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Strategic and Scenario Planning in Ranching: Conducting a Ranch Inventory

Updated June 05, 2020
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Sean Kelly

SDSU Extension Range Management Field Specialist

Conducting a complete ranch inventory is a perfect time for ranch managers to take an in-depth look at their operation. Completing a ranch inventory is the first step in the strategic planning process, but it also helps provide a current overview of the operation. During times of belt-tightening, it’s imperative to make sure all the resources of the ranch are being utilized as efficiently as possible.

A ranch inventory should include 4 categories of resources available to the ranch operation:

  1. Natural
  2. Financial
  3. Human
  4. Physical

In addition to providing a current overview of the operation, we can complete a balance sheet, provide a summary of collateral for loans or operating notes, and assist with future decisions as finances are used to help determine if the operation can accommodate a son or daughter returning to the ranch.

We also may discover soil erosion problems or find pastures and underutilized rangeland when completing an inventory of the natural resources. Do stocking rates equal current carrying capacity of the ranch? A thorough inventory of the natural resources will tell us.

A thorough ranch inventory should allow someone not familiar with the operation have a good working knowledge of all the resources available to effectively manage the ranch. Gather all documents, maps and records that provide a clearer picture of the operation.

Natural Resources

Two ranch inventory maps. This first is labeled "A" and is a hand-drawn map developed from FSA crop-reporting maps. The second is labeled "B" and is a professional map developed by the NRCS. For a complete description, call SDSU Extension at 605-688-6729.
Figure 1. (A) Hand-drawn inventory map made from FSA crop-reporting maps. (B) Professional NRCS inventory map.

Acquiring Maps

Acquiring maps of the ranch is the first step to begin a natural resource inventory. Maps will allow a manager to get a 10,000-foot overview of the operation.

The maps should include locations of corrals, fences, water sources, etc. Stocking rates with carrying capacities and ecological sites should also be detailed on the maps.

A ranch inventory map developed using the NRCS Web Soil Survey application. For a complete description, call SDSU Extension at 605-688-6729.
Figure 2. Ecological site map made from web soil survey. Red area is overflow, green area is clayey, blue area is shallow ecological sites.

Maps can be hand-drawn from FSA (Farm Service Agency) crop-reporting maps (Figure 1-A) or professionally done by the NRCS (Natural Resources Conservation Service) (Figure 1-B).

If neither of those sources are available, a ranch manager can develop their own maps (Figure 2) by using the NRCS Web Soil Survey. If additional information or instruction is needed on web soil survey, please refer to iGrow Corn: Best Management Practices Chapter 16.

South Dakota MLRA (major land resource areas) map from South Dakota NRCS. For a complete description, call SDSU Extension at 605-688-6729.
Figure 3. South Dakota MLRA (major land resource areas) map from South Dakota NRCS.

Major Land Resource Areas

MLRA (major land resource areas) maps (Figure 3) from NRCS offer great information for baseline rangeland production, historical weather and precipitation records. They are especially handy if no previous records are available from the ranch.

In addition, MLRA maps will also have the state and transition model (Figure 4) for that particular MLRA. The state and transition model identifies different vegetation states that may exist on that site and provide ideas on how to move the site to more desirable states and how to avoid moving the site to an undesirable state.

    South Dakota state and transition model for MLRA 63B clayey ecological site Tripp County, South Dakota from NRCS. For a complete description, call SDSU Extension at 605-688-6729.
    Figure 4. State and transition model for MLRA 63B clayey ecological site Tripp County, South Dakota from NRCS.

    Determining Ecological Sites

    In order to get the correct MLRA maps for the ranch, a manager must determine what ecological sites are present on the ranch. Acquiring correct ecological site maps allows a ranch manager to accomplish this.

