Profits Over Production Makes More Sense Than Ever to Rancher Kit PharoWed, 29 Aug 2012 06:49:11 CDT
Businessman Kit Pharo decided he wanted to be a rancher. He took a look at the cattle business and thought he could see how to make a profit on a ranch in eastern Colorado. He and his wife began implementing a profit-centered approach and it has rewarded their efforts.
Pharo recently spoke with Ron Hays at the Southern Plains Beef Symposium in Ardmore. He says the secret to the success of the Pharo Cattle Company is simple: itís not just about producing quality cattle itís about making money.
ďWe had been in other businesses prior to this and I knew I had some business sense and I decided the ranching was either going to make me a living or I was going to do something else. And, unfortunately, it looks to me like a lot of ranches are just a way of life. Theyíre not as profitable as they should be. In fact, I think most of them are break-even at best.
ďSo we decided to do some things differently. We didnít want to decrease production, necessarily, but we realized that production was not the same as profit. So we started focusing on profit and realized fairly quickly that inputs or expenses played a bigger factor than production. So, if we could reduce or eliminate expenses, we could increase our profits. And thatís been very positive for us as far as the ranching business. The easiest dollar that Iím ever going to make is the dollar I donít spend.Ē
For the last 40 or 50 years, the emphasis in the cattle business has been on producing every last pound of gain. Pharo says that strategy has reached the point of diminishing returns. With cattle prices being high, he says, high-producing ranches are doing well. When the market takes a dive again, as he believes it will, he thinks many ranchers will be find their operations in trouble.
Pharoís viewpoint is echoed by Dr. Dave Lalman of OSU who wonders if we havenít bred cows too big to make maximum profits.
ďI think, yes, weíve realized we went too far and now itís time to turn around, and thatís encouraging,Ē Pharo says.
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