Avoid Unintended Consequences with Ryan Rhoades and Hector Menendez

A quick fix rarely fixes anything the way we want it to. Any decision on the ranch has potential to have both short- and long-term effects on production and profitability. The trick is to make decisions that prevent unintended consequences. Ryan Rhoades, Colorado State University, and Hector Menendez, South Dakota State University, help us avoid those unintended consequences by thinking in a system's approach.

Read "Feeding Cows During a Feed Shortage" from the ABB EXTRA

For more information:
Ryan Rhoades: ryan.rhoades@colostate.edu
Hector Menendez: Hector.Menendez@sdstate.edu

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Transcript

Welcome to Angus at Work. Thanks for joining me. I'm your host, Kasey Brown. A quick fix rarely fixes anything. As much as we don't want it to, that quick fix usually affects a lot more than we intended, like putting some wire on a gate, but it still broke and the heifers got out, and then they got bred by the neighbor's scruffy bull. Any decision on the ranch has potential to have both short- and long-term effects on production and profitability. The trick is to make decisions that prevent those unintended consequences, because there's no doubt that the cattle business is volatile, and those willing to adapt are going to be those who survive challenging times. Now, I'm not saying this to induce decision paralysis. I bring this up because today's experts help us avoid those unintended consequences by thinking in a system's approach. Doctors Ryan Rhoades and Hector Menendez say a lot of cattlemen already do this in some form or another, but they can help us be more intentional about it and that can help us in the long run. So let's dig in. Tell me a little bit about your background in the beef industry.

Ryan Rhoades:
So Ryan Rhodes here, associate professor, beef extension specialist at Colorado State University. Been there for five years, and prior to that, I was faculty for six years at King Ranch Institute for Ranch Management. And that's where I developed this passion or skill set, I guess if you will, for thinking in systems. It was the foundation of everything there, so yeah, that's about me.

Kasey Brown:
All right, Hector, tell us about you.

Hector Menendez:
Sure. So I am faculty here at South Dakota State University. I'm an assistant professor with the Department of Animal Science, and I have been here for about a year. So I'm a state livestock grazing specialist. And in that role, I get to interact with producers and I really enjoy that extension component, but also we have a heavy research component or I have a heavy research component at the Cottonwood Field Station, and we're really pushing using systems integration of different precision technologies, producer experiences to advance the beef cattle industry, especially in Western Range Land System. So my background includes a B.S. In animal science, and that started in Texas. And that journey eventually led me through working for the Texas Department of Agriculture at Texas A&M University. I graduated here from South Dakota State University and then did a postdoc at Texas A&M with a beef cattle nutritionist. And having that combination of model and experience enabled me to fill a role here in South Dakota as a systems expert in beef cattle systems. Yep.

Kasey Brown:
Great. I love this because I am also an Aggie, so this is going to be great podcast.

Hector Menendez:
Oh, mine's just a postdoc, so.

Kasey Brown:
Well, that's all right. So tell me a little bit about why producers should think in a systems manner. You talked about unintended consequences and how everyone knows this is a complex industry. Can you talk a little bit more about that?

Hector Menendez:
Sure. So our world, as you know, is becoming increasingly complex, especially given the data-driven or technology-based nature of the industry. And so as producers are given more information and face new challenges, whether that be drought or climate or political, they need to know how to connect the dots and be able to still maintain a profitable and sustainable operation. And I would add that the growing consumer demand and perception playing such a strong role, like Dr. Blair and her presentation earlier today mentioned, a picture's worth 1,000 words. And so I think the 21st century rancher has been faced with more information and more challenges than ever before. And so bringing a systems approach can help address that complexity and bring clarity to problems that might be persisting, like these drought challenges of cattle destocking. Ryan, do you want to add anything?

Ryan Rhoades:
Yeah, we talked about some of the big trends going on in the industry, whether it's variation in profitability from place to place or it's increased regulations, increased complexity, increased volatility in markets. It just seems like every day producers are faced with greater financial and production risks in a very complex environment. And we tend to... In agriculture, we tend to create solutions that are oftentimes linear in nature, and we forget about the unintended consequences and the feedback loops and all the things that are inherent to very complex systems. And so that's really why we believe thinking of these sort of adaptive challenges in a systems thinking format really allows you to create more effective leverage points and solutions.

