Sustainability: What does it mean at the ranch level?

Dr. Jason Sawyer, King Ranch Institute for Ranch Management Author

08/27/2021 Added

49 Plays

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Dr. Jason Sawyer discusses economic, social, and environmental sustainability at the ranch level during the 2021 GSL Open House.

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[00:00:01.362](light upbeat music)
[00:00:07.630]I can't tell you how grateful I am
[00:00:09.370]for y'all to be here today,
[00:00:10.960]and I can't tell you how grateful I am to be here with you.
[00:00:14.830]I really, this is, I've been very excited
[00:00:17.730]about the opportunity to come up here.
[00:00:19.220]This is my first visit to this facility.
[00:00:21.850]It's a fantastic place.
[00:00:23.690]I'm sure you all wish it was a little bit greener
[00:00:25.700]than it currently is, but it looks pretty good to me,
[00:00:29.210]some of the other places I've been so far this summer.
[00:00:32.390]And I really do appreciate the number of people
[00:00:35.573]that come out here to, not to hear me,
[00:00:38.930]but to hear other people
[00:00:40.580]that are a lot smarter than me talk.
[00:00:42.070]So, thanks for the invitation
[00:00:44.180]and really happy and excited to be with y'all today.
[00:00:47.430]I'm gonna put my watch up here.
[00:00:50.780]It's my only watch, I don't actually know what time it is
[00:00:53.400]'cause I crossed back and forth between too many times zones
[00:00:56.560]on my way here and so I'm looking at that mostly 'cause
[00:01:00.050]one of the things that people put me on programs like this
[00:01:02.810]to do is stretch it out.
[00:01:05.310]So I'm guaranteed to talk longer than my allotted time slot.
[00:01:09.210]I have about 3,000 slides.
[00:01:11.790]It's okay, we don't have to go through all of them,
[00:01:13.730]probably just about two-thirds of them.
[00:01:15.960]And the fun part is, is that sometimes
[00:01:18.630]I don't really know what they are.
[00:01:19.930]So it's going to be an exciting morning because of that,
[00:01:23.850]for at least one of us in the room, that's me.
[00:01:26.840]But the topic that I have here
[00:01:30.830]is this topic about sustainability
[00:01:33.200]and one of the things that we think about quite a bit
[00:01:36.370]at the institute, in fact, you can see
[00:01:38.670]down bottom right-hand corner of my slide, it says,
[00:01:41.610]sustaining our ranching heritage.
[00:01:43.830]And so the sustainability of ranches
[00:01:46.260]is really kind of the preeminent focus that we have.
[00:01:50.240]And we think about it, because it's a big focus for us,
[00:01:54.140]we think about it maybe in a number of different ways.
[00:01:57.520]And part of what I want to do this morning
[00:01:59.700]is share with y'all some perspective,
[00:02:02.730]right, on this sustainability term.
[00:02:05.490]Now I would ask you to raise your hand,
[00:02:07.150]but I'm confident that I already know the answer,
[00:02:09.530]and I'm also confident that none of y'all
[00:02:10.477]are gonna raise your hand anyway.
[00:02:13.470]I'm guessing that this term sustainability
[00:02:15.540]is not a new term for anybody in the room, right?
[00:02:18.830]I'm also guessing, I am gonna ask you this question.
[00:02:22.640]What does it mean?
[00:02:25.000]What do you think sustainability means?
[00:02:30.805](muffled speaking)
[00:02:33.960]I didn't expect you all to say it out loud, either.
[00:02:35.960]So, I'm gonna see if I guessed correctly, right,
[00:02:40.360]so you can just give me like a little affirmation,
[00:02:43.940]or a no, you missed it pretty big there.
[00:02:48.300]'Cause I want to think about what does sustainability mean
[00:02:51.310]for you, for your ranch, because frankly,
[00:02:54.980]a big point of contention and concern over this term
[00:03:00.090]is what people think it means, right?
[00:03:02.640]I spent a couple of years digging around
[00:03:05.270]trying to understand what it really means.
[00:03:07.000]If I'm supposed to make things sustainable
[00:03:10.330]I kinda need to know what that is, right?
[00:03:12.160]If I'm gonna manage for sustainability,
[00:03:14.890]what exactly am I supposed to do?
[00:03:18.180]Here's what I think it probably means to most of us.
[00:03:23.150]When we communicate with ranches that we work with,
[00:03:27.030]with ownership of those ranches,
[00:03:29.390]this is the most common answer.
[00:03:32.110]This is what they feel sustainability as.
[00:03:36.520]Any of y'all, this come to mind for anybody,
[00:03:38.320]when I asked the question?
[00:03:42.290]This is another thing, and to me these are both
[00:03:44.640]the same thing, right, I mean,
[00:03:47.010]somebody wants to take this resource
[00:03:49.620]that maybe was handed to them,
[00:03:51.480]steward it in a way to make, leave it better than it was,
[00:03:55.270]right, so that they can pass it on to the next generation.
[00:03:58.390]So I feel like this notion of a legacy, creating a legacy,
[00:04:02.430]something that you have taken pride in,
[00:04:04.600]spent your life building,
[00:04:06.670]so that it can be passed on for the future
[00:04:09.870]is part of that same story.
[00:04:14.390]But let's be honest, right, in order to do either one
[00:04:16.700]of those two things, you have to do this one.
[00:04:21.060]So maybe a more acute definition of sustainability
[00:04:24.580]for most operators, is staying in business.
[00:04:30.100]So what do y'all think, is this wrong or right, did I miss?
[00:04:33.500]I mean, when I said, "What does it mean to you?"
[00:04:37.040]Did I miss?
[00:04:40.030]Now, this isn't necessarily the conversation
[00:04:42.700]about sustainability that happens in the newspaper, right?
[00:04:45.030]It's not necessarily the conversation that happens,
[00:04:47.660]you know, on the TV news or, you know, podcasts
[00:04:52.220]or whatever, wherever stuff comes from these days.
[00:04:55.160]How many of y'all, I mean, this is a sidebar,
[00:04:57.540]just a little sidebar here.
[00:04:59.430]Like, I don't even have TV at my house.
[00:05:01.920]Y'all have TV at your house?
[00:05:04.860]Everything comes on the computer now, right?
[00:05:06.880]I mean, my kids watch TV on a computer.
[00:05:10.970]Which is bizarre to me, 'cause I mean,
[00:05:13.770]it's better than when I was a kid
[00:05:15.220]and we had two channels on TV for half of the day, you know,
[00:05:18.990]but it's way better,
[00:05:20.618]but different because you're not really sure
[00:05:23.630]where that conversation's coming from at any given time.
[00:05:27.330]So I'm going to propose to you that I think sustainability
[00:05:30.850]is really a forecasting problem.
[00:05:33.600]So it's nice to follow the cattle market outlook, right,
[00:05:36.560]in a talk like this,
[00:05:38.080]because sustainability is a forecasting problem.
[00:05:41.570]In other words, if I think about being able
[00:05:43.430]to pass the ranch on to the next generation,
[00:05:46.160]that's a forward look, isn't it?
[00:05:48.360]If I'm thinking about staying in business,
[00:05:51.600]I'm in business today, will I be in business tomorrow,
[00:05:56.560]next year, 10 years from now?
[00:05:59.370]That's a forecasting problem.
[00:06:01.870]This to me is one of the things about sustainability
[00:06:04.710]as a topic that's been really challenging is that,
[00:06:09.270]I mean, let's be honest, right,
[00:06:10.630]I'm supposed to be a scientist.
[00:06:12.280]I kind of play one on TV sometimes,
[00:06:14.130]I don't know if I'm really one,
[00:06:15.140]but we like to measure stuff, right?
