Raising Your Own Replacements? Maybe You Shouldn’t

We get a cross-section of livestock producers at the Ranching For Profit School. A session can include outfits with more than 10,000 cows and others with less than 100 attend the course.  When it comes to enterprise selection and structure, most of the small places look like miniature versions of the large ones.  That’s a problem because size matters and what works for the large scale producers isn’t always a good idea for folks working at a smaller scale. One size doesn’t fit all.

One of the things limited-scale producers should challenge is their replacement strategy.  Like most of their bigger neighbors, most small scale producers assume they should raise their own replacements. Assuming that a cow/calf enterprise is best suited to their situation (a dangerous assumption), most small scale producers are well advised not to raise their own replacements.  The gross margin per unit of heifer enterprises is usually significantly lower than the margin per unit in the cow herd they support. When capacity is limiting, it is hard to economically justify having an enterprise with a relatively low gross margin. Of course, if you don’t know your enterprise gross margins, decisions regarding enterprise mix and structure can only be based on guesswork and emotion.

Some argue that they have special genetics. This claim is similar to the results of a recent survey in which 90% of American drivers felt they had above average driving skills. By definition at least 40% of them are wrong.  I’ve been told by geneticists that producers with fewer than 400 cows simply don’t have a large enough of a genetic pool to select from to claim an outstanding breeding program.  This doesn’t mean that it isn’t possible to raise quality cattle on a limited scale, but the deck is stacked against it.

There are economic realities every business must face.  We must keep overheads low, the margin per unit high and recognize that size matters. If we are limited by scale, a limitation that is usually self-imposed, trying to produce profit by copying the business model of larger scale neighbors rarely works. One size does not fit all.