January 22, 2024 • 62 mins
Join us in Episode 89 of The Ranch Investor Podcast as we host Colter DeVries and industry pioneer Todd Churchill. Dive into an enlightening conversation covering Todd's journey from a family-rooted agricultural background to leading the grass-fed beef revolution with Thousand Hills Cattle Company. Unravel the complexities and challenges of the grass-fed beef market, including global competition and consumer appeal. Explore Todd's transition from Illinois farming to Oklahoma ranching, discussing the economics, innovative business strategies, and the importance of Audubon certification in sustainable ranching practices. Gain valuable insights into the evolving dynamics of ranch ownership, management, and the critical role of financial planning in adapting to changing market conditions. This episode is a must-listen for anyone interested in the future of ranching and agricultural entrepreneurship.
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Episode Transcript
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Todd Churchill (00:00):
Ruminant animals are the foundation of human
civilization, and so, forthousands and thousands of years
, success and security wasdriven by one thing how much
grass.
Colter DeVries (00:12):
Welcome to the Ranch Investor podcast.
I am your three year host,Colter DeVries, accredited land
consultant with the Realtor LandInstitute and accredited farm
manager with ASFMRA.
I'm excited to bring you theexperts on a weekly basis to
hear what's trending, what'shappening, what's going on in
(00:34):
Montana, Wyoming, the West andranches across the United States
.
Ad (00:38):
The Ranch Investor podcast is the most downloaded and
informative industry specificcontent that intrigues while
entertains.
Colter DeVries (00:47):
Let's just get started with who is Todd
Churchill?
What's your background, what'sthe starting story here?
Todd Churchill (00:55):
Todd yeah, that could take an hour, but we'll do
the short version.
I grew up on a farm with a500-ed feed lot in.
New.
Moly, illinois.
My grandfather bought the farmbut he was an attorney and
didn't really spend much timethere.
And my dad started spending hissummers out there when he was I
(01:18):
don't know nine or 10.
And the next door neighbor tothe farm was an old cowboy from
Colorado, bought my dad a ponyand a saddle and got him a job
at the sale barn running hispony up and down the alleys
moving cows.
And my dad fell in love withhorses, started showing and
training cutting horses when hewas a teenager.
(01:39):
He took over the farm when hewas 16, when it was, I think, 80
acres, and has been involved insome fashion in the cattle and
farming business ever since.
He actually went to law schoolas well and has a law practice
in Moline that my youngerbrother went to law school and
(01:59):
joined him.
So I grew up in a veryag-focused, entrepreneurial
family with horses, cattle,crops.
But to me agriculture wasdriving a tractor straight,
dealing with cattle in the feedlot and playing with bats and
toxic chemicals.
So I went to college inMinnesota and went into public
(02:21):
accounting and really didn'texpect to be involved in
agriculture.
There wasn't the way we did agat the time.
It wasn't particularlycompelling for me, I didn't feel
drawn to it.
So I went to school at St OlafCollege in Northfield, minnesota
, went into public accountingand then, after a couple of
(02:46):
years there, left in 97 andstarted one of the first
part-time CFO practices inMinneapolis.
And because I was a farm kid, Iended up with a portfolio of
food and ag clients.
Didn't really plan on that, itwas just what I knew, and so one
of those in the late 90s was astartup meat processor called
(03:09):
Lawrence Meats Became somewhatfamous or notorious because
Michael Pollan devoted a wholechapter in the Omnivorous
Dilemma book to the way thatthis processing plant was
designed.
Mike and Rob Lawrence they hadbought out their parents little
locker plant, like every smalltown in America had until maybe
(03:30):
10 or 15 years ago, thatprocessed a couple beef or pigs
a day, had a deli cateringbusiness.
But they had much biggervisions.
They really believed that therewas going to be tremendous
demand for very high qualityfresh meat processing, for
specialty meats, grass-fed beef,bison, pastured pork, organic
(03:56):
meats, and nobody had reallybuilt a plant that was designed,
that was big enough to create aproduct that looked every bit
as good on a retail shelf asanything coming out of the big
players, but it was small enoughto be flexible and responsive
to the needs of what we callbranded meat companies.
(04:16):
And so I was kind of aconsulting CFO there.
We got that first 10,000 squarefoot plant, built in 2000.
And because I learned the nichemeat business well, I had the
opportunity to start one of thefirst grass-fed beef companies
in the US, which was calledThousand Hills Cattle Company.
(04:37):
That got launched in 2003because I had a good friend who
was an integrative physician inSt Paul and he had a large
concierge medical practice andall of his clients.
He was literally prescribinggrass-fed beef to all of his
clients.
The problem was the quality wasterrible.
It was frozen.
(04:57):
They had to go buy it from somefarm somewhere.
When you buy a whole animal,you never really know what
you're getting.
And he said if you can figureout how to do a very high
quality grass-fed beef that wasfresh, I can get you into the
premium grocery stores in theTwin Cities.
(05:18):
And we launched Thousand Hillsin 2003.
And it took off fast.
We kind of caught the wave ofpopularity with grass-fed beef,
but our focus was not convincingyou that you should eat this
beef because it's good for you.
I only had to do that the firsttime.
After that I wanted to create aproduct.
(05:39):
That was such a great eatingexperience that it didn't matter
if it was good for you orhealthy.
This was the steak, this wasthe burger you wanted to eat,
just because it was so darn good.
So I had a lot of fun with that.
We learned a lot, grew thatbusiness pretty well.
By 2015, we were killing about6,000 head a year.
Sold it to my business partnerwho's still running it, still
(06:00):
doing a great job with it.
Has kept that going.
But by 2015, when I sold, theAustralians had figured out that
they'd been selling grass-fedbeef for decades to the US,
really cheap.
Because we import lean meat toblend with our fat trim coming
out of feedlots and that's howwe make our 80% lean or 85% lean
(06:24):
burger that Americans love.
We actually can't produce thatproduct.
People get mad because we'reimporting beef, but what most
people don't understand is thatour feedlots cannot produce a
hamburger.
It's too fatty.
The grind coming off of afeedlot steer is going to be
maybe 50% to 60% lean.
(06:45):
Well, you can't make a burgerout of that.
It's too much fat.
So we have to buy some leanmeat from South America
Australia, new Zealand to blendwith that fat trim to make the
perfect burger, which is goingto be 80% to 85% lean.
Well, so the Australians havebeen supplying the US market
that way for years.
They just weren't gettingcredit for the fact that it was
(07:06):
grass-fed.
Because they have a nationalanimal ID system, it was pretty
straightforward for them to getall of their cattle certified
grass-fed and, in many cases,certified organic, and by 2015,
my customers could buyAustralian 100% grass-fed ground
(07:29):
beef, delivered to the WestCoast at less than half of what
I was selling mindful.
Now, they couldn't get steaksbecause the steaks weren't very
good, but the grind was prettymuch indistinguishable, and so I
decided it was time to sell andto do something a little
different.
(07:50):
Parallel to that, in the mid-90s, as a family we decided to stop
investing in farmland inIllinois.
We paid, I think, $3,300 anacre for some land in 1993 and
thought that was reallyexpensive in hindsight.
Prices just kept on climbing.
But we decided to start buyingranch land in Oklahoma and move
(08:16):
our cutting horse business andour cattle business to Oklahoma,
and so we've had a ranch and apretty prominent cutting horse
quarter horse breeding programnear Wayne, oklahoma, just south
of Oklahoma city about 60 milessince the mid 90s and so I come
(08:39):
from this family backgroundthat's very involved in
traditional ranching and cuttinghorses and feedlot cattle and
grain production and then I'vekind of taken a spin on it and
tried to provide what.
I'm curious by nature and somost people in the beef industry
(09:03):
told me in the early 2000s thatit wasn't possible to do high
quality grass fed beef, thatgrass fed beef is always gonna
be tough and gamey and lean andthere's nothing you can do about
it if you don't feed them corn.
Colter DeVries (09:15):
I wanna come back to this grass fed.
Let's stay on this for a minute.
But first, since this is branchinvestor, why Oklahoma?
Todd Churchill (09:23):
Oh well, if the goal is to win the National
Cutting Horse Association forCharity, it helps to be at the
epicenter of that industry,which is the corridor from
Weatherford, texas, fort Worth,up to Oklahoma city.