[00:06:19.040]I want a concrete, measurable definition of this thing
[00:06:23.670]so that I know when I got it.
[00:06:27.205]Does that make sense?
[00:06:28.920]I want to be able to say:
[00:06:31.620]not sustainable, there's a line right there, sustainable.
[00:06:37.220]I want to know where the finish line is.
[00:06:40.630]But what I've come to I realize is in this topic,
[00:06:43.530]this is part of the problem in this conversation.
[00:06:47.540]When have you achieved sustainability?
[00:06:53.440]Where is the line?
[00:06:57.020]It's always tomorrow, right?
[00:07:00.350]Free beer yesterday and free beer tomorrow,
[00:07:02.570]but never free beer today, you know what I mean?
[00:07:04.920]So, that's the problem with this notion of sustainability,
[00:07:08.840]the way we discuss it and describe it
[00:07:11.010]is it is always a forward look.
[00:07:13.060]It is always a question about sustainability.
[00:07:16.490]Am I going to still be here tomorrow?
[00:07:20.150]And that makes it difficult to quantify, measure,
[00:07:23.640]and manage too.
[00:07:25.300]And so what I want us to do today
[00:07:26.880]is kind of with that thought in mind,
[00:07:29.180]think about sustainability for your ranch.
[00:07:34.060]We're gonna spend a little bit of time there,
[00:07:35.780]talk through some things and maybe try to reframe this
[00:07:38.650]to make it a more manageable, more tractable problem.
[00:07:42.320]And then I'm gonna finish up with some things
[00:07:44.610]that are beyond the ranch, a little bigger picture,
[00:07:47.870]because they're certainly part of the public conversation
[00:07:50.140]today in the industry, and more broadly than that,
[00:07:53.370]and see if we can at least gain some insights.
[00:07:56.180]Does that sound fair?
[00:07:57.990]All right. Am I out of time yet, 'cause...
[00:08:02.070]Ah, man, that went faster than I thought it would.
[00:08:04.650]Okay, well we'll keep going then.
[00:08:06.760]So, I put down here at the bottom
[00:08:08.750]is sustainability part of your mission.
[00:08:11.170]Something that also we find a lot
[00:08:14.673]as we interact with a number of different operators,
[00:08:17.860]you know, and I'm really blessed and fortunate
[00:08:20.010]to be with the King Ranch Institute
[00:08:22.230]because we do have the opportunity to work with operators
[00:08:25.060]across a pretty big swath of the U.S.
[00:08:28.640]And so I'm able to get a lot of perspective and learn a lot
[00:08:32.100]from the different people that we interact with.
[00:08:34.900]One thing that's always a question mark is
[00:08:38.450]do you have a purpose?
[00:08:39.790]Does your ranch have a purpose, right?
[00:08:42.610]And in corporate speak, we'd say, do you have a vision,
[00:08:45.120]a mission statement, you know, a set of values,
[00:08:48.280]all this stuff that maybe you wrote down
[00:08:50.050]and went to our strategic planning conference
[00:08:52.540]and wrote a bunch of stuff on flip charts
[00:08:54.740]or something like that.
[00:08:55.573]Any of y'all ever done that?
[00:08:58.980]Some of y'all are laughing, which means you have,
[00:09:01.350]and the rest of y'all are thinking, I don't want to do that.
[00:09:06.200]But the reason I ask is if sustainability,
[00:09:09.480]maybe by one of those other definitions I gave,
[00:09:13.210]if that's not something that you think
[00:09:14.990]is part of the mission, the purpose of your ranch,
[00:09:19.530]then how are you going to achieve it?
[00:09:22.304]If it's not your purpose?
[00:09:25.810]Something to think about, right?
[00:09:27.940]Now, if you say that the purpose of your ranch
[00:09:29.840]is to pass it on to the next generation,
[00:09:31.500]then I would submit to you that it is part of your mission,
[00:09:35.180]but maybe you just haven't thought about it
[00:09:36.700]in that way, okay?
[00:09:40.260]So this is at least one glimpse of how
[00:09:42.130]we have been trying to think about sustainability
[00:09:45.440]or maybe the forces that drive sustainability.
[00:09:48.220]Because sustainability is a forecasting problem
[00:09:51.170]I want to think about all of the factors and forces
[00:09:54.290]that give my ranch longevity, right,
[00:09:57.240]that allow me to continue in business,
[00:09:59.360]to continue to operate,
[00:10:01.140]to pass it on to the next generation, et cetera.
[00:10:04.370]And there's a lot of factors.
[00:10:05.620]This is actually a simplified version, and I don't,
[00:10:09.670]I still don't think we have it all there, or all right,
[00:10:12.380]but that's too messy, right,
[00:10:13.830]so I made a little more simplified version
[00:10:16.680]and this one captures at least some of the big ideas.
[00:10:19.490]And I've highlighted in both of these
[00:10:21.950]these three things that we talk about
[00:10:23.820]as three pillars of sustainability.
[00:10:25.720]Have y'all heard these terms?
[00:10:28.590]The three pillars of sustainability.
[00:10:31.250]One of the main things, I don't really,
[00:10:33.050]I'm not gonna talk through this entire chart
[00:10:35.040]and everything like that,
[00:10:36.190]I know it's like a bunch of spaghetti.
[00:10:38.740]The big thing that I want you to come away with
[00:10:40.840]is that these are not three independent things.
[00:10:44.230]These are not three independent things.
[00:10:46.770]They are three things that are part of one large system,
[00:10:50.300]and so it might be a little better
[00:10:51.670]to visualize it like this, not quite as messy.
[00:10:56.710]And so when I think about it like this,
[00:10:58.690]these are the three categories of stuff
[00:11:01.630]that are part of the conversation about sustainability:
[00:11:04.920]economic viability, social responsibility,
[00:11:07.620]environmental responsibility.
[00:11:11.810]Everybody familiar with those?
[00:11:14.540]Okay, so I see somebody in the back circling their finger.
[00:11:19.530]Think my gears aren't gearing up right,
[00:11:20.947]and my arrows are backwards.
[00:11:24.160]I'm gonna tell you that I've actually had that conversation
[00:11:27.160]a lot of times, and the top arrow is backwards
[00:11:31.220]because I can't figure out how to flip it around.
[00:11:36.820]In case y'all haven't noticed yet,
[00:11:38.370]I'm not really a graphic designer.
[00:11:41.840]This is the thing, though,
[00:11:43.260]this is how as managers and operators,
[00:11:46.550]we tend to prioritize these three buckets.
[00:11:50.950]So, same three buckets, right?
[00:11:53.260]Except notice now my top gear
[00:11:54.840]it doesn't matter which way the arrow points,
[00:11:57.530]because they ain't touching any of them, right?
[00:11:59.910]It's something, it's out there, we have awareness of it,
[00:12:03.410]often we're angry about it
[00:12:04.780]because we perceive this as an attack on our industry,
[00:12:07.510]on our personal business, and on our own behavior, right?
[00:12:11.570]This social dimension is something that's away from us,
[00:12:15.110]and we don't like it very much.
[00:12:17.884]I'm not really sure what it is
[00:12:19.030]but we don't like it very much.
[00:12:22.240]We tend to be really focused on this one
[00:12:27.230]because we need to stay in business.
[00:12:30.630]Right, first step of future is being in business today.
[00:12:35.530]And then we also provide a lot of emphasis on this one,
[00:12:39.820]and I put there my environment
[00:12:42.070]because we are very focused typically
[00:12:44.700]on stewardship of our resources.
