Ben H
Well-known member
Kit Pharo put this up on his website, mentioning it in the most recent PCC Quickie, it's from the September issue of Stockman Grass Farmer
http://www.pharocattle.com/extrastuff/Spf99_Eliminating_costs.pdf
Grassroots of Grazing: Eliminating costs is always better than reducing costs
by Jim Gerrish
Last month we reviewed how continually rising costs force us to keep our management strategies
always one step ahead of the next price increase. Fuel and fertilizer costs are a couple of the
biggest culprits in the current cost-price squeeze. It seems to me we give too much attention to
reducing costs and not nearly enough to eliminating costs. If you just reduce costs, you still have
to wrestle with the same beast every time that particular item makes another price leap.
Most of you know both SGF and Jim Gerrish devote a lot of time and energy towards the goal of
making and feeding no hay. This is a prime example of eliminating a cost rather than just
reducing it. If hay is no longer a necessary ingredient in your livestock operation, it is a cost you
don't have to manage anymore. If, on the other hand, you just reduce hay feeding from 120 days
to 45 days, it is still a cost you must contend with.
I've seen a lot of producers who were very proud of the fact they had trimmed their hay feeding
way back from what it used to be. But did they sell their equipment? No, they still have it and
rather than making 500 tons of hay a year, they only make 150 tons. A lot less operating cost
generated every year, but no real reduction in the overhead cost of owning equipment. The cost
per ton of hay is now likely to be even higher than it was before. If the equipment had been sold,
the overhead cost would also have been eliminated and the income from equipment sales could
have likely financed much of the fence and water infrastructure development.
Another downside of keeping the equipment is you can easily be tempted to start making hay at
the drop of a hat. Got a little extra grass this year? Bale it up. Made some extra hay last year?
Let's feed a little longer. Pretty soon you're right back in the same rut. Enslaved by the hay
paradigm.
What did Agamemnon, King of the Greeks, do on the shores of Troy? What did Hernan Cortes
do on the shores of Mexico? They burned their ships so there would be no going back. If they
had been really serious businessmen, they would have sold their boats to some other conqueror
and used the income to finance their further adventures. The moral here is don't just burn your
equipment, market it in an effective manner.
There are some regions where year-around grazing is very easy, while there are other areas where
even I'll admit it to be a much greater challenge. In those areas you might be faced with the
question of making the hay you need or buying it. If hay can be bought routinely for under
$60/ton, it's hardly even worth discussing the options. At today's N-P-K prices, a ton of hay
contains almost $60 worth of fertilizer without even considering the calcium, magnesium, sulfur,
iron, zinc, and other trace minerals as well as the roughly 800 lb of organic matter that will get
excreted on your property. At $60/ton, you're either getting the hay or the fertilizer for free. Take
your pick.
If hay is costing between $60-100/ton, you're still ahead to buy hay as the latest university
figures suggest just the operating cost to harvest a ton of hay to be between $35-40. Lots of
farmers who insist on putting up their own hay use the argument they can do a better job of
'putting it up right'. If you do it yourself, you may be spending that $40 to put up rained on, over
mature garbage. Buy the hay and you actually have better control over quality.
In some parts of the US and Canada, the cost of buying hay is two to three times what it was just
a couple of years ago. Currently in our neighborhood, hay right out of the field is selling for
$140-180/ton. In areas where hay costs this much, I have a little bit harder time making the
argument to buy your hay. It makes the argument for eliminating hay a lot more convincing,
though.
Last month I used nitrogen fertilizer as an example of another input cost that may have priced
itself right out of practicality. Some farmers and ranchers wonder how they can ever get the
production they need without using N fertilizer. Many of you who have heard me speak at
conferences already know there were only three times we ever used N-fertilizer in the 23 years
we were on our grass farm in Missouri. Did we have low producing, thin pastures? No, we ran
twice the county average stocking rate. We ran on legumes and an effective nutrient cycle. Yes
we limed some pastures and used phosphorus, potash, sulfur, and boron when needed. Last
month we talked about those nutrients as being long term investments in contrast to the very
ephemeral nature of N fertilizer.