And we were looking forproductive ranch land, not
(09:46):
necessarily scenic ranch land.
So there's a, you know, thereseems to be.
I don't know exactly what it is, but once men achieve a certain
amount of wealth, there'ssomething hardwired, that's
instinctual, that we just haveto buy a ranch, we have to own
(10:07):
cattle and buy a ranch.
And it doesn't really.
That transcends social classes,it transcends educational
background.
It is a really hardwired, deep,instinctual need to.
There's a sense of security thatI don't think we're even really
(10:28):
conscious of, but it's apowerful driver.
Once people have the means todo it, they want to own in some
fashion, a ranch that has cattleon it, and if you have the
money, you know why not buy one?
(10:50):
That's also beautiful, that hassome recreational value, that
gives you incredible views, andthose are typically gonna be in
the, in the Intermountain West,and so you know, we see ranch
land in those markets increasingtremendously in value.
But that value has iscompletely decoupled from its
(11:12):
operational productivity.
Its value is driven by the factthat there will always be more
people that have just recentlyacquired the wealth and they
feel compelled, for ways thatthey can't really explain or
articulate, to buy a ranch.
Colter DeVries (11:28):
And people will mortgage everything they have
and live on the razor's edge,making at best $2,000 a month to
own, control the land and liveout there.
I wouldn't say own, because thebank owns it at that point.
But, to have the illusion ofcontrol and the lifestyle
(11:49):
Correct and you know I tellclients all the time.
Todd Churchill (11:54):
So you know my career has evolved.
I, after selling 1,000 Hills,I've had a consulting practice
similar to the one I had beforeas a part-time CFO, but my focus
now is on large ranch and farms.
Merge that practice in withClifton, larson, al and we're
the eighth largest CPA firm.
I've been there for three yearsand I run our outsourced
(12:15):
accounting group.
So I run the team of peoplethat provide outsourced CFO
controller and bookkeeperservices for our large ag
producers and do a lot of workwith ranches and farms and meat
processors.
Colter DeVries (12:32):
Well, that's going to be.
The next topic is CFO work yourCPA work, cfo work, your CPA
background.
You have enterprise analysisfor QuickBooks, which comes up
on this podcast a lot and itcomes up in my conversations
with owner operators and lesseeoperators and a lot of times.
(12:52):
Yesterday I had three big callsabout this passive syndication
investment that I'm working onand talking to people about the
land as its own entity, as aninvestment, not as operating
asset.
These are generationaloperators and you'd think I'm
(13:14):
speaking Mandarin to them.
They cannot.
It doesn't translate that theland is a separate entity and it
is an investment asset, not anoperating asset.
It's tough.
That's a tough conversation.
It is to win people over withbecause it's just so far out of
their realm, because they'relike well, what about the
principal?
I mean, what about my principalpayment and my equity?
(13:38):
And you've always got there.
That's not going to go anywhere.
It's challenging.
Todd Churchill (13:45):
Yeah, it is challenging because we have a
very intricate tax law thatprovides completely different
rules for agriculture than forany other business, and so a lot
of what is recommended byadvisors, attorneys, cpas, farm
(14:06):
management consultants is reallydesigned to optimize for tax
strategy, which is a good thing,but that seldom gets you a
successful multi-generationalresult.
If you truly want to have amulti-generational land
(14:30):
investment, you have to bebrutally honest with you.
If you're never going to sellit, it doesn't matter how much
the land is appreciating.
Then what matters is you haveto figure out how to use that
land to create enough operatingfree cash flow that you can
afford to pay your familymembers and other non-family
(14:52):
members to operate it, and thatis a very difficult thing to do.
It's harder in the cattlebusiness than any other part of
agriculture, because the cattleindustry is the only one.
Nobody who achieves anysignificant wealth is compelled
to go own a million chickens,laying hens or chicken broilers
(15:15):
in a barn.
Colter DeVries (15:16):
In.
Todd Churchill (15:17):
Arkansas.
Hollywood doesn't make moviesabout farm work.
Oh no, they don't.
There's nobody who achieveswealth, goes and builds 30
saubarns.
It's just.
There's something about thepastoralist, I mean rumored.
Animals are the foundation ofhuman civilization and so, for
(15:39):
thousands and thousands of years, success and security was
driven by one thing how muchgrass do you have access to?
This is far before.
This predates any Greco-Romanconcept of land ownership.
How much grass, how manyrumored animals can you manage?
(16:03):
Because rumored do this amazingthing that people, pigs and
poultry can't do they turn solarenergy, stored and collected in
a leaf of a plant, into meatand milk, and they're mobile.
Those two things is that's whywe have human civilization.
And they do it on non-arablelands.
They do it on well, exactlyBecause, by definition, those
(16:27):
leaves are growing in anenvironment where annual plants
won't grow.
We've already turned everypossible acre around the world
if you can grow an annual crop,and because grain has some
incredible advantages over grass.
Grain is nature's solar energybattery.
(16:48):
It stores extremely well, ittransports well and it's
concentrated energy.
Rumorants can feed us with justsunlight and water, but you
have to be able to move, tofollow where the grass is,
(17:08):
because grass doesn't grow thesame place, reliably,
consistently, year after year.
So the moment that we adopt apersonal property right mindset
and we start building fences now, the success in life is not
optimized by owning more cattlethat you can move to wherever
(17:29):
the grass is.
Success is optimizing theproduction of the land that I
control, and that inevitablyleads us to grains instead of to
rumours, because grain isalways gonna provide a long term
, better security and a betterreturn.
If I can grow it, and I don'thave to be able to grow it every
(17:53):
year because grain stores sowell Stores and markets very
easily.
That's right.
So what's happened is that inthe cattle industry, you're
always competing against peoplewho will devote wealth they made
in other ways to owning cattle,and that doesn't happen in any
(18:17):
other livestock sector.
Colter DeVries (18:18):
That's like the old saying, never get into a
business that so many arewilling to do for free Right,
and that's exactly how it works.
Todd Churchill (18:26):
So the only real limit to the number of cows we
have in the US is drought, wheneveryone that owns cows, that
owns ranches, will expand thecow herd if they have enough
rainfall to grow enough grass todo it.
Colter DeVries (18:46):
And this I mean we're gonna get into now some
technical.
You have so many landowners whoare thinking expansion,
expansion, control of grass, asyou said, so that I can grow my
herd.
They're not thinking ofinternal expansion, though.
Right, 14 cross-pins is ratherthan buying 14,000 new acres.
(19:06):
How about that?
Yeah, right.
Todd Churchill (19:08):
We know from our work.
You know I've been good friendswith Dr Allen Williams, who
started Understanding Egg anumber of years ago and leads
the Soil Health Academy with allof the ranchers that he's
consulted with over the last 20years.
We know that anyone thatchanges their grazing management
to adaptive multi-paddockgrazing essentially we wanna
(19:31):
give all of our cattle onlyaccess to a small portion of our
grass, graze it intensely for ashort period of time and then
leave it and make sure theycan't get back to that grass
again until it's fully regrown.
In five years we've doubled thecaring capacity in every ranch
everywhere in the world.
This works and all we're reallydoing is replicating what
(19:55):
rumored animals instinctively doif there's no fences.
Colter DeVries (20:01):
And does this play into the QuickBooks plugin
that you have that was developedin New Zealand?
Because it does so.
My wife and I we went on ahoneymoon to New Zealand and we
did a hot air balloon ride overthe Canterbury Plains and I'd
always known that New Zealandwas well ahead of the United
(20:21):
States in grazing management,resource management for
livestock, because they are anisland nation and island nations
are very volatile with theirbudgets.
As a nation they're verydependent on exports and I
believe the story is that therecame a day where New Zealand
(20:43):
realized they were subsidizingtheir farmers too much and they
could not stand to bear thatcost any longer, given they are
an export nation with primarilyone market at China a dry
powdered milk going to China,and so all these rotational
intensive grazing operations aremostly dairy down there.
(21:03):
But from the view of a hot airballoon, you just saw all the
pie slices over the centerpivots, every square foot of
grass was optimized, every farm,every farm was clean.
You didn't see all the junkequipment, the the boneyard out
(21:24):
back, and I think that has a bigpiece of plays into subsidies.
