What is personalized grazing? – Canadian breeders
Custom grazing is an arrangement or contract between two parties where one livestock owner pays grazing fees to another for the management of grazing animals. The customary shepherd would have control of the land, manage the animals, and take care of the water and fences. Labor and equipment costs would be included in grazing costs. In contrast, a livestock owner can simply lease the land from a landowner and do all the work himself. This is simply a rental of land, not a personalized pasture. The difference is in who does the management.
The main part of my business here at Greener Pastures Ranching is custom grazing. I rent land from landowners and graze other people’s cattle in a regenerative way. You could say my business is just harvesting sunlight and building earth. What I’m trying to do is find land all together in one area and graze it as one pasture. These small plots of land belong to several landowners. This way I can offer personalized grazing to larger herds. Labor and equipment costs are much better distributed over a large herd than over a small herd.
Are you a tailor-made breeder? On paper, yes, you should be. Now the question is whether you are grazing someone else’s cattle or using your own. If you are running a farming business, the only way to know where you are making a profit is to divide your farm into profit centers. Grazing is only a profit center. On your farm, you must use the market price for the pasture you are loading.
Let’s look at a simple example. You own the land. You graze the pasture and we own the cattle. You wear all three hats. These are three separate profit centers. What part of the operation is profitable? You have to break down each part separately into a gross margin to see. Is it the real estate part that makes you profit? Or maybe it is the pasture? Or is it the ownership of the cattle? Each profit center will have income and will have costs. Hopefully it’s a large number minus a small number – then you will have a positive margin. The land will have rent as income and will have its own costs. Part of the cost to the shepherd is the rent from the land and the income comes from the livestock in the form of grazing costs. Grazing fees are a cost to the livestock owner and who receives income when the livestock are sold. Simple isn’t it? Three profit centers. Three hats.
If this sounds complicated, let me tell you my story. Many years ago I owned a small herd of cattle. I owned a quarter of the land but didn’t have enough animals to store it. I found a neighbor who needed a little extra grazing so I supplemented my pasture with custom grazing. I was able to charge $ 1.25 / pair / day. I was struggling to keep the farm afloat, I was working off the farm and didn’t know why it wasn’t working.
I decided to attend the Ranching for Profit school. It was the first place I learned how to make a gross margin. I went home and worked out some numbers. I found out that I was losing money on my cows and making money on my custom cattle. The reason my cows were losing money was that I was paying too much for grazing, and that was my grazing on my land. What? I had to factor in the opportunity cost that I could earn at $ 1.25 / head / day by grazing someone else’s cattle, so I had to charge my cows for that. I soon realized that in my area, under my conditions, it was more profitable to graze someone else’s cattle than to own mine. And there was less risk. This is what I have done since. I started to develop my bespoke grazing business through land leases. Do you remember the three hats? I now have landowners who are only in real estate. I am the tailor-made breeder and I have clients who only own the cattle. Three separate companies.
This may not work the same for you on your farm in your environment. Your margins will be different. It depends on the demand. It depends on the price. It depends on a lot of things. This is why it is so important to manage your own numbers. Maybe custom grazing won’t pay off for your farm.
Will I always graze to measure? Not necessarily. It depends on the market values within the different profit centers. If the markets change, then maybe my profit centers will change. My cows at the time were not making a profit because the biggest cost was the cost of grazing at $ 1.25 / head / day. Demand for pasture set the price at $ 1.25. What if the demand goes down and I can only get $ 0.80 / head / day? The profit center margin of the pasture would be much less and probably no longer profitable. In turn, the cost of pasture to the livestock owner is now decreasing, which improves the livestock margin. At this point, I might be further along in purchasing cattle again. Don’t take my numbers to heart, I’m just using random numbers to take stock. Which profit center is right for you in your environment? The margin will give you the answer.
There are plenty of other reasons why you might or might not want to custom graze. The point is, you need to calculate your numbers to determine where you are making a profit. It’s up to you to decide which profit centers work for you, on your farm, in your environment.