Kasey Brown:
Can you give me some examples of some of those unintended consequences, where you're trying to address this problem and then it snowballs? Tell me some more about that.

Hector Menendez:
Sure, so really a simple one, biologically, is just the unintended consequence of overgrazing, so you can maintain profit margins. We have a long 80-year study that shows, well, if you graze heavy, you still might be able to maintain your grass production and the margins are close, but in these systems where there's increasing volatility, not thinking about the long-term effects of how you're grazing today is going to affect your ability to capture snow pack, how that ties into soil temperature, soil moisture, which all feeds back into plant regrowth. And so producers who are continually eroding their capacity for their range lands are actually eroding their profit margins because the grass becomes that much more sensitive. And so that can be an unintended consequence of overgrazing. There's also things like burning the midnight oil, so take fixes that backfire, which is a systems' archetype principle, and a producer with a labor shortage might just say, "Oh, well, I can burn that midnight oil and work extra hard during a calving season or breeding season," but there can be things unintended, like family stress, different dynamics, or just being burnt out. And those unintended consequences can lead to other difficulties in terms of ranch life.

Kasey Brown:
I think, Ryan, you had talked about how breakeven costs can change because of destocking. Can you talk about that?

Ryan Rhoades:
Yeah, so in our example... And Hector mentioned some archetypes, so one that's very common in ranching seems to fit almost all examples is this idea of shifting the burden. And so what happens is, again, we get into these quick fixes. And our example today was feeding cows in the face of feed shortages. And so, really, we've got two decisions to make, and that's either culling cows, reducing the size of our herd to address a feed shortage, or buying feed at what is now elevated prices. And so both of those things are what we would call quick fixes to that problem. And really what we want to do is get into a situation where we're longer term implementing better grazing management practices, for instance, that hopefully, by doing that, we increase our feed resources over time, so we're not in these feed shortage situations.

Ryan Rhoades:
But unfortunately, going back to unintended consequences, these quick fixes create unintended consequences, such as if I'm selling cows on a suppressed market, I have to buy those cows back eventually at an elevated price. And now I'm in a situation where the unintended consequences... Now, my cow breakeven costs have elevated making it hard for me as an operation to get to that longer-term solution, or on the other side purchasing feed, so now I have elevated feed costs. Again, eroding capital, I think is what we use today, which makes it harder to get to that longer-term solution.

Kasey Brown:
And we all know every operation is different, but you gave a lot of great examples on what are some options that producers should think through or things that are available to them.

Hector Menendez:
Sure, so let me queue this one up for Ryan is that before we get into the specific options, it's really worth it to invest the time in exploring these things. And I think that's one of the main things we want to drive home to producers is the time it takes and the cost of planning and exploring these different options is nominal compared to the cost in terms of production and loss of profitability. And so, Ryan, I'll hand it over to you to talk about those different options.

Ryan Rhoades:
So if we think about the decision to cull cows to, again, alleviate our feed shortage concerns and thinking back to the unintended consequence of elevated breakeven costs in our cow herd, we really need to take the time to sit down and evaluate a destocking strategy, if that's the way we want to go. The unintended consequence of destocking is this idea of stocking rate relative to our fixed-cost structure. And we talked about today that, on most ranches, the fixed cost structure accounts for 60%, 61%, 62% of total costs and those fixed costs, once we've decided to invest in the assets, are hard to change. And so, as we destock, there's not as many units to cover those fixed costs. And so our per cow costs are elevated because of that.

Ryan Rhoades:
So that's one example of taking the time to analyze it before you get two years down the road and, all of a sudden, we're not stocked appropriately, our fixed costs are still the same, and how did my cow costs get so out of control? Well, that's the unintended consequence there. On the feeding side, we talked about if range grazing is still in play, thinking about being strategic about our supplementation program that compliments that range grazing piece, evaluating our options based on dollars per pound of crude protein and not necessarily buying whatever's cheapest at the store, because in the end, it ends up being more expensive.