[00:12:47.200]We know intuitively and implicitly
[00:12:50.600]that the better care we take
[00:12:52.290]of the resources entrusted to us,
[00:12:54.350]the more likely it is that we'll stay in business
[00:12:57.080]over the long term, and so those two are typically
[00:13:00.890]part of our thought process.
[00:13:06.200]This is how this concept of sustainability
[00:13:09.120]is often represented,
[00:13:10.570]I'm gonna say in the public conversation, right,
[00:13:13.615]in the media, you know, writ large,
[00:13:16.410]whatever media means today,
[00:13:18.950]and in the policy conversation of our government.
[00:13:23.310]This typically is the weighting that exists.
[00:13:27.910]And notice here, now the economic viability part
[00:13:32.690]seems to be disconnected, doesn't it?
[00:13:38.190]And then of course,
[00:13:39.330]this is what consumers say they care about.
[00:13:44.860]Today, most consumers, and you might think,
[00:13:48.050]well maybe the environment one should be the biggest,
[00:13:50.580]but from consumer data, when consumers are surveyed
[00:13:53.730]and asked about their preferences,
[00:13:56.170]and I think there's somebody else that knows more about this
[00:13:58.560]gonna talk more about it later today,
[00:14:00.780]but high on the list are concerns about animal welfare,
[00:14:05.270]things like that,
[00:14:06.400]how animals are raised, treated, and produced,
[00:14:09.260]and those tend to be high on their list,
[00:14:11.130]and we typically lump those into sort of
[00:14:12.667]the social category of sustainability.
[00:14:16.520]The environmental piece is smaller, still there.
[00:14:20.840]The economic piece is there, but for consumers,
[00:14:24.260]the economic piece is how much they pay for product,
[00:14:27.700]not how much money you make.
[00:14:29.920]In fact, they might be antagonistic to think about the fact
[00:14:33.240]that you're making money off of their food.
[00:14:36.500]Now, to me, that's irrational, right?
[00:14:39.150]They wouldn't have any food
[00:14:40.440]if somebody couldn't make some money producing it,
[00:14:43.490]but that's nonetheless how people often react.
[00:14:47.110]So this is what consumers say.
[00:14:50.480]This is how consumers behave.
[00:14:55.440]Price often dominates their decision-making, right,
[00:14:59.440]regardless of the fact that they say those other things.
[00:15:02.740]Now we know that there are premiums available
[00:15:04.760]in the marketplace, so consumers are willing to pay
[00:15:07.960]some premium for certain products, things like that,
[00:15:11.130]with attributes that are, say,
[00:15:13.070]non-nutritional or non-tangible.
[00:15:16.580]So we know that those other things matter to them,
[00:15:19.210]but this is probably what their behavior reflects.
[00:15:22.500]So as a manager at the ranch level,
[00:15:24.660]how do you react to that, how do you respond to that?
[00:15:27.273]It's pretty difficult, right, 'cause everybody's perspective
[00:15:30.060]emphasizes a different piece.
[00:15:32.520]And this is where it's really important for me
[00:15:35.320]to communicate with you,
[00:15:37.000]that all of these things fit together, right?
[00:15:39.490]All of these things work together for good
[00:15:42.200]if we think about them in an appropriate way.
[00:15:44.780]So let's think about the economic viability piece
[00:15:47.260]from a ranch perspective.
[00:15:50.417]I'm gonna go through these relatively quickly, I hope,
[00:15:55.330]'cause we've already talked about the forecasting problem,
[00:15:58.830]and this line, this magical line of when am I sustainable,
[00:16:02.300]well I never am sustainable, right?
[00:16:04.780]I was sustainable yesterday 'cause I'm still here today,
[00:16:07.850]tomorrow's always in doubt.
[00:16:10.120]So I'm never gonna arrive.
[00:16:12.170]And this is a real problem, right?
[00:16:14.260]Because I think the public has an expectation
[00:16:16.460]that we're going to cross some magic line,
[00:16:18.810]and I don't know that that's realistic.
[00:16:20.670]So we need to find different ways to think about
[00:16:22.960]and communicate about this.
[00:16:25.730]So, passing the ranch to the next generation
[00:16:28.330]is directly related to economic viability,
[00:16:31.820]and the thing is,
[00:16:33.700]we can have either too much of a good thing
[00:16:37.390]or not enough of it.
[00:16:39.700]And I'm gonna talk through that a little bit more
[00:16:41.410]on the next slide, but remind me if I forget, all right?
[00:16:45.800]And then the forecasting problem
[00:16:47.310]that we've already talked about,
[00:16:48.660]and for managers, I need some kind of key indicator,
[00:16:51.970]I need something to manage.
[00:16:54.090]And so for the next series of slides here,
[00:16:56.940]what I'm going to try to do is point out some things
[00:16:59.360]that we believe as part of that big spaghetti chart
[00:17:02.810]that are things that as a manager, I can actually act upon.
[00:17:07.040]What are performance indicators, what are metrics?
[00:17:09.930]What are things that I can do, manage, and improve
[00:17:13.360]that give me, that are good predictors
[00:17:16.850]of whether I stay in business and whether I'm sustainable.
[00:17:20.430]Okay, so, economic viability,
[00:17:24.760]this first bucket that we're talking about here,
[00:17:28.110]I got too much stuff in my hands.
[00:17:36.700]Give y'all a chance just to look at it.
[00:17:38.340]I'm gonna have a little table like this for each thing
[00:17:39.880]and what I'm trying to do here is say, okay,
[00:17:42.290]on the far left-hand, this is kind of how the world sees
[00:17:46.700]questions about sustainability, right?
[00:17:49.060]How they see the economic viability bucket
[00:17:51.500]of sustainability.
[00:17:53.240]This middle part is how I think we see it at the ranch,
[00:17:57.840]what it means to us, that translation.
[00:18:00.750]And then what do we do to manage that?
[00:18:03.530]And so in the world, like I said,
[00:18:05.210]people think about food price.
[00:18:07.280]Economic viability is somewhat related to substitution
[00:18:10.700]of one protein source for another,
[00:18:12.440]at the supermarket, for example.
[00:18:14.580]How much people are willing to spend on this product
[00:18:16.710]versus that product.
[00:18:18.610]And they have some kind of quality-value trade-off,
[00:18:21.900]'cause, I mean, let's face it, right,
[00:18:25.230]beef is the most expensive protein in the meat case.
[00:18:29.230]And yet, as we heard earlier, demands at all-time highs,
[00:18:33.100]50-year highs.
[00:18:35.260]And so people are willing to pay a value premium, right,
[00:18:38.240]for something they perceive as having quality,
[00:18:40.450]or desirability, but those are really
[00:18:42.740]the economic dimensions to the outside world.
[00:18:47.130]To us, these are the things
[00:18:49.240]that we need to be thinking about: profitability.
[00:18:53.470]So, are these related?
[00:19:00.200]If you make more money, do consumers pay less for food?
[00:19:08.660]It's an interesting question, isn't it?
[00:19:11.890]And so think about the supply-demand graph
[00:19:14.920]that Dr. Dennis showed us just a moment ago.
[00:19:18.690]When people pay more money for food
[00:19:22.200]and we get more money in our pocket,
[00:19:24.360]what are we going to likely do?
[00:19:27.440]Make more of it.
[00:19:29.170]We're really good at that.
[00:19:32.010]When we have the opportunity, someone gives us enough money
[00:19:35.300]to put more gas in the pickup, we're filling it up, right?
[00:19:37.920]I mean, we're gonna make more of it.
[00:19:39.850]And when we make more of it,
[00:19:41.440]more of it gets to the marketplace,
[00:19:43.060]and what typically then would happen to the price of food
[00:19:45.680]and the availability of food for consumers?
