What Ranchers Need to Consider in Good Times

No one in the cow-calf sector would argue that these aren’t the best of times in the beef industry with record high prices. What are ranchers doing with their record profits?
In a recent Northwest Farm Credit Sponsored webinar Dr. Dave Kohl, Globetrotting Emeritus ag econ professor from Virginia Tech asks livestock producers what their profit plan — or what are they doing with their profits — now that they have a strong market.
Kohl: “One of the things that I find is that some of the successful producers that allocate their profits properly - they use the 60-30-10 rule and its simple. Sixty percent of profits go for growth and efficiency. But one of the things is it is not about acquiring more land, more livestock or more machinery — sometimes it is utilizing it better. Thirty percent of it goes for building the working capital. The grain industry is going to discover that concept particularly in the next several years because you’ve got to build in your financial shock absorbers. Ten percent goes for living — but here is the thing I call the Lincoln Rule as I talked about those condos in Lincoln — that 10 percent has jumped up to 60 percent. And again in good times we tend to — What? — spend. One of the things is that is something we’ve got to watch for in the livestock industry where the good times are coming back.”