Saturday, March 12, 2011

How does a Beef Ranch Stay in Business?

Simple answer: income greater than expenses and needed reserves. Makes running a beef ranch seem simple.

This was the problem I encountered when I took over farming. Most (and we still do, at this point) maintain a second job away from the farm. Because (as "everybody conventionally knows") you keep farming until the money runs out. It's that second job which pays the costs of farming when the crop doesn't.

It's the commoditized base of farming which is keeping dirt-poor farmers dirt-poor.

We studied this over and over and kept coming up to the same conclusion. Getting big doesn't make your farm more profitable. Studies show that about 300 acres is the max on cost breaks with the income/expenses leverage. More acres above that and you are doing longer hours with the same basic cost per acre. It's how many acres can you farm to replace your day job income. Not less hours or easier work.

Now you have to get smart about what you are doing. We really have nothing bad to say about corn-fed/lot-finished beef (other than it has no taste, really). But if you are selling a lot of bland burgers at a discount price, this is exactly what you want. And that is the commodity beef business. Why packers are vertically integrating to cut out middleman costs.

(For more information about running a Missouri beef ranch sustainably, see below PDF...)