[00:19:48.470]Availability goes up and price goes down, right?
[00:19:52.030]So in a way, the more profitable more ranches are,
[00:19:56.080]after some lag and adjustment period, the likelihood is
[00:19:59.220]the more affordable food is for consumers around the world.
[00:20:01.920]That's an interesting little reversal, isn't it?
[00:20:05.500]The problem is, as it becomes more and more affordable
[00:20:08.300]for them because of our production levels increasing
[00:20:11.040]what happens to price, it falls,
[00:20:12.550]what happens to our profitability, it starts to fall.
[00:20:15.800]We produce a little less, right,
[00:20:17.170]and we're always on the see-saw, okay,
[00:20:20.170]but these two things are related,
[00:20:23.040]it is not a sin to make money.
[00:20:26.090]It's not bad for the world for us to make money.
[00:20:29.020]Maybe we need to help the world understand that.
[00:20:32.500]For management, though, so this is how we see it
[00:20:34.960]at the ranch, but in order to manage that,
[00:20:38.760]this, really this top one, is what we think of as being
[00:20:42.560]the dominant feature, right?
[00:20:45.250]Is your net income on an accrual basis,
[00:20:47.910]probably on a five-year rolling average.
[00:20:50.890]You can have a bad year and survive
[00:20:54.550]given this last category.
[00:20:57.500]So net income on an accrual basis is probably
[00:21:01.120]a dominant feature, right, a dominant indicator
[00:21:04.470]of your sustainability as a ranch.
[00:21:07.730]I'm gonna bet that most of us
[00:21:10.860]send our books to our CPA
[00:21:15.050]and file on a cash basis.
[00:21:19.630]You don't have to say, I mean, that's my experience
[00:21:23.250]is that's what most of us do, we took a cash basis election
[00:21:26.820]at some time in the distant past, and we just stick with it.
[00:21:30.380]And we probably, maybe some of us try to adjust our books
[00:21:34.110]to an accrual basis.
[00:21:35.960]The reason that I'm gonna make that distinction
[00:21:37.940]and I'm no accountant, you know,
[00:21:39.940]but one of the biggest assets that we have is the cow herd.
[00:21:46.620]And as inventory fluctuates, right,
[00:21:50.080]that drives many of the other financial features
[00:21:53.330]of the cattle enterprise, and we never realize that,
[00:21:57.300]in fact, we can get an opposite signal about that
[00:22:00.190]if we're only looking at cash accounting on an annual basis.
[00:22:04.160]So, we think that this is something
[00:22:07.950]that we probably should encourage
[00:22:09.540]and pay a little bit more attention to
[00:22:11.080]if we want to manage for that future trajectory.
[00:22:15.250]These other things are all related to that, right,
[00:22:17.470]how do we manage that?
[00:22:18.600]Well, we can do something about these.
[00:22:21.350]This one, substitution and yield,
[00:22:23.780]is back to that supply-demand price relationship,
[00:22:27.210]and how do we, and by yield here, I don't mean
[00:22:30.320]yield of beef, I mean, financial yield from the ranch.
[00:22:35.160]We think this is one of the things
[00:22:36.790]that's probably a big threat to sustainability of ranching,
[00:22:41.100]and if you want to think about this, this is where I said,
[00:22:43.310]you can have too much or not enough, right?
[00:22:46.040]If you don't have enough net income,
[00:22:49.540]what happens to your return on assets?
[00:22:53.180]Well, it falls, right, might go below zero
[00:22:55.820]if you don't have enough-enough net income.
[00:22:58.660]And when that happens, what happens to the business?
[00:23:02.380]It eventually gets sold.
[00:23:05.020]Here's the other thing is that return on assets,
[00:23:08.800]the yield, right, from the ranch as a capital investment,
[00:23:13.220]what's happened to land prices over the last,
[00:23:15.610]I don't know, ever?
[00:23:21.120]And so as land prices continue to accelerate,
[00:23:25.900]then if you produce the same amount of cash from your ranch
[00:23:30.520]every year forever, you are perfectly consistent,
[00:23:33.410]rain, shine, flood, or fire,
[00:23:36.870]but land prices continued to increase,
[00:23:39.450]what is the absolute largest asset of the ranch?
[00:23:43.070]The ranch.
[00:23:44.730]And so as that asset value continues to increase
[00:23:47.870]on a steady flat cash, even a positive cash, right,
[00:23:52.240]then your return on assets is falling all the time.
[00:23:56.320]Now, you might be fine with that 'cause you have enough cash
[00:24:01.010]and your kids, who you raised there might be fine with that,
[00:24:04.160]but are your grandkids going to look at a 1% yield
[00:24:07.680]from a multimillion dollar asset and think that's okay?
[00:24:14.490]And I mean, this is not a fun conversation, right,
[00:24:17.470]but it's reality, and I think this is a feature again,
[00:24:21.000]that's something that we can focus on
[00:24:23.470]if we're really interested in the future trajectory
[00:24:25.760]of the business.
[00:24:26.690]And so in order for us to generate higher yield
[00:24:30.600]from a constant land base,
[00:24:32.890]can I just pile more and more and more cows on it?
[00:24:36.190]Is that how I'm gonna increase my cash income,
[00:24:38.680]and therefore my ROA?
[00:24:41.400]Well, I can't do that, right,
[00:24:42.540]because that is unsustainable, right,
[00:24:45.950]I degrade the resource and lose productivity over time.
[00:24:48.910]And so in order for us to manage ROA,
[00:24:52.270]we start thinking about diversification of enterprises,
[00:24:55.640]how many other things can we bundle
[00:24:57.540]into the ranch as a whole?
[00:24:59.510]And so now I'm not talking about the ranch
[00:25:01.260]as a cattle-producing business only,
[00:25:04.050]I'm talking about the multi-dimensional aspects
[00:25:06.350]of a ranch.
[00:25:07.610]How can we add enterprises that generate additional revenues
[00:25:11.050]that help us leverage up return on assets?
[00:25:14.820]And how do we think about our capitalization profile?
[00:25:18.910]Maybe we lease more ground, right, so that our asset base
[00:25:21.910]isn't increasing on the books, but our yield can increase.
[00:25:26.260]And so these are all strategies
[00:25:27.710]that all of you have probably done, thought about,
[00:25:30.330]and acted upon in the past, we just haven't ever really
[00:25:33.490]put them in the context of sustainability.
[00:25:36.110]And so that's really what I'm hoping
[00:25:37.400]from this piece of our discussion today
[00:25:39.640]is that you start thinking about these management actions
[00:25:43.430]and how they relate to your sustainability goals
[00:25:47.250]and how that also translates to the world.
[00:25:50.200]So this last one is, I call it resilience, right?
[00:25:54.750]So, devastating drought in the western half of the U.S.
[00:25:58.710]this year, last two years, really.
[00:26:01.770]And as sad as I am about that, the only thing that's,
[00:26:04.960]that I see as good in that
[00:26:06.530]is that the part of Texas where I live in
[00:26:09.690]is not the blackest spot on the drought monitor
[00:26:12.610]for the first time in three years.
[00:26:15.660]I mean, you win some, you lose some, right?
[00:26:18.110]And so this notion of resilience then
[00:26:22.210]is how do we weather those storms?
[00:26:24.320]If we're thinking about an indicator of our ability
[00:26:26.870]to be in business in the future,
[00:26:30.300]how do we get through those bad times,
[00:26:32.230]'cause they're gonna happen, the only thing I'm certain of
[00:26:34.200]is that they're gonna happen.