If you're not optimizing andmaximizing your resources,
you'll keep a boneyard of junkand we all have those around
farms and ranches because insome way the ability to keep
(21:44):
that junk is subsidized by theUnited States taxpayers.
Todd Churchill (21:47):
Oh, absolutely it is.
And you know subsidies haschanged the game, and so New
Zealand is a great, fascinatingthing to study.
What happens when you take awaygovernment subsidies, and it
for the last 25 or 30 years, Iwould say.
Nearly all of the innovationsin grazing have come, and
(22:10):
genetics, polywire, high-tentalelectric fence all of that has
come out of New Zealand.
So when you take away thesubsidies, the innovation that's
created is amazing, because youcan't just exist, you have to
figure out how to do somethingdifferently.
(22:30):
And their environment, theirunfair advantage worldwide as in
agriculture, is they havereliable rainfall and they have
very limited temperature windows.
So in in Minnesota it's goingto be 30 below zero, with the
wind shield probably 10 belowzero.
Real temperature it'll.
It could be 100 degrees in thesummer.
That's 110 degrees swing.
(22:52):
In New Zealand you might have a40 or 50 degree swing.
So with that predictability youcan grow grass extremely
reliably and grass is cheaper togrow than annuals.
And part of the reason theydon't have the equipment
boneyards.
Colter DeVries (23:08):
They've never built an equipment intensive ag
industry that was focused ongrowing grains they optimize for
grass and I don't know a lotabout the quick books plugin,
but I what I've heard.
My assumptions are that it's anenterprise analysis and, yeah,
(23:30):
the Americans are really bad,really bad with the price
classes yeah, we are.
Todd Churchill (23:38):
And so and this is really what drives my
consulting work is that if, ifI'm working with a manufacturing
company that makes metal partsfor something they're they're
they're going to have by thetime they have a 10 million
dollar revenue business, theywill have a pretty sophisticated
(24:01):
understanding of what does itcost them for the raw materials,
what does it cost them fortheir labor, what does it cost
them for all their indirectcosts.
And they put a lot of thoughtin years of trial and error into
allocating all of those costsback to everything they make.
So they they know with greatprecision, down to a penny, or
(24:23):
maybe even a you know a fractionof a penny, what is their cost
to make each part that they makeand they may have.
You know, they may make 600,500, 000 different different
items and they know with prettygood precision what every one of
those things cost them.
And then you go into the farmingworld and you have a 10 million
(24:43):
dollar business and they allthey have is a checkbook, it's
cash basis, because that's allthat tax tax attorney is is
requiring, and they don't tracktheir inventory.
All they know is that my casheither going up or going down,
and and the.
(25:03):
The brutal reality is that UScommodity markets, grain markets
and and certainly the cattlemarket, it will always, always
return in terms of an averagepay price.
It will pay the average cost ofproduction for the average
producer.
So it will pay enough to keepthe average producer from
(25:24):
quitting, but it doesn't paythem anything other than their,
their cost of production that'swhat, that's what I've.
Colter DeVries (25:34):
You know my uh commiserations with my
generational owner operators I'mfifth generation Montana
rancher, by the way, todd, andso my network, msu and and uh
class C schools.
You know your schools have lessthan a hundred kids um, a lot
of good friends across montanand Wyoming and my general
(25:56):
commiseration because they theylove to call me and bitch about
the weather, the markets and thegovernment.
Uh, as probably as they'releaving the FSA office I think
they're.
They're bitching about thosethree things, but I my, my uh
response is generally well, ifyou, if you operate
conservatively because you're ina commodity business, so it's a
(26:17):
low-cost leader if you justoperate conservatively, manage
your risks, keep at it.
Over the long term, you'regoing to be fine, right, you,
you're not gonna.
You're not going to become JeffBezos, but you're also not
going to be a beggar on thestreet, you'll be fine yep, the,
the.
Todd Churchill (26:37):
The key is you have to stop evaluating your
success based on uh, your profitor your return per animal, and
you have to evaluate it per acreper you.
You have to your.
Your kpi is denominated in your.
In how much forage do youproduce?
How much return are you getting?
(26:59):
So there's two things youoptimize.
One is how much forage can youproduce and two, how do you
monetize that forage withoutselling it off?
Your, your ranch is hay,because all you're doing then is
you're just, you're just miningthe nutrients in your soil and
of course, you're getting paidfor those nutrients, but you're
rarely making anything.
You're rarely even makingenough to afford the replacement
(27:21):
cost of those nutrients thatyou're shipping off what comes
first?
Colter DeVries (27:25):
uh, the chicken or the egg, the kpis or the
enterprise analysis?
Todd Churchill (27:30):
uh, enterprise analysis comes first.
The first thing that I, that Ithat I, when I walk through this
with a client, the the firstthing actually is getting a
commitment to have a disciplinedfinancial review process, and
that means that either monthlyor quarterly, as your part-time
ranch cfo, we are going to spenda couple hours talking about
(27:55):
the business instead of aboutcows or land, or we're going to
work on the business, not in thebusiness, and holistic resource
management has done a great jobwith this.
Ranching for profit has done agreat job with this, and we all
say the same things.
You got to think about this asan owner.
You got to think about it likeyou own a manufacturing business
(28:17):
that you weren't emotionallyinvested in.
You know, if, if you, if you'rethe third generation to own a
hundred million dollarmanufacturing business and you
make car parts and, uh, andyou're only making five hundred
thousand dollars a year onhundred million dollars in sales
, you're going to look for otheroptions.
(28:37):
If somebody will pay you ahundred million dollars for your
business, one times grossrevenue, and you can go do
something different, you're,you're probably going to do that
because you don't have thatemotional investment.
Um, that's, you can't have thatconversation and ranching or
farming, because, uh, we haveconvinced ourselves that
(29:03):
continue to own this land andpass it down is is the the most
sacred thing in our existence,and I'll ever mortgage the home
for right, never mortgage thehome for you that's right
and I have a great, a greatstory.
A friend of mine who's a clientum, on the day that that his
(29:24):
parents transferred the ranch tohe and his wife, his dad said
to him congratulations.
His mom said to his wife I'm sosorry, because you will now be,
your life will be dictatedcompletely by this.
Uh, this all pervading need tohand this off.
(29:50):
And that's great.
Being a steward is an awesomething.
It's a, it's a great and anoble calling.
But what what we do in,especially in the ranching
community, is we're saddled withthe burden of being a steward
and nobody teaches us the skillsor the tools to be an effective
(30:12):
steward.
So I'm a big fan of managingwhat I've been given for the
benefit of my kids and theirkids.
But if all you do is give yourkids the burden without the
tools to manage it well, you'renot helping anybody and you're
(30:38):
not actually doing anybody anyfavors In your experience.
Colter DeVries (30:43):
we're talking about some pretty serious
paradigm shifts right now.
One paradigm shift is that thisis objectively, unemotionally a
business, so I'm going to needyou to get over your homestead
or mentality that this is thelegacy that your blood, sweat
and tears are in the land.
Todd Churchill (31:03):
For just a moment.
I don't want you to lose that,because that's just part of who
you can't just stop being whoyou are.
That's who you are as a cultureto you are, as a heritage.
You know.
All I want is for you to takean hour once a month and set
that aside.
You're going to pick it back upagain.
Colter DeVries (31:28):
So the next, the next paradigm shift that I'm
thinking about is you're askingguys who will damn it.
Todd, I'm a really goodmechanic.
I fix tractors.
I'm very good with animalscience.
I know my cows better thananyone.
I'm a worker.
I like to wake up at fiveo'clock and get right outside
(31:48):
and come back home at about sixor seven.
That's I do labor very well.
And now you're asking me to dosome financial.
Todd Churchill (31:57):
You're asking to think a little bit, yep Well,
and harder.
Colter DeVries (32:03):
which is harder?
The, the legacy or thetechnicality?
Todd Churchill (32:09):
Everybody being human means well, yeah.
So to answer that, I always aska question being human means
that you wake up in the morning,you have to solve problems.
That's that's.
You can't escape that.
The question is what kind ofproblems do you naturally want
to solve?
Do you wake up in the morningwanting to solve thing problems?
(32:31):
I got a tractor that won't start.
I got cows that need to be fed.
