Agriculture may have suffered tremendous losses during the current economic recession, but good times or bad, any business only has three choices, according to Dave Pratt, CEO of Ranch Management Consultants: make a profit, subsidize the business or go out of business.
“Whether we realize it or not, most of us choose the second option — we subsidize our businesses,” Pratt says. “We subsidize our businesses by living off of inherited wealth and appreciating land values, relying on off-farm income to make ends meet and working for less than it would cost to replace yourself on the ranch.”
Pratt operates the Ranching for Profit School, which is a course in ranch business management that teaches ranchers that there are only three ways to increase profit:
Reduce overhead costs
Improve gross margin per unit
But sometimes even the best-managed ranches struggle to squeeze a profit out of a business hit by a recession that has produced increasing costs and decreasing revenues. Many ranches that have not needed subsidies to survive in the past are now searching for ways to boost income, and many have found some creative enterprises that have become essential to their overall business operation.
Zack Wirth says he realized more than 15 years ago that he could not make a living on the Montana ranch where he grew up. To supplement his income he sold auto parts from Montana to New Mexico and later turned to self-employed construction work. But the physical toll caught up with him in his late 40s. Now he’s back on the Rocking Z Ranch nearly full-time, as he and his wife Patty run a dude ranch where horses and nearly 2,000 acres of available riding land attract a largely European clientele.
The Wirths keep only a few cattle on the ranch each season for their guests to enjoy, but they still grow and harvest hay. They save money by running a solar-assisted irrigation system and using old cooking oil from a couple of restaurants in Helena, about 24 miles south of their ranch in Wolf Creek, to power a pump and make biodiesel for ranch equipment.
The Wirths began dude ranching in 2000. Patty says about 50 to 60 percent of their clients are from Europe, where the Rocking Z is marketed through agencies. The weekly summer charge of $1,610 per adult may suggest luxury, but the Wirths treat guests to comfortable simplicity and examples of environmentally friendly living.
“Upscale is no longer a word being thrown around,” Zack says. “Now it’s all about simplicity and sustainability.” And that’s helped the fifth-generation rancher stay on the land that his grandfather bought in 1951.
While small ranches like the Rocking Z have virtually exited the cattle business in order to survive, some larger operations have recognized the opportunities in welcoming visitors to their remote yet scenic locations.
The historic Padlock Ranch in Wyoming has no intentions of exiting the cattle business, says ranch CEO Wayne Fahsholtz, but two years ago they began welcoming visitors to the ranch for what are described as “working vacations.”
“A working vacation on the Padlock Ranch is where guests enjoy good times, good food, good friends and the scenic outdoors — all this while experiencing a week in the life of an American cowboy,” Fahsholtz says.
At the Padlock there’s a lot of cowboy life to experience. The ranch has 55 employees that raise and market over 11,000 calves each year on nearly 500,000 acres across Wyoming and Montana. The ranch’s headquarters is located at the foot of the Big Horn Mountains, and elevations vary from 3,600 feet on the Tongue River at Acme, Wyo., to nearly 9,000 feet on summer permits in the mountains.
“With that many cattle grazing across a half-million acres there is a lot of cattle work to be done,” Fahsholtz says. “Guests are welcome to join in all ranch activities to the extent they desire. If guests want to kick back for a day and not participate in the regular ranch work, that is fine. They are welcome to take scenic trail rides right from the lodge or enjoy nature walks and wildlife viewing.”
But most don’t want to kick back for a day. “The majority of our guests want to experience cowboy work and the culture. They don’t come here for a trail ride; they want to feel like they are a part of the operation for the time they are here,” Fahsholtz says.
Water, wildlife and wind
Admittedly, not all ranches — nor ranchers — are suitable for either a dude ranch or to provide “working vacations.” And the fact that the height of the guest season occurs during the summer when ranch work is also at a peak eliminates many ranches from considering such a business. But your ranch may have other resources that can generate income.
For instance, many ranches have found an excellent source of seasonal income through hunting and fishing leases. “At this time,” Fahsholtz says, “hunting is a larger profit center at the Padlock than the guest business. We lease some of our deer and elk hunting to an outfitter who manages that portion of the ranch. We manage part of the hunting closer to Sheridan from our headquarters. That involves both turkey and deer permits.”
But even if your ranch doesn’t include a half-million acres within sight of the Big Horn Mountains, you may have an ideal hunting or fishing attraction. South Dakota, for instance, has pheasant hunting that is known worldwide as some of the best. Many ranches charge $100 or more per gun per day of hunting. Others sell hunting packages that include lodging and meals for three days and four nights that typically cost more than $1,000 per person.
South Dakota’s Game Fish and Parks estimates that the 100,258 non-residents who purchased pheasant hunting licenses last year spent $179 million in the state. That amounts to an average of $1,785 spent in the state by every non-resident hunter.
Such hunting and fishing income data are supported by a survey of Drovers readers conducted last year. Nearly 12 percent of readers who responded to the survey said they operate either a lease hunting or lease fishing business on their ranch, and the average income generated by that business was over $13,000 per year.
One of those Drovers readers who generates recreational income is Pete Ferrell, who welcomes deer and turkey hunters to his 7,000-acre southern Kansas Flint Hills ranch.
“We include recreational enterprises as a means to diversify the income we generate on the ranch,” Ferrell says. “We work to utilize the ranch’s sustainable resources of sunlight, soil, grass, water, wind and wildlife.”
The Ferrell Ranch was established east of Wichita in 1888, and the outfit has seen its share of lean times. But Ferrell has worked to develop the ranch’s resources while maintaining sound stewardship practices. He’s operated a custom grazing business for many years but has recently gained notoriety for the Elk River Wind Project, a 150-megawatt wind farm that opened in 2005. Fifty of the project’s 100 turbines sit on Ferrell Ranch land.
Ferrell actively worked to get the project started and went through three different developers before completion. He also battled preservationists who were concerned about damage to the prairie and politicians who were tied to the coal industry. Now he earns royalties for every watt of electricity produced on his land. The project has sold electricity to the grid every day of its operation, he says.
And to the preservationists, he says, “The grass is just as green, the water just as clear and the cattle just as fat.”