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Intensive grazing, sell-buy marketing stabilized this operation

Art McElroy farms in southern Saskatchewan, 50 miles east of Alberta. “My wife Leslie and I — and our children — moved here from the family farm in Alberta in 1996 when I was 44. When we moved here, it was a mixed farm. We ran livestock and grain farmed for 11 years. This is a dry part of the world and soil quality is not as good as what I had near Calgary. We did continuous cropping, with high-input agriculture, under a no-till operation with seven or eight different annual crops,” he says.

“We started seeding grass in 1998, when we could see that some of this land should never have been broken up for farming. I seeded about 600 acres to grass the next five years. The rainfall in this area is sporadic; it can be anywhere from three inches a year to 20. Some of our continuous cropping was very successful and some of it was very unsuccessful. I could see that I was playing myself out, playing the kids out and we were not making the kind of progress we wanted,” Art says.

“If what we were doing — the continuous cropping — was not viable, financially or otherwise, we needed to figure out what we should do,” he says.

“That prompted us to consider rotational grazing. I have one 3,200-acre piece of leased land from the provincial government and it was in one big field. In the year 2000 we divided it into six pieces with one-wire electric fence. We started rotating animals through that, and created more dugouts so every piece had water for the cattle,” Art says.

“We could see there were places in that pasture where animals hadn’t grazed for years, yet it was overgrazed close to the dugouts. We divided it up and started putting a 1.5-inch water line to get water to areas that didn’t have water.”

In 2006 he seeded 2,000 acres into grass and in 2007 seeded the last 2,000 acres to grass. “I had a neighbour who wanted me to do custom grazing for him. There was no way that I had enough livestock to harvest all this grass by myself. Ever since 2006 this neighbour has sent me up to 1,200 head of yearlings each year. In our own herd we have between 150 and 200 head of cows because they come and they go, and I also run my own yearlings. Then I ran into Neil Dennis, and his philosophy of high-density grazing. He convinced me that we could really speed up the land health and soil improvement if we increased our stock density. In 2008 we started putting 1,200 head on 2.7 acres for two to three hours and moving them up to six times a day.” This provided adequate animal impact.

“What this has accomplished is just phenomenal on this low-quality soil. When you do it on poor soil you can see the benefits and advances very quickly. There’s no way to make it worse, and we can really make it better!”

Right now, in the livestock business, prices are better than they ever have been and it’s hard to fail. “But we know that will eventually come to an end. As we learn to think holistically, as a family, to understand the relationship between plants and soil and the people and the finances, we continue to make pro­gress. Our exposure to Bud Williams’ livestock handling and sell-buy marketing, and getting some grass-based genetics have also improved the cattle end of it. I see a tremendous stabilizing factor in the life of this farm, going into the future,” he says.

“I can no longer buy the kind of replacement heifers I want. I can raise better heifers than I can buy, because they are more suited to this environment. Any heifer that we keep now as a replacement is the most expensive cow we’ll ever have in the cow herd because of her value as a calf, but if we are going to continue on in the business we have to keep replacements. They are our future and will do a much better job for us than any heifers we can go out and buy,” he explains.

“One thing Bud Williams taught in his sell-buy marketing strategy was that you never let an animal start to lose value. When you have a cow that’s six or seven years old, in a normal market this is when she starts to depreciate a little and lose value,” says Art.

“Bud encouraged people to start selling cows when they are six or seven and still have good time left in them, before they start to lose value, and replace them with something that in theory is genetically superior — which is their daughters, raised on your own place. You can keep more heifers than you can cows, because they eat less, especially if they are developed inexpensively the way we do it.”

Sell-buy marketing

This is a little different than the traditional view of marketing. People in the livestock business tend to think in terms of buying, increasing (weight or number of animals or value), and then selling, to make a profit.

“In sell-buy marketing you determine what is overvalued and undervalued in the marketplace. You can only deal in animals that you can handle and increase their value. I never buy animals above 800 pounds because I am not in the feedlot business. I might buy anything between 250 pounds and 700 pounds, or some cows, pairs or heifers,” explains Art.

“With every sale you can figure out what is overvalued and undervalued in the marketplace by determining the value of every increase in weight gain. It took me a little while to learn how to figure out what was overvalued and undervalued, but you just use 50-pound weight breaks or 100-pound weight breaks and divide the increase in the dollars by the weight gain, to see what the market is paying for every one of those increases in weight,” he explains.

“You’ll always find that the lighter calves bring the most value per pound. If the next increase in weight, whether it’s 50 pounds or 100 pounds is only worth $1 or $1.50 you can begin to see whether you should hold the animals and if you are being paid to put more weight on them or not. If you are not being paid to put more weight on, then you need to sell those animals and replace them with something that is undervalued, that you will be paid to put more weight on,” he says.

“It’s easy to know exactly what all of your costs were on that turn of cattle, and through some simple arithmetic determine what you can afford to pay back for different weight prices and still cover all of your costs on that turn of animals. So you are buying a profit as you are replacing your animals,” Art says.

“Your net worth could be constantly going up and down, but it’s your cash flow that you have to be concerned about all the time, and this is where you end up with cash flow — with what’s left over between the sell and the buy price,” he says.

“Another thing I am learning to do is buying pounds of gain for less money than what it costs me to put it on. There are always some animals out there that you can buy, with the money from your last sale. You can actually take home 50 to 100 pounds or even 150 pounds for very little money, and sometimes you can take them home with a few dollars of cash in your pocket, from your last sale,” he explains.

As we watch the marketplace, the signals that it constantly sends are fascinating. “When you go to replace animals, if you can’t replace them at a profit, you leave your money in your pocket. You not only keep your money, but you also keep the feed that the animals would have eaten, whether it’s grass or stored feed. You have to determine what has the most value to you — the animals, your money, or your feed.

“This is a unique system that Bud Williams figured out when he was at VT Feeders in Alberta for 10 years. His daughter and son-in-law, Tina Williams and Richard McConnell, are still teaching this method. You don’t have to do it in large numbers, and it’s not wise to do it with borrowed money.

“It’s been very good for us, though it’s taken me a few years to get my head around a lot of it. I was still thinking in terms of 40 to 50 years of buy-sell marketing, when I was trying to make a living in the cattle business that way. It’s a play on words, buy-sell and sell-buy, but once you get your mind around it, you can see it makes sense.”

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