I've got hay that needs to bemade.
I need to get the salt out.
I need to go check water tanks.
Those are thing problems.
I'm going to go interact with,with my world in a tangible way
and I'm going to fix stuff.
And, mike, I'm going to feelgood at the end of the day
because I got that kind of stuffdone.
(32:52):
Nobody has to tell me to dothat, nobody has to ask me to do
it, I'm just going to do it.
And then there's then there'speople problems.
Some people wake up in themorning and they're excited
about building betterrelationships with people.
Those are going to becounselors and service
(33:12):
representative, people that workin retail.
You know they.
They wake up in the morning andthey spend all day solving
other people's problems.
And then you have people thatthat are wired to solve abstract
problems and and this is wherewe run into problems because you
(33:36):
can't retain ownership.
Ownership of land is really anabstract thing and you can't
solve.
You can't succeed multigenerationally Owning land If
you don't haven't developed theskills or are hardwired to think
that way.
Ironically, taylor shared doesa great job of showing this in
(34:02):
Yellowstone, because it's notyour skill as a cattleman that
allows you to keep your ranch,it's your skill in in
understanding how ownership of aranch is an abstract thing and
you really have to figure thatout.
Colter DeVries (34:19):
Well, now you have to be able to separate it.
And now we are truly fair andbalanced on this podcast because
you're the first one to come onand speak highly of the TV
series Yellowstone.
Todd Churchill (34:30):
There's a lot of there's a lot, there's actually
a lot of truth about theownership piece of it Now.
So I, I think, and I think youalways get some really
interesting insights from smartpeople who aren't, who didn't
grow up in a multi generationalfarming and ranching.
Colter DeVries (34:49):
You see the forest because you're not in the
trees.
Todd Churchill (34:51):
Correct.
Colter DeVries (34:52):
Yep.
So one thing I'm thinking ofwith this enterprise analysis,
this QuickBooks plugin, thatthat you have from New Zealand,
yep, and you're a specializedCPA CFO yeah, I would, I when I
was ranching.
What I loved about it is it fedmy value system.
(35:17):
That was innate.
It wasn't a chosen value system, it was inherited and the value
system was busy, be busy, justbe busy, be productive.
And so when I took on a project, I would take on another, and
another, and another, and prettysoon you'd be managing 12
(35:39):
projects.
You're juggling and you'reprobably not getting ahead on
any one of them and you starttaking shortcuts.
And this plays well with my ADHD.
I mean, my ADHD loves to startnew projects and I don't know if
a damn one of them ever gotfinished, certainly not to the,
to the specifications of anoutsourced contractor that they
(36:00):
would have done a better jobfencing than I had, certainly,
but I felt like I had valuebecause I had.
Oh my God, I'm so busy, todd,I've got all this going on.
I can't.
I can't even stop to go to thebathroom.
That, that type of personality,I think, plays well on farms
(36:21):
and ranches.
The owner operator, maverick,you're not going to tell me what
to do.
Sitting down to do the thisenterprise analysis to take time
where I have to focus.
That is as overwhelming as afive paragraph email that'll sit
in my inbox for probably two orthree months before I even want
(36:42):
to open it and start on thefirst paragraph, todd.
Todd Churchill (36:46):
Yeah, no, that that's exactly right, and you
know, my work is primarilyencouraging clients to just
start the process of disciplinein themselves, to spend an hour
or two a month, that's it.
That's not a huge ask.
Thinking about some of thesethings and I'm going to, I'm
going to help you, walk, walkyou through that, and the things
(37:08):
that I want to talk about aredo.
The first thing I want to lookat is what's your, what's your
financial plan For your farmerranch for this year, broken out
by enterprise.
How much is your cow calfenterprise going to make versus
your yelling enterprise, versusyour hay enterprise, versus your
, your freezer beef enterprise,versus selling some replacement
(37:30):
havers?
And the truth is that nobodyreally knows.
Very, very few people have anydata about that, and so we start
by putting that farm plan inplace or ranch plan in place,
and we, to do that, I need toknow what.
What are your enterprises?
(37:50):
We have to identify what thoseare and then we have to figure
out how do we take all of yourcosts and allocate them fairly
to the right enterprise andhonestly, because all of us have
our pet projects that we reallydon't want to know if they're
not making us any money, and sonot everybody wants that at this
(38:12):
level of accountability.
Colter DeVries (38:16):
I don't, I don't necessarily want to see the
facts and the data.
Todd Churchill (38:19):
Yeah, right, Right.
A lot of people don't, and youknow my practice is based on the
people that want to.
Not only the first thing isthey're motivated to never be in
a position where they have tosell their, their ranch or their
farm.
That's a multi generationalasset.
(38:41):
They're managing it in trust asa steward for future
generations.
However they're they're in amarketplace where they're
raising a commodity and they'rethey're competing against other
people who are willing tojeopardize their long term
ownership in order to subsidizetheir operating business.
(39:04):
That's just the brutal realityof ranch, absolutely, and so
cheap labor.
Yeah, if if you're going to, ifyou're going to succeed and
survive, you have to have adifferent.
You have to have an unfairadvantage.
The number one unfair advantagein ranching is running it like
thinking it about it like abusiness and making your
(39:26):
operating business cash flow.
If we can get that done, thenyou're very likely to be able to
pass on the land to the nextgeneration.
Colter DeVries (39:42):
And that is a recurring conversation with,
especially so, I'm 36 and mygeneration, who are now
transitioning to decision makers.
Some won't be a decision makeruntil they're 66, but some are.
That's right.
And the chief concern is oh mygosh, how do we buy more land
(40:07):
and make the P&I with cattle?
And my feedback is always younever will Correct.
Focus on the operating marginsof your depreciating assets of
the operating entity tractors,cows, people.
That's focus on the profits youcan drive from there, because
(40:28):
the land is out of reach today.
It will always be out of reach.
Accept that and figure out howyou make a more profitable
business out of the operatingentity.
Todd Churchill (40:40):
Correct, and to do that you have to be able to
produce some kind of anaccounting plan.
You got to have some kind of aplan that says each of these
enterprises are going to be ableto do this.
So, at a very basic level, aranch is in the business of
growing forage and theenterprises tell me one, how
(41:03):
much forage am I growing?
And two, what's the highest andbest use of that forage to
monetize it, to turn it into thehighest value in a way that
doesn't impair the long-termland ownership?
So I've advocated for yearsthat I don't want my clients to
(41:28):
devote any more than about 60%of their forage base to cows,
because we're alreadyemotionally attached to our
ranch and to our heritage, weget emotionally attached to our
cows and so you will not sellcows soon enough in a drought
(41:49):
versus yearlings you can't buythis herd, todd.
I know everybody says you can'tbuy this, and that's true.
You can't.
You know there is incrediblevalue in having an adapted cow
herd that you've picked over theyears, and the number one way
you can preserve that cow herdis making absolutely sure that
(42:11):
you don't feed any more than 60%of your forage to those cows.
Buy some stockers or keep,retain ownership of your calves
as yearlings, because you're notsacrificing that gene pool in a
drought.
And what everybody does thathas 110% of their forage base is
(42:31):
devoted to their cows becausethey're a little overstocked is
you get a drought year and youhold on to those cows hoping
it's going to rain and itdoesn't.
And then now, now you'vedamaged your future grass
growing capacity, you'vepermanently negatively impacted
your caring capacity and you'regoing to sell the cows anyway
(42:54):
and you're going to have to go alot deeper than just 60%, than
just 40% of your herd at thatpoint.
Colter DeVries (43:01):
And that that plays well into a University of
Wyoming study, long term study,that for drought planning and
market volatility markets 6040,60% cow cow, 40% stockers is
what what they show the optimalright blend is.
And then that also kind ofplays well into I forget the
(43:23):
books, the, the consultants whotalk about two thirds, least one
third deeded.
Yeah right.
Todd Churchill (43:30):
That's kind of your mix.
That's also that.
That's a good.
That's, in my opinion, that'sthe way that you optimize.
The other thing that does isyou're a lot closer to being
able to dabble with some freezerbeef options.
You want to do grass fed beef?
You want to do some grain fedbeef?
You want to.
You want to try to do somedirect marketing.