[00:26:35.300]I'm uncertain about when, how bad, and how long,
[00:26:37.920]but they will.
[00:26:40.020]And so what is our capacity to absorb those shocks
[00:26:43.830]and equity-to-asset ratio, and your current ratio
[00:26:47.430]tend to be the two best predictors
[00:26:49.650]of your resilience financially, and therefore operationally.
[00:26:54.100]The decisions you make as an operator
[00:26:56.360]that affect those two things
[00:26:58.750]also affect your net income and your ROA, right,
[00:27:01.570]so they're all part and parcel of your business management.
[00:27:06.760]Now I put this slide up here 'cause as we're thinking about
[00:27:09.580]economic viability, one of the factors
[00:27:12.370]that obviously affects all three of those spaces
[00:27:15.660]is the breakdown of your total cost.
[00:27:18.200]And I want you to focus on these three right now.
[00:27:21.990]Purchase feed is the only one of those big three
[00:27:24.900]that's a variable cost.
[00:27:26.720]That's the one that we spend
[00:27:28.140]most of our time thinking about.
[00:27:30.350]I'm a nutritionist by training.
[00:27:32.720]Don't laugh at me, Dr. Krib.
[00:27:36.796]And so that's the one I liked thinking about.
[00:27:40.650]It's way more comfortable for me to talk about
[00:27:42.910]formulating a supplement for you than it is to talk about
[00:27:45.430]the sustainability of your business, I promise you.
[00:27:49.910]But is it the most important one?
[00:27:53.290]Those other two are fixed costs.
[00:27:56.520]And how do we manage our fixed costs
[00:27:58.690]becomes a significant indicator of our long-term viability.
[00:28:04.670]I want you to kind of pay special attention to this one,
[00:28:07.580]'cause we're gonna see it rise its head up again
[00:28:10.170]in a moment.
[00:28:12.670]So back to our three wheels,
[00:28:14.510]we've talked about economic viability,
[00:28:16.260]let me talk a little bit about social responsibility,
[00:28:19.820]the uncomfortable one, right?
[00:28:22.310]Uncomfortable to me, at least.
[00:28:24.740]See, part of the other thing is,
[00:28:26.330]and this is I think something that's pretty true
[00:28:28.460]about people in this industry writ large,
[00:28:31.820]is that, and not everybody, you know,
[00:28:33.920]'cause everybody's different,
[00:28:35.490]but have you all ever taken a personality test?
[00:28:40.320]I've taken, I didn't take one until I was like 40 years old,
[00:28:44.570]'cause I thought it was hooey, right?
[00:28:46.930]And then I did it once and I'm kind of hooked,
[00:28:48.860]I'd take one right now if you give one to me,
[00:28:50.780]just to see if I changed, you know.
[00:28:54.800]And the reality is is that on a lot of them
[00:28:58.410]they have some measure of whether you're an introvert
[00:29:00.760]or an extrovert, right?
[00:29:02.540]How many of y'all, if you've ever done such a thing,
[00:29:05.995]and if you don't raise, if you don't raise your hand,
[00:29:08.370]I'll know the answer, right?
[00:29:10.530]How many of y'all classified as introverts?
[00:29:16.160]And people laugh 'cause I get up here and give talks
[00:29:18.270]and stuff like that,
[00:29:19.370]but I'll have to take a nap after this, I promise.
[00:29:23.003]And many people in this industry,
[00:29:25.120]the reason we like being outside, away from other people,
[00:29:29.310]is 'cause we like being away from other people.
[00:29:34.820]And as a result, this notion of sort of
[00:29:36.960]our social responsibility, that's ick,
[00:29:40.690]like, that's not good.
[00:29:42.610]That makes me uncomfortable.
[00:29:45.850]And I think this is part of the reason that our industry
[00:29:48.740]writ large has had a difficult time navigating that space
[00:29:53.350]because it is anti most of what we are,
[00:29:57.850]most of how we identify,
[00:29:59.660]and somewhat against our sort of culture, if you will.
[00:30:05.500]But, it doesn't have to be.
[00:30:08.090]So in the world we said consumers express a lot of concern
[00:30:10.670]about animal welfare.
[00:30:12.680]You often feel persecuted by that.
[00:30:15.750]You feel like they're saying you're not doing it right.
[00:30:18.170]And you say they are idiots and they don't know anything.
[00:30:21.950]And that may be true, but they spend money.
[00:30:27.260]You do it every day, though,
[00:30:29.560]because what this translates to at the ranch
[00:30:31.550]is excellence in husbandry.
[00:30:33.140]And how do we manage that?
[00:30:35.160]We manage that through things like morbidity rate,
[00:30:37.270]mortality rate, stockmanship, low stress handling.
[00:30:41.930]The thing I want to encourage you in this space is
[00:30:44.520]do we write those things down.
[00:30:47.630]Do we have a way to document and illustrate
[00:30:50.290]that to the world?
[00:30:52.130]So, hold morbidity rate in your mind for a minute,
[00:30:56.050]I'm gonna skip the middle one for a second.
[00:30:58.250]I think it's probably self-explanatory,
[00:30:59.890]and I'm gonna skip down here to fair treatment.
[00:31:01.990]And fair treatment there, I don't mean fair treatment
[00:31:04.360]of animals, I mean fair treatment of people.
[00:31:07.760]Part of this social responsibility thing
[00:31:10.350]is people's perception about how workers
[00:31:13.120]in the industry are treated.
[00:31:15.520]The packing plant situation with COVID
[00:31:18.010]was a really challenging situation.
[00:31:20.350]Why was there so much political pressure
[00:31:24.040]about the safety of the employees?
[00:31:27.660]I mean, I care about them too, they're people,
[00:31:31.300]but clearly this is a significant element
[00:31:33.970]of the public kind of view
[00:31:35.900]of what sustainability means across all industries.
[00:31:39.640]This is probably much more pronounced
[00:31:41.330]in other parts of the world than it is in the U.S.,
[00:31:43.380]'cause let's be honest in the U.S.
[00:31:45.200]most people are treated pretty good.
[00:31:48.350]Right now, if you don't like the job you have,
[00:31:50.290]you can probably go find another one.
[00:31:53.520]The imputed minimum wage right now where I live
[00:31:56.430]is 15 bucks an hour.
[00:31:58.170]Doesn't matter what the federal minimum wage is.
[00:32:00.880]Nobody gonna work for less than $15 an hour,
[00:32:03.040]and if you pay them less than that,
[00:32:04.030]they'll go across the street.
[00:32:06.190]So people in the U.S. generally are treated pretty fairly,
[00:32:09.580]but it is an important feature of this discussion.
[00:32:13.600]Now, how do we think about it at the ranch?
[00:32:15.750]Well, how do we manage our human resources?
[00:32:19.730]If you're involved in more of a corporate enterprise, right,
[00:32:23.310]you probably have some HR policy.
[00:32:25.610]If you're part of a family business, though,
[00:32:28.370]what's your HR policy?
[00:32:32.430]Do you have one?
[00:32:33.840]I worked for my dad, once.
[00:32:36.500](audience laughing)
[00:32:39.300]And he's sorry, he's a great dad, but he's a sorry boss,
[00:32:42.420]you know, 'cause he doesn't even talk, he doesn't say stuff.
[00:32:45.290]He just look at you and grunt, and if you did something
[00:32:48.600]then he'd yelled at you and keep yelling at you
[00:32:50.180]until you did something else, and finally you'd figure out
[00:32:53.080]which thing you was right by him not yelling at you, right?
[00:32:56.470]That's how a lot of us learn.
