Beef Buzz News
Profits Over Production Makes More Sense Than Ever to Rancher Kit Pharo
Wed, 29 Aug 2012 06:48:27 CDT
Ron Hays talks with Kit Pharo about profitability versus production.
Businessman Kit Pharo decided he wanted to be a rancher. He took a look at the cattle business and thought he could see how to make a profit on a ranch in eastern Colorado. He and his wife began implementing a profit-centered approach and it has rewarded their efforts.
Pharo recently spoke with Ron Hays at the Southern Plains Beef Symposium in Ardmore. He says the secret to the success of the Pharo Cattle Company is simple: it's not just about producing quality cattle it's about making money.
"We had been in other businesses prior to this and I knew I had some business sense and I decided the ranching was either going to make me a living or I was going to do something else. And, unfortunately, it looks to me like a lot of ranches are just a way of life. They're not as profitable as they should be. In fact, I think most of them are break-even at best.
"So we decided to do some things differently. We didn't want to decrease production, necessarily, but we realized that production was not the same as profit. So we started focusing on profit and realized fairly quickly that inputs or expenses played a bigger factor than production. So, if we could reduce or eliminate expenses, we could increase our profits. And that's been very positive for us as far as the ranching business. The easiest dollar that I'm ever going to make is the dollar I don't spend."
For the last 40 or 50 years, the emphasis in the cattle business has been on producing every last pound of gain. Pharo says that strategy has reached the point of diminishing returns. With cattle prices being high, he says, high-producing ranches are doing well. When the market takes a dive again, as he believes it will, he thinks many ranchers will be find their operations in trouble.
Pharo's viewpoint is echoed by Dr. Dave Lalman of OSU who wonders if we haven't bred cows too big to make maximum profits.
"I think, yes, we've realized we went too far and now it's time to turn around, and that's encouraging," Pharo says.
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