(43:51):
You want to supply some youknow some, some cattle for a
premium program like the Audubonprogram that I, that I source
cattle for.
In fact, we just we're bringingsome cattle, some cows, from
Montana end of this month backto Minnesota for processing, for
a pilot project for a verylarge beef buyer that is that
that has asked us to source cowsfrom Audubon certified ranches.
(44:14):
Well, let's.
Colter DeVries (44:15):
Let's get into that, because I did.
I earlier mentioned I wanted tohad a couple more grass fed.
It seems like since you startedand you were the anomaly, the
out outlier that you had asuccessful grass fed program.
For every one of you, there's40 who could not make it work.
They've come and gone and italso seems like it's a Hail Mary
(44:39):
Like oh gosh, you know we canwrite, we start a grass fed
direct to consumer local beef.
We could probably buy theneighbors ranch and I don't.
I get my millennial daughter inlaw to run this.
Todd Churchill (44:55):
Where do?
Colter DeVries (44:55):
people go wrong.
Why has it been?
Todd Churchill (44:59):
Well, couple of reasons.
One is that most people don'thave access to a processor that
can do what aging and cryovacand they can't sell a fresh
program.
The second thing is that justbecause you don't feed grain to
your cattle doesn't make it agood eating experience.
The vast majority of peoplethat are selling grass fed beef
(45:24):
on a whole carcass basis andkilling those animals at a
custom locker, where they'rekilling them and hanging them
for 10 days to two weeks andthen freezing them immediately,
are not producing a great eatingexperience.
They're not going to get repeatcustomers, so you know does?
Colter DeVries (45:41):
does auto bond call it a value add?
Another program doesprogramming up help at all?
I mean we can program up withNHTC and get it.
I mean, and I've definitelyheard over the last three years
with crazy beef prices, thatprogramming up doesn't pay.
(46:03):
But what is the the?
Risk.
Yeah, what you're a factorthere for auto bond.
I'm not familiar with theprogram.
I only remember the auto bondguy getting grilled at the WSE.
Yeah right.
Todd Churchill (46:18):
So let's talk about generalities first.
So there's a cattle cycle.
You know, one to two years outof 10 calves are worth a bunch.
Those years, the premiums don'thelp you, but the premiums
really do put a floor in thevalue of cattle on the down
years in the cattle cycle, andthere's more down years than up
(46:41):
years.
That's the way the cycle.
The cycle works.
Because what?
And that just gets back to whatwe talked about at the
beginning.
You know, the emotional driveto own cows is is not subject to
the traditional economicsignals of supply and demand.
The only thing that slows downthe desired own cows is drought.
(47:05):
Now it remains to be seen.
You know, my pet theory is thatall all these guys that have a
desperate need to own ranchesand cows, I'll grew up watching
gun smoke and Roy Rogers, andabsolutely so.
I don't know if that is doneWith that generation or if it's,
(47:27):
if it's harder, if it's moreinstinctual and harder wired in
there.
Colter DeVries (47:32):
I think it's gone three-fold, from Roy Rogers
and Jean Autry and John Wayne.
I think Taylor Sheridan has.
Todd Churchill (47:40):
They agree, there's a whole new generation
now.
Yeah, yeah right.
Colter DeVries (47:44):
Taylor Sheridan has taken the spaghetti Western
and made it Three-fold yep, I Iwould tend to agree.
Todd Churchill (47:53):
I don't think that's gonna go away.
I Think the desired and it wasnever any different.
I Mean, if you look at, if youlook at the way at the ownership
pattern of large ranches In thelate 1800s, in the mid 1800s
there was, there were Easternersthat owned all the ranches, the
(48:16):
cowboys did the work, but veryrelatively few acres were owned
by operators.
It was an asset class nodifferent than it's then.
It's considered today and youyou have to understand that
history If you, you simplycannot retain ownership of
(48:38):
large-scale ranch land Formultiple generations, if you
don't really understand whatdrives the, the decision that
other people who have way moremoney than you do To come, what
compels them to go buy a ranchin the out, a long ways away
from work, that it's so farremoved from anything they've
(48:59):
ever done in their life.
Why is that?
And it's so unique, it doesn'thappen in any other industry.
You don't have in any otherindustry people that don't know
anything about it, that are justcompelled to invest their money
in it.
You have to understand that,the psychology behind that
phenomenon, if you're going tosucceed as a multi-generational
(49:23):
rancher.
Colter DeVries (49:25):
So multi-generational rancher.
Is it time to go neat so youcan either scale or niche,
differentiate scale or sorry,differentiate niche or scale
multi-generational ranchers.
Is it time to consider partnerssuch as the autobahn?
And what is that?
Todd Churchill (49:43):
yeah?
Well, I, I think yes.
So you're either going to haveto drive more income per ton of
grass or you have to go acquirecontrol of more grass and the
the problem with acquiringcontrol more grass is you've
already illustrated is thatyou're bidding against people
(50:06):
that Don't need.
They don't pay for that grasswith what the grant they can
make from it in the future.
They made their money doingsomething that has nothing to do
with grass and they're they'reRedeploying that wealth into
buying control of grass.
You cannot outbid them.
So what you have to do is youhave to get a lot more creative.
How do I one use the grass, theacres?
I have to grow twice as muchgrass.
(50:27):
Everybody can do that in fiveyears with just change in
management to how do I get morevalue out of the grass that I
grow?
And that's that's going to meangetting closer to the consumer.
If, if, if you're raising Cavsand selling weaned calves,
(50:48):
you're a long ways from theconsumer.
And even if you're, and even ifyou're Audubon certified or
certified organic or Gap five,so many other things have to
have to be done right to retainthat value in that weaned calf
by the time it gets onsomebody's plate that there's
relatively a very smallpercentage of the end consumer
(51:08):
premium paid Ends up back at youbecause you're just a long ways
from them.
If you can take that animal the900 pound, a 900 pound euling
you get a bigger chunk of thepremium because you're closer.
Now.
If you take that animal all theway to a finished weight,
whether that's grass fed orgrain fed, you're you're now in
(51:29):
a position to ask for a greaterpercentage of that consumer
premium.
And if you, if you are involvedin the processing so that
doesn't mean you have to own theprocessor, but you have the
capacity to produce not a liveanimal but a packaged product
(51:50):
Well now you can command an evengreater premium.
And, and you know, ultimately,if you're, if you're selling
directly to your eater andyou're not going through a
retail store or a restaurant ora distributor, then you get all
of the premium.
So, but each one of those thingsrequires developing additional
skills and in most cases they'repeople skills and they're
(52:11):
abstract skills.
And if you don't have somebodyon your team, in your family or
or hired that wakes up in themorning and can't wait to go
solve people problems, youshouldn't start a business that
requires expertise In solvingpeople problems to succeed.
(52:32):
So I did this at that at wse,and I asked everybody to raise
their hand.
Is you know who wants to solveFeed and cattle problems?
And everybody raised their hand.
And who wants to solve peopleproblems?
Well, nobody wants to solve.
Oh no, that's why I'm a rancher.
Leave me alone.
I don't like.
That's exactly right.
Colter DeVries (52:50):
Well, with others no, and and that's the
other thing that we have to berealistic about is that Branch
multi-generational ranchers haveself selected against people,
people, the people people left.
Todd Churchill (53:03):
They didn't even try to come west.
They didn't even try to comewest.
Um and so, uh, it's, it's veryhard to succeed at that because
we're not starting with, we'renot with the right personality.
Colter DeVries (53:21):
Yeah that that man.
A lot plays into that, becauseyou just presented another new
culture, that the uh, theantisocial personalities went
west Right, and I've always saidthat it's also the, the
peasants of europe.
So my fifth generation, uh 1883, is when you know my legacy
(53:42):
came over from From uh frislin,the netherlands.
Sure, they didn't leave akiller business.
No, exactly, they didn't leavebecause they had lots of options
there, yeah, and that type ofmentality of scarcity Travelled
with them and then that type ofmentality of scarcity, kind of
peasant living on the margins,make do with what you have.
(54:05):
That got passed downgenerationally.
Yeah, it's still really strong.
Todd Churchill (54:11):
Yeah, well, todd , I need.
Colter DeVries (54:14):
I need the elevator pitch for the autobahn
certification.
