By Megan Webb, Ph.D. Contributing Editor
We all know that farming and ranching is a noble career and family-oriented business, but it comes with uncertainties, from weather to government policies and global commodity market direct influences. These unpredictable influences can ultimately create volatile swings in our end-product value, causing a loss of income and reduced profitability. Each decision we make can have an everlasting impact on our operational profitability and sustainability.
Here are seven principles to help cattle producers manage and pinpoint profitable outcomes:
1. Budget management. This traditional concept is always a sound strategy. Creating a comprehensive budget to track cash flow will allow you to make informed financial decisions.
2. Cost-effective feeding strategies. Optimizing the feeding process will save you time, and utilizing high-quality, cost-effective feedstuffs will add more profitability to your cattle. Consult a nutritionist to formulate a balanced diet for your cattle that meets their nutritional needs while minimizing costs.
3. Efficient resource utilization. Minimize waste by using resources wisely. For example, ensure proper grazing management to maximize the use of pastureland and minimize the need for expensive supplemental feed.
4. Risk management. Protect your investment by having appropriate insurance coverage for cattle, property and equipment. This will help mitigate financial losses in case of accidents, natural disasters or disease outbreaks.
5. Marketing strategies. Develop a marketing plan to sell your cattle at the right time and for the best price. Stay informed about market trends and consider participating in livestock auctions or directly contacting potential buyers.
6. Financial recordkeeping. Keep detailed records of all financial transactions related to your cattle production, including purchases, sales and expenses. This will help you assess your operation’s profitability and identify areas for improvement.
7. Long-term planning. Develop a long-term financial plan that includes goals to stabilize your business during times of market volatility and tight margins. This may include other diversified income strategies such as real estate, investments, on-farm energy supplementation and natural resource utilization.
As we come to the close of 2023, are there investments we should make to help reduce our operational volatility? Some investments we may choose could include purchasing more land as a recession-proof, high-ROI, sustainable investment. If you don’t need more land, other options could include diversified investments in agriculture that require less physical management. Thinking of stocks such as Archer Daniels Midland Company (ADM); Deere & Company (DE) know as John Deere; Corteva, Inc. (CTVA); or the Mosaic Company (MOS) are a few examples. Other diversifying opportunities include investing in a “basket” of farm stocks and commodities through mutual funds and exchange-traded funds (ETFs). These options are great for investment purposes in the agribusinesses we care about.
Other investments you may be looking for, like me, are more time to make quality moments with family. Looking to more automation and information-sifting technologies can help me streamline efforts to improve my on-farm efficiency and enable me to spend more quality time with my family.
Some automations you may consider may include: 1) technology expansion; 2) remote monitoring; 3) automated feeding and watering systems; 4) big data analysis and support; 5) genetic analysis; 6) supply chain optimization; and 7) disease surveillance.
Overall, big data management in the cattle industry can provide valuable insights, automate processes and optimize various aspects of cattle raising, leading to improved efficiency, profitability and sustainability.
New artificial intelligence (AI) is also a growing efficiency tool that is enhancing the lives of many Americans. The software known as ChatGPT is a natural language-processing tool driven by AI technology that allows you to have human-like conversations, timely development of written documents, questions answered and can compose emails efficiently, saving you time and energy. There may be a future in this AI technology to support farmers and ranchers effectively develop written operational plans and agreements to streamline their management efforts.
Regardless of how you’d like to pinpoint profitability, place investments or automate your efforts, there is an abundance of resources to help make you and your operation become its best version in 2024! Wishing you and your family happy holidays and a Merry Christmas!