understanding of the entire environmental system including all flora and fauna. Ranching in the future will not be substantially different from today. Successful ranchers will adapt to the changing economic environment and capitalize on the opportunities of the moment. These opportunities will change and the rancher who is locked into the past will struggle. Resourcefulness will continue to be rewarded.
KRIRM I Spring 2013 I 11
KING RANCH® INSTITUTE FOR RANCH MANAGEMENT TEXAS A&M UNIVERSITY-KINGSVILLE
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