Todd Churchill (54:19):
So autobahn certification is, in my opinion,
the easiest way to exploreadding value to your cattle by
using a third-partycertification.
Um, for a couple reasons.
One is that it was written byranchers for ranchers and it it
(54:39):
requires the least dumb thing.
You have to do the fewest dumbthings to to to be qualified.
Because it's not really.
It's primarily focused on birdhabitat and there's a tremendous
overlap in all the things thatyou want to do to create bird
habitat, or all the things thatyou want to do to double the
forage production on your ranch,and so there's there's
(55:01):
virtually nothing in thatprotocol that you wouldn't want
to do, even if you don't careabout bird habitat.
If you just want to double yourgrass production and your
carrying capacity, now it and it, so it.
It doesn't really matter.
You know, if you talk to allthe other, the primary benefit
is the bird habitat.
(55:21):
The secondary benefit is theadditional Forage production.
If you talk to a rancher, Ithink it's the other way around.
I'm what my primary objective isto double my grass.
If I can do that in a way thatI also end up creating bird
habitat, that's a greatserendipity.
I like birds and if I can getsome sort of of premium At some
(55:44):
point in the future For thatgreat, because I'm not actually
spending more money.
I'm not doing things that Iwouldn't otherwise do
economically in order to getthis certification.
So and I think that's differentthan all of the other ones,
certainly different thancertified organic.
It's different than 100% grassfed.
(56:05):
It's different than the gapwhere I'm.
I'm deliberately not doingthings that that I would
otherwise likely do.
Colter DeVries (56:20):
So, as the good old boy operator and uh, he'll
be mindful of your time andwe'll wrap it up here pretty
quick Todd In my mind, as thegood old boy operator, you're
asking me to change, and withchange comes Uh perceived risk.
And in my mind I'm kind ofgoing through, uh, that risk,
(56:42):
risk quadrant.
There are no knowns, unknown,knowns, known unknowns and
unknown unknowns right, and sowho?
Who bears the risk in this?
What is the risk?
And am I, am I going to becompensated for that?
Todd Churchill (57:02):
right, and it's a great question.
And because, because theottoman proto program didn't
start with a, a Marketer, itdidn't start with somebody
saying, hey, the customer willpay me a 30 premium.
Well, and that's how I startedthousand hills.
The customers want 100, grassfed, no antibiotics, no hormones
(57:26):
, all right, um, what?
What do I have to do to induceuh rancher and Uh to to retain
ownership of those calves?
Keep them around, feed them,don't feed them any grain and
ship them to me when the 1300pounds?
And uh, what am I going to haveto pay to induce that person to
(57:46):
do that?
Because that's not, that's notreally in their best interest
economically.
So the conversation is alwayscentered around the premium has
to be big enough to justify my,my lost opportunity cost or or
my additional expenses.
The ottoman's back, ottoman'sjust the other way around.
(58:07):
There's nothing that ottoman isasking you to do that is going
to require you to spend moremoney.
Um, in fact, all all ottoman isasking you to do is to change
your mindset about a number ofthings.
Um, as an example, when you mowa hayfield, don't mow the
headlands first and work yourway in, because then you trap
all the birds and kill them.
(58:27):
You can start in the middle andwork your way out.
That all the birds get flushedout to the edges.
Never thought of that, but itit makes perfect sense and it
doesn't actually cost meanything.
It's an.
Colter DeVries (58:40):
It's a minor irritation the first couple
times I do it, and Then it'sjust becomes natural um yeah, I
don't want a virtue signal anyhere, but I I tried not to chop
up as many birds and baby deeras I could when I was mowing.
Yeah, of course as I waslistening to kick the hay habit
by right by jim garish, pissedoff about what I was doing,
(59:02):
right exactly that.
Todd Churchill (59:05):
That is exactly right.
So, um, I guess, final plug.
You know I obviously I'm arancher philosopher and we've
mostly talked about myphilosophies about ranching, but
, um, what I love to do is helpmy clients develop the
accounting systems that thatgive us data to support these
(59:27):
philosophical conversations, andwe use figured figures a great
tool to do that we.
If you don't want to do any ofthe accounting, you can
outsource all of it to us.
I'm actually going to be out in, uh, livingston February 20th
and 21st teaching at aFundamental you know, financial
fundamentals for ranching schoolthat wse is putting on.
(59:48):
They haven't really announcedit yet, but Hold the date on
your calendar for that.
That's going to be really fun,um, and we're going to dig into
all this stuff then over thosetwo days.
Colter DeVries (01:00:01):
Well, I will put it in the show notes.
I think we'll also link it toyour website, but uh, so it
makes it to the Transcriber andshow notes to this how can
people get it?
Get in touch with you, reachout to you, learn more?
What's your contact info?
Where to go.
Todd Churchill (01:00:18):
Next contact info is todd to do d Dot
Churchill ch.
You are ch ILL at CLA connectcom, if you just.
You can find me on linkedin atTodd Churchill.
You can google me, toddChurchill, thousand hills, and
find all kinds of videos and allkinds of stuff I've done
(01:00:39):
speaking in the past.
I'm easy to find.
I'm easy to find.
Google knows everything aboutme.
Colter DeVries (01:00:45):
Well, thanks for coming on and I I appreciate
your time and, if there'sanything I can help you with in
the future, be a resource.
I'd like to repay theopportunity and I want to.
Todd Churchill (01:00:55):
I want to talk to you more about this
indication approach that you're,that you're working on for
ranch ownership, because I Workwith a lot of people that are
new to ranch ownership.
They want to own a ranch,they're going to buy one, and
but they don't know what they'redoing and and I think there's
tremendous opportunities tobring a little more
thoughtfulness to that whole,that whole piece of this.
Colter DeVries (01:01:17):
I'm.
I was actually uh gonna stopthe recording, but and tell you
I'd like to send you the, theppm.
Todd Churchill (01:01:26):
Yeah, great.
Colter DeVries (01:01:28):
We'd love to take a look at it.
Get your thoughts on the draft.
Todd Churchill (01:01:32):
Yep Sounds good.
Colter DeVries (01:01:34):
Thanks, todd, we'll be in touch on that.
Todd Churchill (01:01:36):
All right.
Colter DeVries (01:01:37):
Have a good weekend.
Great, great visiting, thankyou for tuning into the ranch
investor podcast.
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Colter DeVries (00:12):
Welcome to the Ranch Investor podcast.
I am your three year host,Colter DeVries, accredited land
consultant with the Realtor LandInstitute and accredited farm
manager with ASFMRA.
I'm excited to bring you theexperts on a weekly basis to
hear what's trending, what'shappening, what's going on in
(00:34):
Montana, Wyoming, the West andranches across the United States
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Colter DeVries (00:47):
Let's just get started with who is Todd
Churchill?
What's your background, what'sthe starting story here?
Todd Churchill (00:55):
Todd yeah, that could take an hour, but we'll do
the short version.
I grew up on a farm with a500-ed feed lot in.
New.
Moly, illinois.
My grandfather bought the farmbut he was an attorney and
didn't really spend much timethere.
And my dad started spending hissummers out there when he was I
(01:18):
don't know nine or 10.
And the next door neighbor tothe farm was an old cowboy from
Colorado, bought my dad a ponyand a saddle and got him a job
at the sale barn running hispony up and down the alleys
moving cows.
And my dad fell in love withhorses, started showing and
training cutting horses when hewas a teenager.
(01:39):
He took over the farm when hewas 16, when it was, I think, 80
acres, and has been involved insome fashion in the cattle and
farming business ever since.
He actually went to law schoolas well and has a law practice
in Moline that my youngerbrother went to law school and
(01:59):
joined him.
So I grew up in a veryag-focused, entrepreneurial
family with horses, cattle,crops.
But to me agriculture wasdriving a tractor straight,
dealing with cattle in the feedlot and playing with bats and
toxic chemicals.
So I went to college inMinnesota and went into public
(02:21):
accounting and really didn'texpect to be involved in
agriculture.
There wasn't the way we did agat the time.
It wasn't particularlycompelling for me, I didn't feel
drawn to it.
So I went to school at St OlafCollege in Northfield, minnesota
, went into public accountingand then, after a couple of
(02:46):
years there, left in 97 andstarted one of the first
part-time CFO practices inMinneapolis.