[00:32:58.810]Is that a good way to retain people in the business
[00:33:01.480]and encourage them to put their best effort forward?
[00:33:05.820]Probably not, but it's cultural and its ingrained,
[00:33:08.480]and it's something we need to focus on.
[00:33:10.610]What makes people want to stay on the ranch
[00:33:12.900]instead of go to town?
[00:33:14.950]And in a little bit more discreet way, right, safety events.
[00:33:20.140]So what I mean here is injuries, workers' comp claims,
[00:33:23.270]things that are actually measurable.
[00:33:25.400]What things are put in place there to ensure the safety
[00:33:28.040]and wellbeing of the people that work for you and with you.
[00:33:31.320]Now, I asked you to keep morbidity rate in your mind.
[00:33:35.680]So the Bureau of Labor Statistics actually keeps track
[00:33:38.500]of some things like this for people, not for cattle.
[00:33:42.500]Now, if we thought about morbidity rate
[00:33:44.790]in a feed yard, right,
[00:33:46.150]so all cattle go into feed yards across the board,
[00:33:49.320]I'm not talking about lightweight high-risk calves,
[00:33:51.500]I'm talking about across the board,
[00:33:53.260]the overall average morbidity rate in feed yards
[00:33:56.020]as reported by the National Animal Health
[00:33:58.480]Monitoring Survey System, NAHMS, you know the one?
[00:34:03.250]Anybody know that number off the top of your head?
[00:34:07.290]This time somebody has to say something.
[00:34:11.110]It's a percent, it's something in percent.
[00:34:15.110]Just guess.
[00:34:15.970]Ten.
[00:34:17.400]Ten, okay, ten's a little low, but a pretty good guess.
[00:34:20.610]Depending on the year and stuff like that,
[00:34:22.640]number usually hovers somewhere around 14 to 16.
[00:34:27.070]Now a lot of us have worked with a lot of
[00:34:29.640]lightweight cattle coming in to receiving programs,
[00:34:32.130]and we often double that number, we think 30 or 40%,
[00:34:36.110]that's the exception, not the rule, right,
[00:34:37.930]on average about 14 to 16%.
[00:34:41.820]If you looked at the Bureau of Labor Statistics
[00:34:45.460]at the number of people who called in sick
[00:34:49.500]at least one day in a year,
[00:34:53.330]or the number of people who were sick,
[00:34:55.240]but went to work anyway, any ideas what that number is?
[00:35:02.410]Me either. I looked it up.
[00:35:04.480]It's somewhere in the 60s.
[00:35:09.200]And that's not people that called in sick
[00:35:11.280]'cause they were lying, that's people that were legit,
[00:35:13.440]called in sick, couldn't go to work 'cause they were sick,
[00:35:15.830]or those that went to work even though they were sick.
[00:35:19.360]And that number's probably a lot higher now,
[00:35:21.250]those data are like several years old,
[00:35:22.900]that's not COVID data.
[00:35:24.720]So, who's better cared for, the cattle in feed yards
[00:35:28.910]or the average American worker?
[00:35:34.990]Interesting perspective, right?
[00:35:37.340]And what I want to call out to you there
[00:35:39.440]is that these things actually do matter
[00:35:41.410]for the future of your business,
[00:35:43.120]they are good predictors of the longevity of your business
[00:35:47.220]because if nobody will work there, you can't do it.
[00:35:52.050]If your children and grandchildren don't want to do it,
[00:35:56.470]they're not gonna do it.
[00:35:59.010]Simple as that.
[00:36:00.490]So how do we manage those things?
[00:36:04.230]This is a survey that one of the students at the institute
[00:36:07.510]put out several years ago
[00:36:09.550]to employees, like line level employees, the cowboys,
[00:36:14.010]and general managers at ranching operations
[00:36:16.770]kind of across the U.S.
[00:36:18.960]And I'm not gonna go through them all,
[00:36:20.690]but one of the things I want you to see is
[00:36:23.280]this was the number,
[00:36:24.590]these are ranked by the cowboys' priorities.
[00:36:27.000]What were the things that gave them satisfaction
[00:36:29.380]and made it a good job.
[00:36:32.340]And notice how their priorities rank,
[00:36:35.910]and how important some of these things are.
[00:36:39.610]And notice how the GMs thought about it.
[00:36:43.410]How important they thought that was to their cowboys.
[00:36:47.590]Little bit far apart on some of those things, aren't we?
[00:36:51.240]So it's not always about money.
[00:36:53.230]In fact, in this industry, it's rarely always about money.
[00:36:58.310]And so how can we as managers do a better job
[00:37:03.750]with our human resources?
[00:37:06.080]And then how do we tell that story
[00:37:07.920]so that it's clear to the outside world
[00:37:11.210]that we care about fair treatment of people.
[00:37:17.410]So this is actually the one that probably y'all thought
[00:37:20.110]I was gonna talk about, and I will talk about this one more,
[00:37:24.810]except I'm almost out of time already.
[00:37:27.740]So we'll talk about this as much as we can.
[00:37:31.460]Environmental sound, environmental soundness of a system
[00:37:35.290]is usually the bucket that gets talked about the most,
[00:37:39.560]right, I said this is the one that seems to be driving
[00:37:41.760]policy decisions today in the U.S.,
[00:37:44.610]and what are the big pieces of that?
[00:37:48.380]And these things actually change
[00:37:49.880]in priority order over time.
[00:37:52.200]So right now, would we all agree that climate concerns
[00:37:56.300]are the biggest driver of policy in the U.S.
[00:37:59.950]that's affecting our industry?
[00:38:03.160]I think it is, I mean, think about
[00:38:05.440]the big conservation initiatives,
[00:38:07.210]think about the Paris Accord,
[00:38:08.800]anybody know what the Paris Accord is or ever heard of that?
[00:38:12.910]The fact that you've even heard of the Paris Accord
[00:38:15.810]means that this is a big deal to somebody, right?
[00:38:20.100]Pollution and depletion.
[00:38:22.670]So pollution means we put bad stuff into the environment
[00:38:25.210]that causes problems.
[00:38:26.970]I don't mean, I mean everything but global warming there,
[00:38:29.600]right, and depletion means we're running out of stuff.
[00:38:32.960]Running out of water,
[00:38:33.870]we're running out of endangered species,
[00:38:35.930]we're running out of stuff.
[00:38:37.470]Those are typically the three big buckets
[00:38:39.530]in the environmental area.
[00:38:42.780]But the public mind can only hold one thing at a time,
[00:38:45.610]and right now it's climate.
[00:38:47.520]That's the big one.
[00:38:48.960]So, let's kind of look at our matrix here again,
[00:38:52.140]so if climate's a big bucket,
[00:38:54.210]these are kind of the sub buckets
[00:38:55.780]that people tend to talk about,
[00:38:57.050]and those are obviously related to each other.
[00:38:59.800]At the ranch, what do these things mean to us?
[00:39:03.180]Well, we're always interested in improving our efficiencies
[00:39:06.720]and we're always interested in reducing our inputs.
[00:39:09.590]Remember that variable cost piece, right?
[00:39:12.400]And so when we manage to those things,
[00:39:16.750]we tend to have positive outcomes on those things.
[00:39:22.020]That's the way it works.
[00:39:23.350]In fact, at one time we worked really hard,
[00:39:25.740]tried to come up with what I thought was a manageable metric
[00:39:28.990]for sustainability at the ranch,
[00:39:31.010]and the one that I kept coming to,
[00:39:32.980]like no matter how many trails I tried to follow
[00:39:36.670]was cost per pound weaned of calf.
[00:39:42.210]The further I drive that number down,
[00:39:44.040]typically the better I perform on environmental metrics.
