Land and cattle are run as separate enterprises at this Flint Hills Ranch
By Allan Nation
BEAUMONT, Kansas: Pete Ferrell describes his ranch's financial and management structure whereby land ownership and cattle are run as separate entities as just "practicing what I preach."
A long-time facilitator in the Executive Link program of California-based Ranch Management Consultants, Ferrell has separated the ownership of the land from the livestock business just as the Executive Link program recommends.
"Ferrell Ranch, the land owner, is one entity.
"4L Grazing, LLC, a management company, is another separate entity," he explained.
"4L Grazing rents the grass from Ferrell Ranch at market value for Bluestem pasture. I describe it as buying grass wholesale, adding a service and selling it retail."
He said this separation has several advantages.
"One, it is a clear statement to my children as to how they can best perpetuate this ranch. They can be active in management and work in a job for 4L Grazing or they can be passive landowners and just collect rent.
"Two, it facilitates an open book style of management with my ranch manager, Jamie Nelson. He knows how, where and if we make any money.
"Three, it keeps us competitive in obtaining other ranch leases because we are used to paying market value for grass.
"Four, I believe that every asset you own should give you at least a 10% return. You should always charge yourself what the asset could earn as a bona fide investment.
"Five, it creates a legal firewall and helps keep your accounting clean and simple."
He said the long-range vision he has for Ferrell Ranch is to explore all avenues of sustainable economic development.
"Our motto is that we succeed because we recognize that ecology and economics are forever connected."
Some of the enterprises on the 7000 acre ranch are wind-generated electricity, custom grazing, hunting leases, agritourism, and, perhaps in the future, bottled spring water and carbon sequestration.
"I admit that I got totally burned out after 30 years in operations: ranch management is really hard work and lots of it.
"My primary job now is to sit and think up new ways to sell stuff we've already got - like the wind that is blowing 250 feet off the ground.
"I have very little to do with the actual day-to-day cattle management any more."
The ranch's recent venture into wind-farming has proven to be very lucrative but much more controversial than he had anticipated.
"Everyone wants 'green power' but apparently no one wants to be able to see the windmill that generates it. I lost good friends over it."
Currently, Ferrell has 50 wind powered generators on the ranch and three of his neighbors have another 50.
He said wind-powered electricity is very compatible with ranching and that the cows use the 250 foot tall windmills' shadows for shade.
"It's funny to see them all lying in a line in the shadow of the tower."
He said Ferrell Ranch just collects a royalty check and has nothing to do with operating or overseeing the generators.
"All I know is when the wind blows harder my check gets bigger. Blow wind blow!"
He is currently working as a consultant with other ranchers who want to put in windfarms.
Ferrell said his real love was cow-calf production but after being battered by several cattle cycles he found custom grazing to be much more consistently profitable.
"I have never lost a dime with my custom grazing enterprise. I can't say that about my other livestock ventures," he said.
LOYAL CLIENTS AND GLOWING REFERRALS
4L Grazing is known as "a management company that leases properties in the Flint Hills for livestock grazing."
He said the secret to success in custom grazing is "loyal clients and glowing referrals."
The Flint Hills area of southeastern Kansas is a tall-grass, warm-season prairie that, thanks to a limestone layer just beneath the soil, has never been plowed.
It is famous for the excellent gains on yearling cattle it can produce until mid-summer and has been a major custom grazing area since the late 19th century.
However, in recent years 4L Grazing has specialized in custom cow-calf grazing. Most of these cow-calf clients are farmers from north-central Kansas who use the cows as a way to harvest their crop stover in the winter.
4L Grazing offers both a 90 day May to August stocker program and a full season May 1 to October 31 cow-calf program.
"Cows are more profitable than stockers due to the longer season but the stocker program allows us to lower our overall stocking rate in late July when the grass growth dramatically slows down.
"The stocker areas are then allowed to regrow and the grass is sometimes used with the cows in the fall and winter if we have adequate residual," he said.
4L Grazing offers both "brown season" and "green season" grazing for both stockers and cows with the brown season priced at a considerable discount to the green season.
"Any brown season grazing fees we earn are just gravy."
Each "green season" stocker contract is sold on the basis of tonnage of incoming weight, for example, 198,000 pounds plus or minus two percent might satisfy one contract allotment. Each allotment is based on the normal carrying capacity of a particular parcel of the ranch.
4L Grazing charges a 90-day rate of $13.50 per incoming cwt. for their stocker allotments. The calculation for the 90 day rate for a 450 pound steer would be 4.5 X 13.50 or $60.75/head for the 90 day graze.
Ferrell said it is the responsibility of the stocker owner to provide the gross contracted weight to fill an allotment. If he provides less than 198,000 pounds, the client is still charged for the full contract tonnage. "In this way I don't care what the head count or the weights of the individual steers are. We weigh them coming in and weigh them going out."
A $10 per head non-refundable advance against future grazing fees is made when the grazing contract is signed.
Research in the 1970s found that 80% of the total season's gain occurred in the first 90 days and if destocked in late July, twice as many stockers could be carried on the same land area.
This has subsequently become the norm for stockers in the Flint Hills.
>b>PRICE OF GRAIN DETERMINES THE PRICE OF GRASS
Ferrell said both the demand for grass, and the fee paid, for stocker grazing is highly dependent upon the cost of gain (COG) in the feedlot, which is dependent upon the price of corn.
"Ideally, you would want pasture gain to be considerably cheaper than feedlot gain but the recent low prices of corn, it actually costs about the same."
Cows and bulls are charged $115 for the green season and the calf is charged $50.
"We don't take in any cows younger than four years of age and we want all the cows on our place prior to calving."
Each year the stockers and the cows switch grazing areas on the ranch and direction of rotation to prevent hitting the grass the same way at the same time of the year.
The stocker cattle are set-stocked for their 90 day graze but the cows are rotationally grazed.
To facilitate this the ranch uses a lot of "seasonal fencing" (temporary electric) in addition to permanent paddocks to vary the grazing patterns for the same reason.
This fence is all taken down in the winter to facilitate pasture burning.
A three-year burning rotation is used to prevent cedar encroachment with one-third of the ranch fired each year.
Until recently, 4L leased an additional 5000 acres and plans to do so again.
Ferrell said the primary problem with most leased properties was the lack of stockwater development.
With both the cows and stockers, feed, mineral supplements, and medicines are charged to the client at no markup.
"Some people try to make the re-selling of goods a separate profit center but we don't. We want our clients to know that we make our money solely from grass management."
Brown season grazing is $10 per adult per month.
He said in years past there was little demand for brown season grazing but the current high cost of fuel has changed all of that.
"At $3.30 a loaded mile, they no longer want to take the dry cows home to corn stalks. They want to leave them here."
© by The Stockman Grass Farmer
If You Would Like To Read More Articles Like This One, CALL 1-800-748-9808 And Request A Free Sample Of THE STOCKMAN GRASS FARMER TODAY!
Or Order A Free Sample Of THE STOCKMAN GRASS FARMER online. CLICK HERE.
To subscribe to THE STOCKMAN GRASS FARMER CLICK HERE.