The challenge of starting a cattle ranch from scratch

Thinking outside the box, taking advice from mentors and old-fashioned hard work are vital to tackling challenges, say farm advisors

While there are plenty of exceptions, beef operations have traditionally been cross-gener­ational family businesses. There’s a good reason for that: while inheriting land doesn’t necessarily mean you’ve hit a home run, it at least puts you on a base.

But what about those young, hopeful beef producers who want to get in the game but don’t have parents or grandparents with land to hand down? Although starting a ranch has never been easy, high and rising land prices across Canada are arguably making it more difficult than ever.

As grim as it may seem, the situation isn’t hopeless, says Scott Dickson, a farm advisor with MNP in Red Deer, Alta. The beef industry is more supportive of young producers today, he says, with mentorships and scholarships available for producers willing to look and work for them.

Scott Dickson.
photo: Supplied

“I think, post-BSE, the beef industry has really come together as an industry,” he says. “They recognize the challenges that are up against beginning producers and they are really interested in helping them because the next generation is their future.”

But make no mistake: the business is still highly competitive and to make it, you have to be better than half the pack, says Aaron Honess with the MNP Lethbridge, Alta. office.

That may mean starting out on grazing leases or community pasture, working off-farm jobs to save money for down payments, buying land where few other people are willing to go and always, always being on the lookout for opportunities. In short, it means busting your butt.

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“If you think this might be a nice lifestyle for you but don’t back that up with the understanding that it’s going to take a lot of hard work, it’s going to be a tough go for you,” says Honess. “You have got to be intensive and aggressive and work harder.”

The unavoidable‘three Cs’ of credit

Short of winning the lottery or having someone literally give you a farm (don’t hold your breath), seeking funding from a traditional financial institution is virtually inevitable. And that’s where the “three Cs” of creditworthiness — character, capacity and capital — come in, says Honess.

In this context, character relates to basics such as paying your bills on time. Capacity means having money available for a down payment and a solid plan for servicing your debt to the lending institution.

Where it gets tricky for from-scratch ranchers is the question of capital. Ranching is a capital-intensive industry and much of that capital is tied up in land.

Aaron Honess.
photo: Supplied

“The young individuals entering the business might have good character. The challenge is — possibly because of their youth — they lack some of the capital security they need,” says Honess.

Although some financial institutions either specialize in or feature lending programs catering to young producers, their main difference is longer amortization periods.

“They still have about the same credit requirements that anybody else would. Maybe the applicant doesn’t need as much security, but you still need those three Cs.”

Think unconventionally

So what can startup producers do? This is where they need to start thinking outside the box, says Dickson. One option is “adopting a grandparent.”

“In the agricultural world you have to play to the heartstrings of people who want to see their land continue as a working ranch. They might want to help you become that person who carries on using the land as ranchland once they’ve moved on.”

Of course, no one is going to give you a ranch. But doing things like working on the ranch — and being a good, conscientious worker — can go a long way towards establishing trust between the two parties. And once you’ve established that trust, being a little bold can pay off.

“You have to make yourself the person available if they want to sell the farm,” says Dickson.

“Say that place is worth eight million dollars. You need to ask them if they need eight million or would they take seven million or even six-and-a-half.”

If the legacy is near and dear to their hearts, they may make some concessions to give that young producer a fair shot at success, Dickson says.

Seek opportunity

You don’t have to own land right away to be a beef producer, say Dickson and Honess, you just need access to some. Community pastures, off-farm jobs, grazing leases and other rental agreements all offer opportunities to build up enough cash to get skin in the game.

However, you may be able to fast-track this process by buying quality ranchland in areas where prices are cheaper. This more often than not means moving to places some other ranchers aren’t willing to go, often in the north. Dickson calls this “the inconvenience factor.” Spoiler alert: you will likely get cold, but you will own your own land.

“If you want to make the opportunity work you have to look beyond, say, southern Alberta where land is expensive but you get nice winters. Maybe you have to live someplace where the climate may not be as ideal but the capital price for entry is a lot cheaper. You’re going to have a lot better chance to succeed and make roughly the same profit.”

Producers are often discouraged from buying land in remote areas due to increased freight costs. However, depending on how much cheaper the remote land is compared to high-demand ranchland, it may be worth it, says Dickson.

“The number one thing is the cost of land. Anything you can do to get that and your feed costs down is going to help your profitability.”

Keep records

Okay, so you’ve managed to buy some ranchland — now what? Both Dickson and Honess say young producers have to be better than half the pack to survive in the industry. But what does this mean and how do you know you’re achieving it?

The answer may not be as daunting as you think — it could mean keeping top-notch records and deriving performance metrics from them. These records are critical, says Dickson, yet many beef producers don’t bother with them.

“The beef world hasn’t been the best at record-keeping. Although some producers are fantastic at it, it requires extra thought and work and is sometimes the first thing they get out of.”

Not only does record-keeping help beef producers optimize production decisions, but it helps qualify them for risk management tools such as AgriStability and various insurance programs, says Dickson. Failing to have these tools in the event of a wreck is not an option.

“You had better have all the risk management tools in place, be it AgriStability, Western Livestock Price Insurance Program (available in B.C., Alberta, Saskatchewan and Manitoba), forage insurance, AgriInvest — these are all things you need.”

The good news is that younger producers may have an advantage in this regard. Modern record-keeping is increasingly reliant on tech skills — particularly with handheld devices — that many young people already have, says Dickson.

“Having grown up living on their phones, (electronics) are not going to scare them the way it sometimes did with past generations.”

Mentorship, lifelong learning key

Completing a post-secondary program in beef production has become a must today for both newcomers and farm kids alike, says Honess.

“I think there’s a combination of education; there’s the book education offered through college and university programs, but there’s also the out-in-the-real-world work experience on operations which merge those practical and book-learning pieces. I think it’s money well spent.”

Although young cattle producers tied to family farms may have an advantage when it comes to financing, much of the advice Dickson and Honess offer applies to them as well. Tyler Fewings, a Black Angus and crop producer from Pierson, Man., is one example.

Fewings — who currently shares land with his father and brother in addition to properties he owns and rents — has spent his entire adult life to date doing many of the things farm advisors recommend. He earned a degree from the University of Sask­atchewan College of Agriculture and Bioresources. He’s worked in a wide range of ag-related off-farm jobs as far away as Australia, where he worked at a sale yard. And he’s always looking for opportunities — be they land expansion or lifelong learning.

It was a desire to hone his farm and financial management practices which led Fewings to the Cattlemen’s Young Leaders (CYL) Mentorship Program last year. Under the guidance of Dickson, he got even more out of the program than he expected.

“It’s a great networking opportunity,” he says. “I was introduced to some concepts and ideas and Scott pointed me in all sorts of good directions.”

Fewings believes education is a lifelong commitment and a necessity in today’s competitive beef industry.

“I learned from my year of mentorship that you can’t embark on that kind of learning process and then one year down the road say you’ve learned it all and you’re done,” he says.

“I need to continue to find a way to keep on that learning trajectory and keep improving my skills regardless of the program ending or not.”

About the author

Contributor

Jeff Melchior is a central Alberta-based freelance journalist specializing in agricultural topics.

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