Ryan Rhoades:
On the managing cows differently piece, we looked at if range grazing isn't an option, "Hey, let's think outside the box and look at maybe a drylot limit-feeding situation for our cows." And the analysis that we ran, given prices of commodities in Colorado, suggested that that might be a pretty economical situation to look at. It does require a different set of resources and equipment and more intensive management, but it's definitely an option to look at long term. And then if drylotting is not an option, then we also looked at a situation where we try to source some lower-quality forages, like corn stock bales or hay or wheat straw or something like that and supplement that with a dried distillers' grain supplement for protein. And that looked like that was pretty economical too versus I think the point was hay is expensive and so because you bought hay in the past, be adaptable. We also talked about that. What worked yesterday might not work tomorrow and so just leave your options open, create some flexibility in your system is kind of the point, so.

Kasey Brown:
Aren't the most dangerous words "Well, we've always done it this way," right?

Ryan Rhoades:
Yeah.

Kasey Brown:
So if cattlemen want to learn more about a systems approach, what are some resources that might be available? Who should they contact?

Hector Menendez:
Sure, so I think producers are more than welcome to contact Dr. Rhoades or myself as a starting point to say, "Hey, I have a persistent problem that I'm faced with year after year," or maybe they realize, "Oh yeah, this is me and this drought operation every time it's a drought." And so if there are those type of problems that they can't really seem to put their finger on, we'd be happy to visit with them. Also, on both of our websites, there are different publication and extension material as just introduction to systems to be able to read about that and the context of a cattle beef cattle production. And so those would be two great resources to start.

Kasey Brown:
Perfect.

Ryan Rhoades:
And I would add that, in general, most people in ranching are naturally systems thinkers. We just don't realize it. The difference is there's actually a process behind thinking systematically, and there are some places... not very many. There are some places where you can learn that process. The only one I know of is the King Ranch Institute has a lectureship on systems thinking. It's a four-day deal, and you learn that process of thinking through a problem systematically and finding leverage points and whatnot. And that's all it is, but we naturally think that way. It's we don't ever think of a problem through a process and actually map it out and write it down.

Kasey Brown:
Well, we all know that the cattle business is really the people business, so I like to end on a high note. Tell me something good that has happened either personally or professionally. It could be anything.

Hector Menendez:
Yeah, so personally, I have a three month old daughter named Irene, and I'm thankful that I get to work in South Dakota. That's one of the last areas with huge, intact grasslands. And having a role in preserving those and preserving the beef cattle community and range land community for her to enjoy, hopefully, in the future, I'm quite thankful for it.

Kasey Brown:
I love that.

Ryan Rhoades:
So I'll go professionally. So we have a program I described to everybody today called TRAC — Total Ranch Analysis for Colorado. And we go around the state, 30 ranches in our network. And we visit with folks and collect their financial and production data and have conversations about how they can be more profitable to sustainability, to generational transfer, and things like that, all those things that are important. And so last couple of weeks, I've gotten to go on several visits and sit down with folks and have kitchen-table conversations. And it's really neat. It's really impactful when you can show people that no, you can make money doing this. You can make money in this business, and you just have to have the information to make those decisions. And so that's fun for me.

Kasey Brown:
I love that. Well, thank you both so much for your time. Thank you for joining us at Range Beef Cow. If you want to learn more about this topic, check out the great article by Troy Smith that ran in the Angus Beef Bulletin EXTRA. I'll put a link to that in the show notes. We welcome you to check out our other print and digital content geared to make Angus work for you. You can subscribe to the Angus Beef Bulletin and the Angus Beef Bulletin EXTRA at angusbeefbulletin.com/extra and check out that pull-down menu at the top right. This topic is a great introduction to our Feeder-Calf Marketing Guide, which is all about what affects the prices you get for your calves. It will hit mailboxes in early June, and we are so excited for you to see it. And we always welcome your feedback. We'd love it if you would rate or review this podcast or share it with other profit-minded cattlemen. I really appreciate your time listening. This has been Angus at Work.