    An ecological site is a distinctive kind of rangeland based on similar:

    1. Surface soil depth
    2. Soil texture
    3. Available soil moisture
    4. Land slope
    5. Precipitation
    6. Soil fertility and salinity
    7. Distinctive kinds of native vegetation

    Common ecological sites in South Dakota include:

    1. Sub-irrigated
    2. Overflow
    3. Sands
    4. Sandy
    5. Loam
    6. Dense clay
    7. Thin upland
    8. Shallow
    9. Claypan
    10. Clayey
    A 4-wheeler parked beside a wire cage enclosure around smooth brome and Kentucky bluegrass on grazing land.
    Figure 5. Exclosure cage on smooth brome and Kentucky bluegrass site on MLRA 63B clayey ecological site in Tripp County, SD.

    Putting It Together

    1. Acquire maps for the ranch.
    2. Determine your ecological sites in your pastures from maps.
    3. Find your correct ecological site for the MLRA your ranch is in.
    4. Conduct field visits to your pastures and determine what state your pasture is in.
    5. Determine your stocking rates and what direction you want to manage your pasture.

    Example

    If the pasture I am searching is in northern Tripp County, SD, my pasture is in MLRA 63B. If my pasture is a clayey ecological site, I will select the clayey file for MLRA 63B from the South Dakota NRCS website. This file will contain all the historical weather and precipitation records along with baseline rangeland production estimates in lbs/acre.

    Two photos of grazing land. The first is labeled (A) and shows a fencline comparison of smooth brome and kentucky bluegrass divided by a fence. The second is labeled "B" and shows a photopoint plot of smooth brome and Kentucky bluegrass on the same site. For a complete description, call SDSU Extension at 605-688-6729.
    Figure 6. (A) Fence-line comparison on smooth brome and Kentucky bluegrass site on MLRA 63B clayey ecological site in Tripp County, SD. (B) Photopoint plot on smooth brome and Kentucky bluegrass site on MLRA 63B clayey ecological site in Tripp County, SD.

    At this point, I need to select the proper “state” my pasture is in (Figure 4) from field visits I conducted to my pasture (Figure 5, Figure 6-A, Figure 6-B). If I determine my pasture is mainly smooth bromegrass and Kentucky bluegrass, the pasture is in an invaded state according the state and transition model. If I want to manage my pasture to get more native grass species established, I follow the arrow from the “invaded state” to the “native/invaded grass state.” The arrow represents a “threshold” our pasture must cross with management. The “LTPG” stands for long-term prescribed grazing. This is a management strategy to move our pasture across that threshold. Such as having stocking rates that match our current carrying capacity.

    It is also true vice-versa; if our pasture is mainly western wheatgrass and green needle grass and is in the native/invasive state, non-use and overgrazing will push this pasture across that threshold back into the invasive state.

    Financial Resources

    A male producer analyzing records on an office computer.

    A financial inventory should include:

    • Any cash, checking and savings accounts used by the ranch.
    • Any brokerage accounts utilized by the ranch.
    • Any debts owed by the ranch to banks or other lenders along with the amounts owed, interest rates, and time remaining on loans.
    • Any lease agreements for land or livestock.
    • Any legal or trust agreements should also be included so all members of the ranch operation are on the same page.

    Financial Records

    Knowing the financial condition of the ranch is critical when negotiation new operating notes, new loans for diversification, or possibly making room for a son or daughter returning to the ranch.

    Several computer programs, smartphone apps, and paper record booklets are available to complete a financial inventory of the ranch. No matter which method or technology is used, a financial inventory is critical when determining how well positioned the ranch is to manage risk.

    A thorough financial inventory should allow a ranch manager to complete a balance sheet, income statement, and cash flow projection for the ranch. Please refer to Importance of Keeping Records for Filing Taxes on the Ranch/Farm and Financial Record Keeping Software: A comparison of Quicken and QuickBooks for resources available for organizing financial records. Please refer Iowa State University Extension’s Farm Financial Statements for spreadsheet examples for completing balance sheets, income statements, and cash flow statements.

    Human Resources

    Four photos depicting ranch Human Resources. Clockwise from the top: A man repairing a fence with his daughter in a pasture. An ambulance for the Gregory community health system.  A firetruck for the Gregory fire department. A woman with her daughter riding a four-wheeler equipped with a spray tank.

