The Laws Of Economics

My Cousin Vinny is one of my favorite movies. There’s a scene where Vinny, played by Joe Pesci, challenging the witness, asks, “Are we to believe that the laws of physics cease to exist on your stove?”

That line, makes me think of some people who market grass finished beef and use grazing practices that improve soil. They seem to believe that, because they are doing something they feel is socially responsible and environmentally friendly, the laws of economics cease to exist on their farms and ranches.

Don’t get me wrong. I’m a fan of grass finishing and I’m first in line to promote ecologically sound management practices. But whether you set stock and overgraze or use ultra-high density grazing, whether you sell feedlot ready steers into the commodity market or organic grass-finished beef at farmers markets, whether you have 10 acres or 10,000, 25 head or 25,000, the laws of economics apply. As much as the health and productivity of the land and livestock are part of sustainability, the laws of economics also determine the sustainability of your farm or ranch. It isn’t sustainable if it isn’t profitable.

Over the last couple of decades, we’ve seen a shift in the demographics of land ownership in the west. One trend is that many people with non-ag backgrounds who achieved tremendous financial success in other endeavors, have purchased ranches. Let me be clear. I’ve got nothing against non-ranchers buying ranches. If you believe in capitalism and free markets, you should admire them for the success they’ve achieved and tip your hat to them for being in a position to buy these properties.  

There is, however, a burr under my blanket about some of the things I see happening on some of these properties. Some of these owners have embraced progressive practices and have sponsored field days and workshops to promote these practices and provide training for area ranchers. I think their generous spirit is commendable. But unless the results on the ground are accompanied with the financial results, these demonstrations aren’t very convincing. It’s relatively easy to improve soil health when you have unlimited resources. But it would mean more to demonstrate that ecologically sound, socially responsible practices also result in improved cash flow and increased profit. To do that, the demonstration must be completely transparent. We need to see the capital required, the production costs incurred, and the returns received to know if a practice is really sustainable.

Earlier this week I got a call from someone who bought a large ranch and wants to use progressive management practices to improve the health of the land. He explained, “I am not financially reliant on the farm.”  I responded, “I hope you’ll act as though you are reliant on the farm to pay you a good salary and make a profit. You’ll find that your employees will be more motivated, you’ll be more clear-minded and you’ll have more fun.”

It’s been my experience that when there is financial pressure to get things done, things get done. It’s not about the money. It is about the urgency to change the situation. That urgency doesn’t exist when money is not an issue. The farmers and ranchers who need to make profit tend to make the most rapid ecological progress.

Bottom line: the laws of economics apply on your ranch and there are big penalties for breaking the law.