[00:39:48.010]Interesting, right?
[00:39:50.030]And so those are the things we can manage to communicate
[00:39:54.590]about how we reduced inputs, improved efficiency,
[00:39:56.860]and therefore made positive contributions in these spaces
[00:40:00.130]that are of concern in the public mind.
[00:40:02.900]Depletion, this is one that we manage all the time.
[00:40:05.770]This is what stewardship is all about.
[00:40:08.270]Your efforts to not deplete a resource base.
[00:40:12.320]That's range management, right, that's your grazing system.
[00:40:15.840]That's the ecological enterprises that you use
[00:40:19.250]to diversify your ranching business.
[00:40:22.020]I live in Texas, and in Texas it is pretty common
[00:40:26.880]for the wildlife enterprise to equal, or, in fact, dominate
[00:40:32.020]the livestock enterprise in terms of revenue.
[00:40:36.130]So, do you want to shoot 'em all?
[00:40:41.160]Probably not, right, you want to avoid depletion.
[00:40:44.170]And increasingly people don't care about
[00:40:46.040]shooting them with guns as much.
[00:40:48.340]They're happy to come shoot 'em with cameras.
[00:40:51.140]And if you got some stuff that nobody else has,
[00:40:55.920]they're willing to come and do that a lot.
[00:40:59.300]Diversification, right, management for endangered species.
[00:41:03.170]And that's something that strikes fear into the heart
[00:41:05.790]of every land owner in the United States of America,
[00:41:07.840]is it not?
[00:41:09.600]But it is an opportunity and a way for us
[00:41:11.820]to communicate more effectively about what we do
[00:41:14.770]in language that matters to policy makers.
[00:41:18.390]And the pollution one I'm gonna skip over.
[00:41:22.460]Okay.
[00:41:25.270]That may or may not be what you expected.
[00:41:29.240]I don't intend to cause you to think something,
[00:41:32.900]I'm not trying to change your mind.
[00:41:35.980]You can still hate sustainability if you want to,
[00:41:40.260]but I don't think you really do.
[00:41:42.970]What I hope is is that by talking about some of these things
[00:41:46.600]that what we do is shift our perspective
[00:41:48.800]on what sustainability means,
[00:41:50.430]what this conversation really is about for us
[00:41:54.640]and how we as managers can actually act on things in a way
[00:41:58.960]that facilitates our overall business, right?
[00:42:02.270]By doing good for our business,
[00:42:03.900]are we also fulfilling those public expectations
[00:42:07.610]and sustaining our marketplace?
[00:42:10.120]'Cause at the end of the day,
[00:42:11.640]if consumers don't think that your product
[00:42:14.740]is wholesome, viable, sustainable in their language,
[00:42:20.180]they're not gonna buy it.
[00:42:23.300]And will that allow us,
[00:42:25.420]is that a good predictor of us being in business tomorrow?
[00:42:29.320]I would submit to you that it is.
[00:42:31.660]So I'm gonna kind of wrap up there.
[00:42:34.350]I'm gonna go through, I have a bunch of this
[00:42:35.940]'cause I thought this might be stuff
[00:42:37.690]y'all want to talk about.
[00:42:40.030]And many of you all might be aware that NCBA
[00:42:42.980]has recently announced a climate neutral objective
[00:42:46.240]for the beef industry.
[00:42:48.070]That's a topic of some conversation.
[00:42:50.510]If y'all want to discuss that, we can.
[00:42:53.940]I've got lots of slides about that.
[00:42:57.350]I'm gonna kind of leave it right here
[00:42:59.830]in order for us to have that discussion,
[00:43:01.740]so I'm gonna wrap up.
[00:43:03.970]I told you I wasn't gonna get through
[00:43:05.010]all 3,000 of them, right?
[00:43:07.220]But trying to do my part
[00:43:09.560]and keep us on time as much as we can,
[00:43:11.530]so thank you for your attention to maybe a talk
[00:43:14.410]that wasn't exactly what you expected this morning.
[00:43:18.575](audience applauding)
[00:43:24.010]Do we have any questions?
[00:43:29.920]Hold on, Nancy, I'll be right with you.
[00:43:33.860]You touched on both efficiency and resiliency,
[00:43:37.500]and I'm curious your thoughts on how those two interplay.
[00:43:41.270]The last year has shown that highly efficient systems
[00:43:45.620]are sometimes not very resilient.
[00:43:48.610]Yeah, that's a great question, and so,
[00:43:51.580]so if we want to, I'm gonna kind of make
[00:43:54.550]some definitions there, just so I can give you
[00:43:57.010]the answer I want, right, that's how it works.
[00:43:59.940]So if we talk about efficiency as being sort of
[00:44:02.730]outputs over inputs, right,
[00:44:04.790]how effective we are at turning an input into a product,
[00:44:08.070]that's really what efficiency means writ large,
[00:44:12.758]and you're right, the more highly efficient
[00:44:15.930]we make the system,
[00:44:17.550]typically means that we're operating it at capacity, right?
[00:44:21.780]In other words, we're getting every bit output we can
[00:44:24.750]from the inputs.
[00:44:26.000]And in the ranching context often what that means
[00:44:29.150]is that we're stocked exactly at carrying capacity.
[00:44:32.770]And that's actually the most effective way
[00:44:34.940]for us to minimize our unit cost of production, right?
[00:44:37.740]So that's our cost efficiency.
[00:44:40.170]But as you indicated, when we have those insults,
[00:44:43.500]like drought, our capacity shrinks all of a sudden,
[00:44:47.450]but our inventory doesn't shrink as fast,
[00:44:49.780]and so highly efficient systems
[00:44:52.190]in fact are often more brittle.
[00:44:55.560]And so really the challenge to management
[00:44:57.890]is how do we optimize that system, right,
[00:45:02.130]how do we generate the most efficiency we can
[00:45:05.690]without sacrificing resilience?
[00:45:07.860]And I think there's a couple of ways.
[00:45:09.500]Here's the traditional way, right,
[00:45:11.400]and I'm going to use stocking rate as the example,
[00:45:14.070]is we understock perpetually.
[00:45:16.450]My early background's actually in range science,
[00:45:19.380]and so you know what I was taught?
[00:45:20.870]You should never use a ranch as hard as you can.
[00:45:23.360]I mean, I'm paraphrasing obviously, right?
[00:45:25.800]But you should never use the ranch as hard as you can.
[00:45:29.610]But what does that mean to you as an operator?
[00:45:33.270]It means your fixed cost per unit of production
[00:45:35.850]just went way up.
[00:45:37.610]So the business mind of you is driving you to overuse it,
[00:45:41.470]if you will, the stewardship mind of view is driving you
[00:45:45.160]to under-utilize it,
[00:45:46.730]and so that's really the tension of management.
[00:45:49.380]I think the best example of the interplay
[00:45:51.340]between efficiency and resilience
[00:45:53.290]is how do we manage that tension.
[00:45:55.890]And I'm gonna submit to you that the best way to do that
[00:45:58.300]is understand what the volatility and variability
[00:46:01.060]of forage yield in your region is.
[00:46:06.736]I don't know if I have this graph.
[00:46:08.060]I don't have it in this deck.
[00:46:11.520]If it's highly variable, take that into consideration
[00:46:14.850]as you stock the ranch.
[00:46:16.380]Give yourselves an out.
[00:46:19.550]Be well enough capitalized, or have enough cash reserve
[00:46:23.660]that you can do something else, right?
[00:46:26.790]Put cows in a feed yard.
[00:46:28.200]I know that that may not seem like a great solution,
[00:46:30.860]but in my experience, it's one that has a viable place
[00:46:35.370]in our drought planning, right?