    An inventory of the human resources of a ranch should include any person who works on the ranch or who works for the ranch in a support role. Also, don’t forget about your local volunteer fire and ambulance departments that will respond to your ranch in case of an emergency.

    • Family, full and part-time employees.
    • Custom hired operators.
    • Neighbors and friends.
    • Volunteer Fire and Ambulance Departments.
    • Banker, attorney, FSA, NRCS, veterinarians.

    A simple spreadsheet or notebook can be used for the human resources inventory (Table 1).

    Table 1. Human Resources Inventory Example

    Name Duties Salary/Wages Skills/Experience Work Schedule Contact Info
    John Farmer, Age:39 Owner/Manager $20,000/year B.S. Animal Science 24/7 605-555-5555
    Tracy Farmer, Age: 36 Owner/Manager $20,000/year B.S. Ag Econ 24/7 605-444-4444
    John Doe, Age: 22 Hired Man $27,000/Year - 24/5 605-333-3333
    - Banker - - - -
    - Lawyer - - - -
    - Vet - - - -
    - FSA - - - -

    Physical Resources

    Physical resources will include: Equipment, livestock and crop resources. List all equipment utilized by the ranch along with the model, size, age and condition. Specify if the piece of equipment is owned, leased, or borrowed. Placing a value on the equipment can be done two different ways. We can use the market value or cost value.

    Depreciation Example

    For example, if we want to determine the cost value of a tractor using a straight-line depreciation method we take:

    (Original Cost - Salvage value) ÷ Yrs. of Useful Life = Annual Depreciation

    Example of tractor: ($120,000 - $30,000) ÷ 10 = $9,000

    Now we multiply $9,000 by the years of accumulated use and then subtract from original cost of $120,000 to calculate the cost value.

    If our tractor is 4-years-old: $9,000 × 4 = $36,000 in accumulated depreciation.

    Original cost - accumulated depreciation = Cost value. ($120,000 - $36,000 = $84,000).

    Our tractor would have a cost value (book value) of $84,000 (Table 2). This value can then be used in our balance sheet.

    Table 2. Equipment Inventory Example

    Equipment Name Model Purchase Year Age Ownership Book Value Market Value
    John Deere Tractor 7200 2012 4 Owned $84,000 -
    Farmall Tractor 656 with F11 Loader 2009 50 Owned $4,500 $4,500
    Ford F-150 2016 1 Owned $38,000 $44,00

    All livestock and crops produced on the ranch need to be included in the inventory. Fair market values can be used for stored crops or raised livestock. Purchased breeding stock can use fair market value or cost value. Please refer to these useful tools courtesy of SDSU Extension and the SDSU Department of Economics to assist with livestock and crop inventories.

    Conclusion

    • As mentioned in the Strategic and Scenario Planning in Ranching Manual, a ranch operation first needs to “know where it is” before figuring out “where it’s going.” Completing an in-depth ranch inventory is a critical first step in the strategic planning process.
    • Slower winter months ahead on the ranch are an excellent time to work on a ranch inventory. The first attempt will be the most time consuming. Each passing year the ranch inventory will become more detailed, accurate and useful.
    • Accurate ranch inventories also improve communication with family members if they are absentee landowners. A yearly inventory will show other family members not on the ranch that the “family” resource is being taken care of.
    • Having a list of all available resources to ranch will allow a ranch manager complete a SWOT analysis. SWOT stands for strengths, weaknesses, opportunities and threats. SWOT is the second step in the strategic planning process.

    References

    • Gates, R.N., B.H. Dunn, J. Davis, A. Arenzo, M. Beutler. 2007. Strategic and Scenario Planning in Ranching: Managing Risk in Dynamic Times. Manual No. EC924. South Dakota State University, King Ranch Institute for Ranch Management, Texas A&M University-Kingsville.
    • Johnson, J., B. Bennett, S. Beavers, B. Duckworth, W. Polk, B. Thompson. 2005. Developing Business Plans for Agricultural Producers. Department of Agricultural Economics, Texas Cooperative Extension, Texas A&M University.