by Aaron Berger, University of Nebraska

At its foundation, ranching is the business of harvesting sunlight energy with plants that are then utilized by animals to produce products that benefit people for a profit. While the business model of ranching is fundamentally simple, there are a multitude of production risks involved with growing forage, harvesting it with livestock and then delivering products to the customer. Delivery of products can either be to the next segment of the supply chain or directly to the consumer.

Operations are diverse in terms of the resources they have and their risk exposure. To recognize threats to an operation, it is important to first identify, in writing, goals for the production system and critical components to system success. Knowing the keys to success helps identify potential threats. The following are steps that can be taken to develop and execute a risk management plan for a grazing-based production system.

Step 1. Identify the risks.

Step 2. Assess the risks.

Step 3. Address the risks.

Step 4. Monitor and report on the risks.

Ranching is fundamentally dependent on growing and harvesting forage with livestock. Therefore, environmental conditions that significantly reduce forage production and availability are a major threat. For most ranchers, drought is the primary risk factor that can dramatically affect forage production. However, wildfire, hail, blizzards, flooding, grasshoppers, extreme temperatures, soil nutrient availability, brush encroachment, noxious weeds, etc., can all affect forage growth and accessibility.

A written plan for addressing these circumstances that provides contingency options and triggers for action, can help producers make timely decisions. The https://drought.unl.edu/ranchplan/ website has several producer drought-management plans that can be a helpful place to start when developing a plan.

The thought of putting a plan for risk management  in writing may seem daunting and unnecessary to many. The thought often is, “I have that all in my head. Besides, whenever I plan, it must change anyway, so what is the point of planning?”

The point of planning is to have a documented thought process to prepare for risk exposure when one isn’t in the middle of a stressful event. A written plan will give greater confidence to act when the event occurs. Getting perspectives from multiple people both in- and outside the operation when developing a risk management plan will help strengthen it. While plans will have to adjust and change, the act of documented planning will increase effectiveness in responding to realized threats in the decision-making process.

Operators deal with production risks on the ranch daily and often don’t realize historic events and experiences are influencing the way they are doing business now. Past production risk incidents such as droughts, blizzards, reproductive failure, disease outbreaks, poisonous plants, input shortages, etc., are still shaping decision-making today. Often, past exposure to risk events subconsciously affects day-to-day operations, even though the blow of the risk was actually experienced by a prior generation. Providing a brief explanation of past experiences when developing a plan to address risk exposures can be helpful in communicating the “why” behind a strategy.

The procedure of writing the plan down forces thinking and discussion that likely otherwise would not happen.

The process of discussing, developing and writing a production risk management plan is just as valuable as having the finished plan itself. The procedure of writing the plan down forces thinking and discussion that likely otherwise would not happen. Having a documented risk management plan gives everyone involved in the operation a framework for discussion on risk exposure and is a reference document. A written contingency plan can prove invaluable if the “decision maker” is no longer able to communicate thoughts on how a risk should be addressed or if they are no longer part of the operation.

Ranchers deal with risk exposure every day and often don’t identify it as such. Prioritizing time to develop a plan for addressing perils associated with production systems can help producers identify risks, as well as contingencies, to successfully navigate the seemingly increasing levels of hazards affecting them and the businesses  they operate.

Editor’s note: Aaron Berger is a beef educator for the University of Nebraska–Lincoln.

Angus Beef Bulletin EXTRA, Vol. 16, No. 8-B