We can talk all we want about cost reduction, but the real step forward comes when we embrace
cost elimination. I don't believe Mother Nature worries too much about what the banker thinks
she should do. One more reason to look to Mother for an example.
http://www.pharocattle.com/extrastuff/Spf99_Eliminating_costs.pdf
Grassroots of Grazing: Eliminating costs is always better than reducing costs
by Jim Gerrish
Last month we reviewed how continually rising costs force us to keep our management strategies
always one step ahead of the next price increase. Fuel and fertilizer costs are a couple of the
biggest culprits in the current cost-price squeeze. It seems to me we give too much attention to
reducing costs and not nearly enough to eliminating costs. If you just reduce costs, you still have
to wrestle with the same beast every time that particular item makes another price leap.
Most of you know both SGF and Jim Gerrish devote a lot of time and energy towards the goal of
making and feeding no hay. This is a prime example of eliminating a cost rather than just
reducing it. If hay is no longer a necessary ingredient in your livestock operation, it is a cost you
don't have to manage anymore. If, on the other hand, you just reduce hay feeding from 120 days
to 45 days, it is still a cost you must contend with.
I've seen a lot of producers who were very proud of the fact they had trimmed their hay feeding
way back from what it used to be. But did they sell their equipment? No, they still have it and
rather than making 500 tons of hay a year, they only make 150 tons. A lot less operating cost
generated every year, but no real reduction in the overhead cost of owning equipment. The cost
per ton of hay is now likely to be even higher than it was before. If the equipment had been sold,
the overhead cost would also have been eliminated and the income from equipment sales could
have likely financed much of the fence and water infrastructure development.
Another downside of keeping the equipment is you can easily be tempted to start making hay at
the drop of a hat. Got a little extra grass this year? Bale it up. Made some extra hay last year?
Let's feed a little longer. Pretty soon you're right back in the same rut. Enslaved by the hay
paradigm.
What did Agamemnon, King of the Greeks, do on the shores of Troy? What did Hernan Cortes
do on the shores of Mexico? They burned their ships so there would be no going back. If they
had been really serious businessmen, they would have sold their boats to some other conqueror
and used the income to finance their further adventures. The moral here is don't just burn your
equipment, market it in an effective manner.
There are some regions where year-around grazing is very easy, while there are other areas where
even I'll admit it to be a much greater challenge. In those areas you might be faced with the
question of making the hay you need or buying it. If hay can be bought routinely for under
$60/ton, it's hardly even worth discussing the options. At today's N-P-K prices, a ton of hay
contains almost $60 worth of fertilizer without even considering the calcium, magnesium, sulfur,
iron, zinc, and other trace minerals as well as the roughly 800 lb of organic matter that will get
excreted on your property. At $60/ton, you're either getting the hay or the fertilizer for free. Take
your pick.
If hay is costing between $60-100/ton, you're still ahead to buy hay as the latest university
figures suggest just the operating cost to harvest a ton of hay to be between $35-40. Lots of
farmers who insist on putting up their own hay use the argument they can do a better job of
'putting it up right'. If you do it yourself, you may be spending that $40 to put up rained on, over
mature garbage. Buy the hay and you actually have better control over quality.
In some parts of the US and Canada, the cost of buying hay is two to three times what it was just
a couple of years ago. Currently in our neighborhood, hay right out of the field is selling for
$140-180/ton. In areas where hay costs this much, I have a little bit harder time making the
argument to buy your hay. It makes the argument for eliminating hay a lot more convincing,
though.
Last month I used nitrogen fertilizer as an example of another input cost that may have priced
itself right out of practicality. Some farmers and ranchers wonder how they can ever get the
production they need without using N fertilizer. Many of you who have heard me speak at
conferences already know there were only three times we ever used N-fertilizer in the 23 years
we were on our grass farm in Missouri. Did we have low producing, thin pastures? No, we ran
twice the county average stocking rate. We ran on legumes and an effective nutrient cycle. Yes
we limed some pastures and used phosphorus, potash, sulfur, and boron when needed. Last
month we talked about those nutrients as being long term investments in contrast to the very
ephemeral nature of N fertilizer.
We can talk all we want about cost reduction, but the real step forward comes when we embrace
cost elimination. I don't believe Mother Nature worries too much about what the banker thinks
she should do. One more reason to look to Mother for an example.