[00:46:37.320]And so I think that's how we manage that tension,
[00:46:41.420]that inverse relationship between resiliency and efficiency.
[00:46:44.280]It's a great question.
[00:46:48.540]Nancy.
[00:46:51.510]Are your, all the rest of your slides
[00:46:53.410]available online?
[00:46:54.560]I could listen.
[00:46:56.510]I'd like you to go through all of them,
[00:46:57.930]but I know you don't have time, so.
[00:47:00.450]I'm going to be honest with you, I have plenty of time,
[00:47:02.530]but I probably, I think y'all don't, so (laughs).
[00:47:05.980]You know, this deck isn't really online anywhere,
[00:47:09.790]but it's on this computer, and so I'm perfectly happy
[00:47:13.440]for the team here to share that with whoever requests it.
[00:47:16.530]It's fine with me.
[00:47:18.010]You know, I make no guarantees or warranties
[00:47:21.330]about the accuracy or validity of any claims made.
[00:47:24.539](audience laughing)
[00:47:25.430]Just joking.
[00:47:27.847]Wonderful, do we have any other questions?
[00:47:30.250]I really kind of thought somebody was gonna ask
[00:47:31.620]the global warming thing.
[00:47:34.160]We have five minutes.
[00:47:35.200]Yep, go ahead.
[00:47:36.300]So do cattle cause global warming, or what?
[00:47:38.430]I mean, it's just us in the room.
[00:47:39.760]I mean, other than the people on the interweb
[00:47:41.710]that are watching.
[00:47:43.110]Do cattle cause global warming or what, sir?
[00:47:45.149]There is no global warming.
[00:47:46.216]There is no global warming.
[00:47:49.420]Good defense.
[00:47:50.313]Care to see what anybody thinks.
[00:47:51.320]Good defense.
[00:47:53.900]Cattle don't, or it's minimal.
[00:47:57.210]Don't or minimal.
[00:47:59.690]What do other people think?
[00:48:02.200]There's a normal warming, just like the cal cycle,
[00:48:06.810]a wave.
[00:48:07.643]Could be.
[00:48:09.160]Could be.
[00:48:10.580]I mean, you know, that's certainly one of the questions,
[00:48:13.070]right, is how much of it is man made.
[00:48:17.110]I don't think there's any real debate
[00:48:18.960]about whether or not temperatures have increased
[00:48:21.240]over the last hundred years.
[00:48:23.090]That's pretty, I mean, that's pretty solid
[00:48:25.830]in the evidence stream.
[00:48:27.890]The precise causes of that certainly are gonna be debatable
[00:48:30.550]for a long time.
[00:48:32.380]But it is a physics problem, right,
[00:48:35.800]like this is a physics problem, not a philosophy problem
[00:48:38.520]about whether or not molecules vibrate.
[00:48:41.670]They do.
[00:48:43.630]That's why the Earth isn't a big frozen chunk of ice.
[00:48:47.880]Okay, that's physics, right, not philosophy, not religion.
[00:48:54.250]It is also a fact that methane has
[00:48:56.830]four little arms sticking off of it.
[00:48:59.210]Carbon is this miracle molecule, or atom, you know,
[00:49:02.000]it's a miraculous thing, it's the basis of life.
[00:49:06.560]And methane has four little arms sticking off of it.
[00:49:10.050]CO2 only has two little arms sticking off of it
[00:49:12.730]and they're stiff arms.
[00:49:15.050]So if we shake the hell out of each of those two things,
[00:49:17.830]which one wiggles more?
[00:49:22.790]Four springy arms or two stiff arms?
[00:49:25.680]Methane.
[00:49:26.560]Methane wiggles more, so guess what?
[00:49:29.360]When people say methane is more potent than carbon dioxide,
[00:49:33.250]that's what they mean.
[00:49:34.510]That's a physics problem.
[00:49:38.330]And so that shaking around means they bump into more stuff,
[00:49:41.520]and when they bump into stuff,
[00:49:42.530]they release that shaken energy as heat energy.
[00:49:46.690]That's the greenhouse effect, right?
[00:49:49.580]Now, do cattle emit methane?
[00:49:55.350]They do.
[00:49:56.890]It is your number one competitive advantage
[00:50:00.410]over other proteins.
[00:50:04.700]Y'all should never have given me this kind of microphone.
[00:50:09.320]The fact that cattle, here, I do have that slide.
[00:50:16.760]The fact that cattle can convert stuff that people can't eat
[00:50:21.680]into stuff that they can
[00:50:24.560]is your number one competitive advantage.
[00:50:27.290]And you know what the price of that is?
[00:50:30.640]Methane.
[00:50:31.473]Methane.
[00:50:33.920]But we need not make methane go to zero.
[00:50:38.090]We need not make methane go to zero.
[00:50:40.390]And we don't want to get trapped into that position, right,
[00:50:43.770]of being so defensive that we say,
[00:50:45.137]"Well, yeah, we'll feed them garlic oil and cloves
[00:50:49.070]and CBC until they don't make any more methane."
[00:50:54.320]'Cause if they don't make any methane,
[00:50:56.290]they have stopped digesting feed.
[00:51:03.180]So, that logic chain,
[00:51:07.470]methane is a more excitable atom or molecule,
[00:51:11.170]cattle produce it, therefore cattle cause global warming
[00:51:14.130]is a flawed logic chain.
[00:51:16.660]Flawed logic chain, it does not hold.
[00:51:20.800]We've got a question back here for you.
[00:51:22.890]Shoot.
[00:51:25.710]It's not a question, I think our,
[00:51:28.975]our key to sustainability is right here.
[00:51:34.120]It's the young generation able to
[00:51:38.000]maintain these ranches in the future.
[00:51:41.940]And the public needs to realize that that's the key
[00:51:47.450]to their food chain is the young peoples
[00:51:51.760]have to make a profit
[00:51:54.220]in this ranching business to sustain it.
[00:51:57.547]You know, I thank you for that comment
[00:51:59.700]and I could not agree with you more.
[00:52:02.390]And that's part of why I didn't spend all of my time
[00:52:04.610]talking about graphs today,
[00:52:06.970]but I spent time talking about how do we translate
[00:52:09.830]these public concerns,
[00:52:11.150]which drive demand in our marketplace,
[00:52:13.170]which impact our ability to persist into the future,
[00:52:16.600]how do we translate that into actionable
[00:52:19.240]management decisions that you can make for your business
[00:52:23.310]and in the best interest of your business,
[00:52:25.810]that also contribute and assuage the concerns of society
[00:52:30.210]and sustain and maintain the demand for the product,
[00:52:33.240]such that you can also continue to deliver
[00:52:35.640]the multiple ecosystem services
[00:52:37.500]that are delivered through this industry.
[00:52:39.690]Like that's the story.
[00:52:41.670]And how do we encourage and incent people
[00:52:44.120]to remain in the business,
[00:52:46.830]and that's profitability, right, profitability.
[00:52:50.020]So, I want you to be more profitable.
[00:52:53.050]That means you'll be more sustainable.
[00:52:55.880]And I want you to be able to translate the public concern
[00:52:59.060]into management action,
[00:53:00.480]and more importantly, to your point sir, the reverse,
[00:53:04.270]translate your good management actions
[00:53:06.270]into positive public outcomes.
[00:53:08.080]So, I'm sure that I've way extended my grace.
[00:53:12.750]Thank you very much, I'll be around for a little bit
[00:53:14.730]and love to visit with any of you at any time.
[00:53:18.411](audience applauding)

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Sustainability: What does it mean at the ranch level?

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