And because I was a farm kid, Iended up with a portfolio of
food and ag clients.
Didn't really plan on that, itwas just what I knew, and so one
of those in the late 90s was astartup meat processor called
(03:09):
Lawrence Meats Became somewhatfamous or notorious because
Michael Pollan devoted a wholechapter in the Omnivorous
Dilemma book to the way thatthis processing plant was
designed.
Mike and Rob Lawrence they hadbought out their parents little
locker plant, like every smalltown in America had until maybe
(03:30):
10 or 15 years ago, thatprocessed a couple beef or pigs
a day, had a deli cateringbusiness.
But they had much biggervisions.
They really believed that therewas going to be tremendous
demand for very high qualityfresh meat processing, for
specialty meats, grass-fed beef,bison, pastured pork, organic
(03:56):
meats, and nobody had reallybuilt a plant that was designed,
that was big enough to create aproduct that looked every bit
as good on a retail shelf asanything coming out of the big
players, but it was small enoughto be flexible and responsive
to the needs of what we callbranded meat companies.
(04:16):
And so I was kind of aconsulting CFO there.
We got that first 10,000 squarefoot plant, built in 2000.
And because I learned the nichemeat business well, I had the
opportunity to start one of thefirst grass-fed beef companies
in the US, which was calledThousand Hills Cattle Company.
(04:37):
That got launched in 2003because I had a good friend who
was an integrative physician inSt Paul and he had a large
concierge medical practice andall of his clients.
He was literally prescribinggrass-fed beef to all of his
clients.
The problem was the quality wasterrible.
It was frozen.
(04:57):
They had to go buy it from somefarm somewhere.
When you buy a whole animal,you never really know what
you're getting.
And he said if you can figureout how to do a very high
quality grass-fed beef that wasfresh, I can get you into the
premium grocery stores in theTwin Cities.
(05:18):
And we launched Thousand Hillsin 2003.
And it took off fast.
We kind of caught the wave ofpopularity with grass-fed beef,
but our focus was not convincingyou that you should eat this
beef because it's good for you.
I only had to do that the firsttime.
After that I wanted to create aproduct.
(05:39):
That was such a great eatingexperience that it didn't matter
if it was good for you orhealthy.
This was the steak, this wasthe burger you wanted to eat,
just because it was so darn good.
So I had a lot of fun with that.
We learned a lot, grew thatbusiness pretty well.
By 2015, we were killing about6,000 head a year.
Sold it to my business partnerwho's still running it, still
(06:00):
doing a great job with it.
Has kept that going.
But by 2015, when I sold, theAustralians had figured out that
they'd been selling grass-fedbeef for decades to the US,
really cheap.
Because we import lean meat toblend with our fat trim coming
out of feedlots and that's howwe make our 80% lean or 85% lean
(06:24):
burger that Americans love.
We actually can't produce thatproduct.
People get mad because we'reimporting beef, but what most
people don't understand is thatour feedlots cannot produce a
hamburger.
It's too fatty.
The grind coming off of afeedlot steer is going to be
maybe 50% to 60% lean.
(06:45):
Well, you can't make a burgerout of that.
It's too much fat.
So we have to buy some leanmeat from South America
Australia, new Zealand to blendwith that fat trim to make the
perfect burger, which is goingto be 80% to 85% lean.
Well, so the Australians havebeen supplying the US market
that way for years.
They just weren't gettingcredit for the fact that it was
(07:06):
grass-fed.
Because they have a nationalanimal ID system, it was pretty
straightforward for them to getall of their cattle certified
grass-fed and, in many cases,certified organic, and by 2015,
my customers could buyAustralian 100% grass-fed ground
(07:29):
beef, delivered to the WestCoast at less than half of what
I was selling mindful.
Now, they couldn't get steaksbecause the steaks weren't very
good, but the grind was prettymuch indistinguishable, and so I
decided it was time to sell andto do something a little
different.
(07:50):
Parallel to that, in the mid-90s, as a family we decided to stop
investing in farmland inIllinois.
We paid, I think, $3,300 anacre for some land in 1993 and
thought that was reallyexpensive in hindsight.
Prices just kept on climbing.
But we decided to start buyingranch land in Oklahoma and move
(08:16):
our cutting horse business andour cattle business to Oklahoma,
and so we've had a ranch and apretty prominent cutting horse
quarter horse breeding programnear Wayne, oklahoma, just south
of Oklahoma city about 60 milessince the mid 90s and so I come
(08:39):
from this family backgroundthat's very involved in
traditional ranching and cuttinghorses and feedlot cattle and
grain production and then I'vekind of taken a spin on it and
tried to provide what.
I'm curious by nature and somost people in the beef industry
(09:03):
told me in the early 2000s thatit wasn't possible to do high
quality grass fed beef, thatgrass fed beef is always gonna
be tough and gamey and lean andthere's nothing you can do about
it if you don't feed them corn.
Colter DeVries (09:15):
I wanna come back to this grass fed.
Let's stay on this for a minute.
But first, since this is branchinvestor, why Oklahoma?
Todd Churchill (09:23):
Oh well, if the goal is to win the National
Cutting Horse Association forCharity, it helps to be at the
epicenter of that industry,which is the corridor from
Weatherford, texas, fort Worth,up to Oklahoma city.
And we were looking forproductive ranch land, not
(09:46):
necessarily scenic ranch land.
So there's a, you know, thereseems to be.
I don't know exactly what it is, but once men achieve a certain
amount of wealth, there'ssomething hardwired, that's
instinctual, that we just haveto buy a ranch, we have to own
(10:07):
cattle and buy a ranch.
And it doesn't really.
That transcends social classes,it transcends educational
background.
It is a really hardwired, deep,instinctual need to.
There's a sense of security thatI don't think we're even really
(10:28):
conscious of, but it's apowerful driver.
Once people have the means todo it, they want to own in some
fashion, a ranch that has cattleon it, and if you have the
money, you know why not buy one?
(10:50):
That's also beautiful, that hassome recreational value, that
gives you incredible views, andthose are typically gonna be in
the, in the Intermountain West,and so you know, we see ranch
land in those markets increasingtremendously in value.
But that value has iscompletely decoupled from its
(11:12):
operational productivity.
Its value is driven by the factthat there will always be more
people that have just recentlyacquired the wealth and they
feel compelled, for ways thatthey can't really explain or
articulate, to buy a ranch.
Colter DeVries (11:28):
And people will mortgage everything they have
and live on the razor's edge,making at best $2,000 a month to
own, control the land and liveout there.
I wouldn't say own, because thebank owns it at that point.
But, to have the illusion ofcontrol and the lifestyle
(11:49):
Correct and you know I tellclients all the time.
Todd Churchill (11:54):
So you know my career has evolved.
I, after selling 1,000 Hills,I've had a consulting practice
similar to the one I had beforeas a part-time CFO, but my focus
now is on large ranch and farms.
Merge that practice in withClifton, larson, al and we're
the eighth largest CPA firm.
I've been there for three yearsand I run our outsourced
(12:15):
accounting group.
So I run the team of peoplethat provide outsourced CFO
controller and bookkeeperservices for our large ag
producers and do a lot of workwith ranches and farms and meat
processors.
Colter DeVries (12:32):
Well, that's going to be.
The next topic is CFO work yourCPA work, cfo work, your CPA
background.
You have enterprise analysisfor QuickBooks, which comes up
on this podcast a lot and itcomes up in my conversations
with owner operators and lesseeoperators and a lot of times.
(12:52):
Yesterday I had three big callsabout this passive syndication
investment that I'm working onand talking to people about the
land as its own entity, as aninvestment, not as operating
asset.
These are generationaloperators and you'd think I'm
(13:14):
speaking Mandarin to them.
They cannot.
It doesn't translate that theland is a separate entity and it
is an investment asset, not anoperating asset.
It's tough.
That's a tough conversation.
It is to win people over withbecause it's just so far out of
their realm, because they'relike well, what about the
principal?
I mean, what about my principalpayment and my equity?
(13:38):
And you've always got there.
That's not going to go anywhere.
It's challenging.
