Diversity is a watchword for the ranching industry in the 21st century. Diverse populations of plants and animals signal ecologically healthy rangelands. Diverse, profitable enterprises signal an economically healthy operation.
“Over time, the ranching industry has changed,” said Stan Bevers, a professor and agricultural economist with the Texas A&M AgriLife Extension Service, who is based in Vernon. “Gone are the days when cattle alone could support ranches. Those who succeed in production livestock agriculture today have identified and implemented diverse enterprises that contribute to their ranches’ overall bottom lines.”
Opportunity and Necessity
The diversification of ranch income has occurred imperceptibly over time. It has been driven by both opportunity and necessity.
Dr. Clay Mathis, director of the King Ranch Institute for Ranch Management in Kingsville said, “Go back 100 years and Texas ranches were invested in livestock—cattle and horses as well as sheep and goats in the Hill Country and West Texas. Then time passed and opportunities arose for many in the forms of oil and gas development and wildlife-based recreation. Families embraced those opportunities because it provided financial stability and allowed them to support additional family members on the ranch.”
While families were busy seizing opportunities, market forces were at work making these operational changes necessities for survival as well. Unlike other business professionals, production agriculturists control neither the cost of their inputs nor the price of their products.
“The reason that ranchers have to diversify their income streams is so simple that it’s often overlooked,” Bevers said. “The costs associated with owning a ranch have increased so drastically that in order to cover their operating expense ranchers must utilize every asset on the ranch.”
On the cost side of the equation, Bevers cited the expense of a pickup truck as one example. In 1970, a pickup cost $2,300 on average; in 2010 that cost was about $35,000; and today, it can exceed $50,000. Land is another prime example. In 1970, land in Lee County, which is located about half-way between Austin and Houston, cost on average $235 per acre; in 2014, the average cost of an acre of land there was $4,829 per acre.
“A cow alone can’t pay for an acre of land or its operation,” Bevers said. “To make ends meet, ranchers must put every asset to work.”
Assets vary with each operation. They can include grass for grazing, mineral assets such as oil and gas, gravel or kaliche, water for sale or lease, utility easements, wildlife for hunting and other hospitality-based enterprises as well the opportunity to add other agricultural enterprises such as hay production or stocker operations.
“As ranchers take advantage of individual assets or embark on new enterprises, they have to be sure the new ventures are worth the costs—in time, emotions and money,” Bevers said.
Some costs, such as the aesthetic impacts often associated with power lines or wind turbines, may be emotional as well as financial. Other costs may be purely financial.
Bevers recently consulted with the management of a large Texas ranch that runs a 4,000 head cowherd and is diversified with wildlife and farming enterprises. Bevers was asked to analyze the overall operation and suggest improvements to strengthen its bottom line.
Traditionally, the ranch planted a significant percentage of its land to wheat in the fall. Conceivably, this allowed the managers to add value to the ranch’s calf crop by retaining ownership and selling larger calves later in the year. When Bevers put a pencil to the operation, he discovered the cost of the equipment, labor, and inputs such as seed, fertilizer and fuel outstripped the farming enterprise’s earnings.
“Not every alternative enterprise makes sense, even those that have been a traditional part of an operation,” Bevers said. “Ranchers have to be clear-eyed about which alternative enterprises add revenue and which ones don’t. If an enterprise doesn’t add money, then don’t expend the manpower and capital trying to make it work.”
Wildlife
For ranchers, the most common form of income diversification beyond adding production agriculture enterprises such as stocker or hay operations is wildlife.
“Across most of Texas, I think it’s safe to say that adding a wildlife enterprise is one of the most common ways ranch owners choose to diversify their income streams,” Mathis said.
Ranching and wildlife management are complementary. Wildlife habitat is a by-product of well-managed rangeland. In many cases, the needs of wildlife and livestock are similar enough that livestock and range management practices just need to be tweaked to help strike the balance necessary to provide a superlative home for wildlife too.
“In a lot of cases, income from wildlife has surpassed income from livestock,” Mathis said.
Managing for wildlife became even easier with the passage of Proposition 11 in 1995 which created wildlife tax valuation. It provides the same tax benefits as agricultural valuation without requiring owners to run livestock. The existence of the wildlife valuation gives additional flexibility for grazing management even for ranches that have livestock operations. Under traditional ag valuation, landowners must meet minimum mandatory stocking rates year-round regardless of range or weather conditions. Under wildlife valuation, landowners must implement three of seven specified wildlife management practices—and grazing can be used as one of many habitat management tools.
The Bottom Line
Ranching, unlike any other occupation, engenders a deep emotional attachment to the land and the lifestyle. Despite that spiritual connection, ranching always has been—and will always be—a business.
“My advice to ranchers is: ‘Start with the end in mind—and work backwards,’” Bevers said. “Know what the fixed costs are associated with owning and managing land, and then determine what enterprises will not only cover their own variable costs but address significant portion of the fixed costs as well.”
And, remember there is no such thing as easy money in the world of ranching.
“Every alternative income stream takes work—a lot of work,” said David K. Langford, vice president emeritus of the Texas Wildlife Association and renowned wildlife photographer, who lives near Comfort.
He and his wife, Myrna, host nature photography workshops on their portion of his family’s six-generation Hill Country ranch known as Hillingdon Ranch. The ranch is owned by more than two dozen family members, but leased by and run as a contiguous unit under the management of Langford’s cousin, Robin Giles and his immediate family.
“While Robin and his family bear the day-to-day responsibility of running the ranch, our extended family bears the long-term responsibilities of keeping the ranch in production,” Langford said.
The land, which is located in Kendall County was purchased by Langford’s great grandfather Alfred Giles in 1885 for $.50 per acre. In 2014, the average price per acre for the Land Management Area including Kendall County was $7,500 per acre.
“Individually our family landowners have resisted the temptation to carve out their parcels and sell them to the highest bidder,” Langford said. “Collectively, we’ve decided the highest and best use of the land is keeping the ranch intact and working.”
Hillingdon Ranch is home to an integrated livestock operation that includes cattle, sheep, and goats as well as lease hunting. Another cousin has constructed more than 27 miles of mountain biking trails on his parcel, which overlays but doesn’t replace all of the other ranching activities on his land. He and his wife hosts major bike races to help defray the cost of land ownership.
“There’s nothing about helping land pay for itself that’s easy,” Langford said. “But when you look out and see hills, trees and open rangeland instead of rooftops, it’s all worth it.”