Asking and answering tough economic questions in a ranching operation isn't pleasant or easy. Just ask Mike Kelly.
“The first time he was out, we about loaded Jim up and sent him back,” says Kelly of James McGrann's visit in 1992 to the Kelly Ranch in Sutherland, NE. The Kellys were one of a dozen ranches that agreed to participate in a pilot project for what would become the nationwide network of Standardized Performance Analysis (SPA).
Today, McGrann of Texas A&M University is heralded as the originator and godfather of all things SPA. But Kelly recalls that day when McGrann “was asking questions that were uncomfortable because he was asking for information we needed to know and didn't.”
Kelly's glad today that they cowboyed up and faced the music. The annual SPA analyses they've conducted since that first sit-down with McGrann have enabled their ranch to make huge economic strides.
For instance, Kelly says, “We're certainly more conscious today of the pounds of feed fed per cow. We've cut the amount of feed fed per cow in half, if not by 60%. That's cut our cost of production substantially.”
Timing Biology To Nature
Feed reductions have come primarily through hay, by backing up calving dates so the highest nutritional demands on the mama cows more closely match the nutrition available in the pasture. They also increased aftermath forage grazing on corn stalks and in meadows, and increased dormant-season grazing along rivers.
There have been more open winters since they began SPA, so that plays into their gains, too, Kelly points out. But the point is that they would have missed finding the opportunities to reduce feed per cow, or taken longer to start finding them, if they hadn't been committed to analyzing the ranch's economic costs and returns. It enabled them to see what a chunk of resources cattle feed was taking, and how much economic opportunity there was in shaving feed demands while still meeting the herd's nutritional requirements.
When Kelly says, “SPA made us more business-minded,” one must appreciate that the statement is coming from a former banker who signed up for the SPA pilot because he knew there had to be a more effective way to analyze the economic potential and reality of all ranches.
Also, be aware the Kelly Ranch isn't robbing Peter to pay Paul. Kelly Ranch was the National Cattlemen's Beef Association's Environmental Stewardship Award winner in 2003. That honor was in part due to Kelly Ranch's extensive soil and water conservation accomplishments in the fragile environment that exists here on the Sandhills' southern edge.
Learning Is The Journey
“I don't think you ever get to the point where you feel comfortable you've learned everything,” Kelly says, “because the bar is constantly being raised.”
With SPA, though, and especially within the Integrated Resources Management (IRM) philosophy embraced by the ranch, he says they have a tool to monitor progress while continuing to identify new opportunities. That's how it's worked for them, anyway.
“It has constantly evolved since we began,” says Kelly. “Now, we're starting to do managerial accounting through QuickBooks in order to do a better job of enterprise analysis. Each one is a cost center, but each is a potential profit center, too.” The ranch consists of both cow-calf and stocker enterprises.
“Most of us do a good job of knowing our costs and cost of production in the cow-calf operation. It's the other enterprises that get tougher,” Kelly emphasizes.
As time goes on, Kelly explains it's easier to ask and answer questions. For that matter, it's easier to understand what questions should be posed. Just like building a solid breeding program, the longer you commit to it, the more opportunity you find.
In the case of SPA, Kelly says once you have several years' worth of data, you can begin seeing trends in various areas. It represents an entirely different level of information.
Throughout the Kellys' SPA experience they've followed the advice they offer to others contemplating the same road of economic analysis.
“I recommend people get some help, especially conducting the analysis the first time. It's money well spent,” Kelly says.
Moreover, he points out there's plenty of SPA instruction to be had through state IRM programs, Extension, university farm and ranch management programs and the like.
“Just being able to track these numbers has benefit,” Kelly says.