Perhaps producers should consider whether their operations warrant the addition of bulk storage facilities so they can buy feed ingredients in volume when the price is most advantageous.

“They might want to ask themselves, ‘What is my most limited resource?’ For many, I think the biggest challenge is labor. So, they may want to invest in ways to ease the need for labor,” suggests Erwin. “Or think about why your cattle are out all of the time. Is your machinery always broken down? Are poor facilities actually costing you time and money? Are these things you should be addressing while times are good?”

Cautious approach

Daniel Smith’s business near Gibbs, Mo., has long been diversified, including a cow herd and a backgrounding enterprise for home-raised and purchased calves. Along with feeder cattle, he sells both open and bred replacement females. Most recently though, Smith has added a modest finishing enterprise. He sells fed cattle through a local market, along with selling individual animals for butcher beef.

“We’ve also been doing some things that we’d put off while margins were thin, like upgrading the buildings on the place, adding new tin; and we’ve made improvements to our working facility. We also added watering sites to a grazing system, which will help increase carrying capacity in the long run,” explains Smith.

“But we’re also holding some cash back to operate on,” he adds, recalling a time not so long ago when interest was a major expense. “We’d bought a property with money borrowed at 8¼%. Now, we’re trying to borrow less and avoid paying a lot of interest.”

Capital allocation

Taking a similar approach is Luke Perman of Hoven, S.D. Perman manages his family’s Rock Hills Ranch, which includes cow-calf and yearling enterprises, custom-grazing and some row-crop production. Now that increased profitability allows for it, Perman is scaling back the operating note and running the ranch more on a cash basis.

“I’ve been reading about how, in the corporate world, the most successful CEOs are those that are good at capital allocation. I think we have to try to do that, too. I also talk with a friend who worked for Wells Fargo, and he has seen plenty of examples of what not to do,” says Perman. “Putting all of that together, I think it’s best to pay our taxes, pay down debt, and avoid adding to overhead expenses.”

Perman is shifting more of the ranch’s grazing resources to yearlings, for which there is risk protection. The decision to cull deeper and reduce brood cow numbers was made easier by high cow prices and dry spring weather. When the cattle cycle does turn and prices move lower, Perman will likely be ready to build up the breeding herd again. Meanwhile, he’s implementing new technology for genetic selection.

“We’re dipping our toes into genetic testing,” Perman explains. “We’re interested in identifying the most profitable animals in the breeding herd, so we can further the genetics that fit our range-based operation and also satisfy the industry.”

Technology old and new

On the high desert, public lands rancher Shawn Jack is taking advantage of high cattle prices to allocate portions of profit toward old and new technologies. Headquartered near Blanding, Utah, the Jack family’s traditional cow-calf operation grazes spring-calving cows on Bureau of Land Management (BLM) grazing leases during the winter and moves to U.S. Forest Service (FS) grazing permits in the summer.

Jack says providing sufficient water for their stock is a primary issue. Traditionally, that has involved developing and maintaining natural springs; but hauling water to remote locations is a part of ranching in that arid environment.

“We also have some state school land leases where we’ve recently started drilling deep wells. The state helps with the cost of drilling 900- to 1,000-foot wells on those school sections,” says Jack, explaining plans for 15 new well sites, each with 10,000-gallon storage tanks. Much of the water will still be hauled to other locations on federal land, but the wells will reduce the distance, time and expense involved. Jack says the new water sources represent “a huge benefit” to effective grazing management.

The other, newer technology of particular interest to Jack is virtual fence. Here, too, is a promise of enhanced grazing management, but cattle managed under virtual fence also wear electronic collars that offer GPS tracking capability. Jack was skeptical of the technology and leery of the price when a neighbor announced plans to implement a virtual fence system. The neighbor’s subsequent success fanned Jack’s interest.

“Virtual fence looks promising for controlling cattle access to environmentally sensitive areas and cultural sites, and you can put a virtual fence in places where we can’t build a physical fence. It looks like it might really work, and there is some federal funding available to help with the cost, so we’re going to experiment,” grins Jack.

The other advantage is the ability to track cattle wearing the GPS collars. Jack and his family routinely ride horseback across many miles of rough country, trying to locate cattle and move them from one vast pasture to another. They have tried using a camera-equipped drone to locate cattle, but it’s still difficult in areas thick with cedar trees.

“We spend days and days looking for cows, and we could save a lot of time if we could use GPS to locate the cattle. It’s definitely not a cheap technology, but I think the benefits are likely to outweigh the cost,” states Jack.

Four buckets

Reflecting on his own ranching career, Troy Marshall thinks he was myopic. In the past, he didn’t even think about investing in anything other than the ranch and the cow herd. As director of commercial industry relations for the American Angus Association, Marshall now encourages cattle folk to be more farsighted. Record prices present many with the opportunity to invest in the future. How they choose to target their investments depends on the individual, their stage of life, their goals and the goals of family or other associates.

“I think the choices fall into four big buckets — land, cattle, people and the business model,” says Marshall. “I think it’s wise to diversify your investments, investing in all of those areas.”

Getting more specific, Marshall reminds producers that the value of genetics has never been higher. Furthermore, there have never been more tools available for implementing genetic improvement.

“Producers can use the tools to select for cows that fit the production environment and the marketplace. They can participate in programs that provide feedback — information to use in making future selection decisions, as well as documentation that can aid marketing,” advises Marshall.

Another area to think about is how to improve efficiency of production, Marshall notes. This could include adoption of different practices for grazing management or for sourcing, processing and delivering feedstuffs. It also could include investment in equipment that reduces the need for hired labor, or makes it easier to retain the current labor force. Consider diversification, perhaps adding an enterprise that adds value to your product while making more efficient use of equipment and the labor force.

“All of these things can have value on the other side of the cattle cycle,” states Marshall. “Other things to consider are putting money away for the kids’ education, putting money away for your own retirement or investing in home improvement. Those investments in people have value, too.”

Editor’s note: Troy Smith is a freelance writer and cattleman from Sargent, Neb.