When Wayne Fahsholtz took over the reins at Padlock Ranch three years ago, the owners gave him a mandate to develop a new strategic plan by the end of 2004. That plan needed to reduce risks, increase profitability, improve the sustainability of natural resources and improve the quality of life for the people working on and around the ranch. The Padlock Ranch board of directors approved such a plan over the summer and implementation has already begun.
“Every business goes through cycles,” says Mr. Fahsholtz. “You operate in one manner then suddenly realize that times are changing, and that you need to change with it.” That need to change has been magnified due to the seven-year drought in the area. The ranch, however, has been successful over the years because of the willingness to make changes to the business model when necessary.
The ranch keeps extensive enterprise records, so they had a way to track all of the costs that go into a particular area. “We felt we had done a good job of cost control, so it wasn’t just a matter of trimming here or there.” What they really needed to do was take a completely different approach, thus the strategic plan was developed to improve profitability over the long run.
“Nearly all cow-calf producers are facing the same challenges with cost of feed, labor and interest,” Mr. Fahsholtz points out. So they broke it down into five areas to focus change.
Have the right people on the bus and in the right seats. Rather than hire new people, they decided to train and educate existing employees to better fit into the new strategic plan and to have them be part of the planning process.
“We’ve done a lot to educate our present workforce,” says Mr. Fahsholtz. For example, they’ve brought in experts in various fields to teach ranch management to employees. “We had Bud Williams here to work with our crews on cattle handling, and looked at ways to move cattle with fewer people and less stress. We’ve had a range consultant who came in and put on classes on monitoring range conditions so our cowboys can look and report on what different pasture conditions are and so forth.”
Extend grazing season to reduce feed costs. This is an area where most ranchers are challenged—keeping feed cost in check—and the Padlock Ranch was no exception.
To reduce feed cost, they realized the need to extend the grazing season by growing more feed in pastures. That required reducing stocking rates and giving pastures more time to recover. This winter, they started selling off part of the cow herd to take the herd from 13,000 brood cows to 9,500. They’re still working to reach that goal.
“We realize that drought is a part of doing business whether it is this year or another year. So we need to have a plan where we can adjust and manage around drought,” says Mr. Fahsholtz. Until now, the ranch did not have a stocker program; instead, all calves were weaned and placed in a growing yard. Adding a stocker program will give the ranch more flexibility during drought since stockers are easier to sell than cows.
Reducing the dependency on the feedyard helps reduce the amount of harvested forages needed to feed the calves. “We’re going to reduce our dependence on the feedyard, we’re going to graze out more, do some fenceline weaning on grass as opposed to bringing everything to the lot for backgrounding.”
Reduce interest debt. Mr. Fahsholtz points out that by reducing the size of the cow herd at a time in the cattle cycle when prices are high, they are able to reduce debt.
Convert some farm ground to irrigated pasture, thus reducing equipment needs. “In our enterprise analysis, we believe we have ground that is well suited for irrigated pasture. And if the returns are good enough, then we can reduce the amount of equipment and labor costs on that ground,” says Mr. Fahsholtz.
Commit more cattle to a niche-marketing program.Currently, Padlock Ranch markets half of the calf crop through Country Natural Beef and Agri Beef’s Wagyu program. This niche market
offers more profit potential and it has a more stable price because it is based upon production cost plus a reasonable return.
“Padlock is no different than other ranches,” says Mr. Fahsholtz. “Overhead, fuel, feed and labor costs continue to escalate. We are enjoying good prices now, but the cattle cycle and drought will continue to put pressure on ranchers to lower risk and financial exposure. Homer and Dan Scott have built a successful ranch that now has third- and fourth-generation family members as owners who want to see it continue to be great into the future.”