The Holy Grail of Farming and Ranching… “The Niche”

​There are many reasons to own livestock, but for most of us there has to be some degree of profitability.  However having conversations that revolved around achieving breakeven prices was never my cup of tea either.  Sure it can be enjoyable to raise cattle, but I’ve experienced working all year only to lose money enough times to appreciate that breaking even would have been better than going backwards but it doesn’t mean that I would keep going to intentionally make zero dollars either. 
 
Believe it or not there are bright spots in agriculture, but with such slim margins, adhering to conventional farming practices will create a struggle to get ahead and simply doing things on a scale doesn’t ensure profitability anymore.    While it is simple to say you have to find a niche in order to be profitable it can be quite a daunting task to find a scenario that separates their operation from the neighbors in such a way to provide a distinct economic advantage while not going clear out on an unsustainable limb that leads to raising something like ostriches.  Although I did take my kids to the zoo and found out an ostrich egg is equal to 18 chicken eggs and I believe I would pay for a one egg omelet sometime in my life if given the chance!
 
Sometimes a little outside perspective goes a long way so allow me to share a few thoughts about what it takes to secure a profitable niche within the cattle industry right now.
 
Make Money When You Buy Them
 
Many years ago I remember sitting at an auction next to an older man named Rex, he taught school at a rural school in Nebraska for years.  A teacher’s salary doesn’t afford one to build up much of a ranching empire but he still ended up owning an impressive amount of cattle and land by the time I knew him.  He told me,  “make money when you buy them”.  This sentiment will still ring true today, when you understand that what this older gentleman was a steady grasp of what was good value.  The realty right now is that you could be spending way to much on a cow that costs $900 and you could have a bargain and $1700. 
 
The niche could simply be defined as superior market savvy. The key here is to simply have a better understanding than those around you to know when to let opportunities pass and when to act quickly.
 
Intentional Input Management
 
A significant advantage grain farmers have is being able make more detailed decisions about their inputs.  Marketing products to grain farmers is a science showing exactly how many dollars per acre this improvement will cost and based on a multitude of trials there will be an expected gain in production that will offset the input and provide a rate of return.
 
               To be clear I am not suggesting that spending money is a bad idea, I am suggesting that spending money that doesn’t provide an intentional path to profit is dangerous.  Sharpen your pencil and dust of your 4th grade math skill and take an honest look at all your inputs and think of them as an investment and make the most detailed accounting possible and see if you will have a significant return on your investment.
 
               This niche could be described as an intensive dedication to managing inputs.  Obviously this will end up being a balance of an art and a science and no two situations are correct, but the goal is to only spend money if it will make you money.  How much money? Well my father would advise to do things if it looks like it will make a lot, because in the end it might make a little!
 
               Create a Marketable Product
 
               I’ll give you my personal opinion that if you are having a  brainstorming conversation about expanding into a new-to-you market segment, say grassfed beef, organic or registered stock and you hear these words expressed, “People will pay more for…” . Stop, what people? What people will pay more? Would you be willing to pay more for this product? Show me a list of names of people who will pay more.  As a general rule of thumb, utilize the philosophy, “If you build it, they will NOT come… unless you give them a darn good reason!”
 
               Be extremely honest with yourself and ask the questions,
 
                              -Can I provide a better product?
 
                              -Can I provide a cheaper product?
 
                              -Can I provide a needed product?
                Take a moment to access your situation, put all the cards on the table and think about what you could offer people that would allow you to answer yes to any of the questions above.  I think about a line from the movie “The Three Amigos”, I think that movie may have won an Oscar for best film involving Steve Martin and a Sombrero.  The little village was about to be attacked by a band of outlaws and the villagers were asked, “What can you do?!” there was a long silent pause and a little old woman said, “We can sew!” Martin Short replied, “You can sew?!... If only we’d known that earlier!”  The villagers then defeated the outlaws because they could sew. 
 
               This niche could be defined as being creatively profitable.  Different people have unique skills and talents and you will need to leverage every last bit of them in order to separate yourself and step away from ranching as a breakeven proposition and create a sustainable lasting legacy for your ranch.  Will this be easy? Of course not, but neither is pulling a calf in a blizzard.  You can do it, and it will be worth it. I’m pulling for you!
 
Thank you kindly,
 
Glade Miller Smith