Todd Churchill (13:45):
Yeah, it is challenging because we have a
very intricate tax law thatprovides completely different
rules for agriculture than forany other business, and so a lot
of what is recommended byadvisors, attorneys, cpas, farm
(14:06):
management consultants is reallydesigned to optimize for tax
strategy, which is a good thing,but that seldom gets you a
successful multi-generationalresult.
If you truly want to have amulti-generational land
(14:30):
investment, you have to bebrutally honest with you.
If you're never going to sellit, it doesn't matter how much
the land is appreciating.
Then what matters is you haveto figure out how to use that
land to create enough operatingfree cash flow that you can
afford to pay your familymembers and other non-family
(14:52):
members to operate it, and thatis a very difficult thing to do.
It's harder in the cattlebusiness than any other part of
agriculture, because the cattleindustry is the only one.
Nobody who achieves anysignificant wealth is compelled
to go own a million chickens,laying hens or chicken broilers
(15:15):
in a barn.
Colter DeVries (15:16):
In.
Todd Churchill (15:17):
Arkansas.
Hollywood doesn't make moviesabout farm work.
Oh no, they don't.
There's nobody who achieveswealth, goes and builds 30
saubarns.
It's just.
There's something about thepastoralist, I mean rumored.
Animals are the foundation ofhuman civilization and so, for
(15:39):
thousands and thousands of years, success and security was
driven by one thing how muchgrass do you have access to?
This is far before.
This predates any Greco-Romanconcept of land ownership.
How much grass, how manyrumored animals can you manage?
(16:03):
Because rumored do this amazingthing that people, pigs and
poultry can't do they turn solarenergy, stored and collected in
a leaf of a plant, into meatand milk, and they're mobile.
Those two things is that's whywe have human civilization.
And they do it on non-arablelands.
They do it on well, exactlyBecause, by definition, those
(16:27):
leaves are growing in anenvironment where annual plants
won't grow.
We've already turned everypossible acre around the world
if you can grow an annual crop,and because grain has some
incredible advantages over grass.
Grain is nature's solar energybattery.
(16:48):
It stores extremely well, ittransports well and it's
concentrated energy.
Rumorants can feed us with justsunlight and water, but you
have to be able to move, tofollow where the grass is,
(17:08):
because grass doesn't grow thesame place, reliably,
consistently, year after year.
So the moment that we adopt apersonal property right mindset
and we start building fences now, the success in life is not
optimized by owning more cattlethat you can move to wherever
(17:29):
the grass is.
Success is optimizing theproduction of the land that I
control, and that inevitablyleads us to grains instead of to
rumours, because grain isalways gonna provide a long term
, better security and a betterreturn.
If I can grow it, and I don'thave to be able to grow it every
(17:53):
year because grain stores sowell Stores and markets very
easily.
That's right.
So what's happened is that inthe cattle industry, you're
always competing against peoplewho will devote wealth they made
in other ways to owning cattle,and that doesn't happen in any
(18:17):
other livestock sector.
Colter DeVries (18:18):
That's like the old saying, never get into a
business that so many arewilling to do for free Right,
and that's exactly how it works.
Todd Churchill (18:26):
So the only real limit to the number of cows we
have in the US is drought, wheneveryone that owns cows, that
owns ranches, will expand thecow herd if they have enough
rainfall to grow enough grass todo it.
Colter DeVries (18:46):
And this I mean we're gonna get into now some
technical.
You have so many landowners whoare thinking expansion,
expansion, control of grass, asyou said, so that I can grow my
herd.
They're not thinking ofinternal expansion, though.
Right, 14 cross-pins is ratherthan buying 14,000 new acres.
(19:06):
How about that?
Yeah, right.
Todd Churchill (19:08):
We know from our work.
You know I've been good friendswith Dr Allen Williams, who
started Understanding Egg anumber of years ago and leads
the Soil Health Academy with allof the ranchers that he's
consulted with over the last 20years.
We know that anyone thatchanges their grazing management
to adaptive multi-paddockgrazing essentially we wanna
(19:31):
give all of our cattle onlyaccess to a small portion of our
grass, graze it intensely for ashort period of time and then
leave it and make sure theycan't get back to that grass
again until it's fully regrown.
In five years we've doubled thecaring capacity in every ranch
everywhere in the world.
This works and all we're reallydoing is replicating what
(19:55):
rumored animals instinctively doif there's no fences.
Colter DeVries (20:01):
And does this play into the QuickBooks plugin
that you have that was developedin New Zealand?
Because it does so.
My wife and I we went on ahoneymoon to New Zealand and we
did a hot air balloon ride overthe Canterbury Plains and I'd
always known that New Zealandwas well ahead of the United
(20:21):
States in grazing management,resource management for
livestock, because they are anisland nation and island nations
are very volatile with theirbudgets.
As a nation they're verydependent on exports and I
believe the story is that therecame a day where New Zealand
(20:43):
realized they were subsidizingtheir farmers too much and they
could not stand to bear thatcost any longer, given they are
an export nation with primarilyone market at China a dry
powdered milk going to China,and so all these rotational
intensive grazing operations aremostly dairy down there.
(21:03):
But from the view of a hot airballoon, you just saw all the
pie slices over the centerpivots, every square foot of
grass was optimized, every farm,every farm was clean.
You didn't see all the junkequipment, the the boneyard out
(21:24):
back, and I think that has a bigpiece of plays into subsidies.
If you're not optimizing andmaximizing your resources,
you'll keep a boneyard of junkand we all have those around
farms and ranches because insome way the ability to keep
(21:44):
that junk is subsidized by theUnited States taxpayers.
Todd Churchill (21:47):
Oh, absolutely it is.
And you know subsidies haschanged the game, and so New
Zealand is a great, fascinatingthing to study.
What happens when you take awaygovernment subsidies, and it
for the last 25 or 30 years, Iwould say.
Nearly all of the innovationsin grazing have come, and
(22:10):
genetics, polywire, high-tentalelectric fence all of that has
come out of New Zealand.
So when you take away thesubsidies, the innovation that's
created is amazing, because youcan't just exist, you have to
figure out how to do somethingdifferently.
(22:30):
And their environment, theirunfair advantage worldwide as in
agriculture, is they havereliable rainfall and they have
very limited temperature windows.
So in in Minnesota it's goingto be 30 below zero, with the
wind shield probably 10 belowzero.
Real temperature it'll.
It could be 100 degrees in thesummer.
That's 110 degrees swing.
(22:52):
In New Zealand you might have a40 or 50 degree swing.
So with that predictability youcan grow grass extremely
reliably and grass is cheaper togrow than annuals.
And part of the reason theydon't have the equipment
boneyards.
Colter DeVries (23:08):
They've never built an equipment intensive ag
industry that was focused ongrowing grains they optimize for
grass and I don't know a lotabout the quick books plugin,
but I what I've heard.
My assumptions are that it's anenterprise analysis and, yeah,
(23:30):
the Americans are really bad,really bad with the price
classes yeah, we are.
Todd Churchill (23:38):
And so and this is really what drives my
consulting work is that if, ifI'm working with a manufacturing
company that makes metal partsfor something they're they're
they're going to have by thetime they have a 10 million
dollar revenue business, theywill have a pretty sophisticated
(24:01):
understanding of what does itcost them for the raw materials,
what does it cost them fortheir labor, what does it cost
them for all their indirectcosts.
And they put a lot of thoughtin years of trial and error into
allocating all of those costsback to everything they make.
So they they know with greatprecision, down to a penny, or
(24:23):
maybe even a you know a fractionof a penny, what is their cost
to make each part that they makeand they may have.
You know, they may make 600,500, 000 different different
items and they know with prettygood precision what every one of
those things cost them.
And then you go into the farmingworld and you have a 10 million
(24:43):
dollar business and they allthey have is a checkbook, it's
cash basis, because that's allthat tax tax attorney is is
requiring, and they don't tracktheir inventory.
All they know is that my casheither going up or going down,
and and the.
(25:03):
The brutal reality is that UScommodity markets, grain markets
and and certainly the cattlemarket, it will always, always
return in terms of an averagepay price.
It will pay the average cost ofproduction for the average
producer.
So it will pay enough to keepthe average producer from
(25:24):
quitting, but it doesn't paythem anything other than their,
their cost of production that'swhat, that's what I've.
Colter DeVries (25:34):
You know my uh commiserations with my
generational owner operators I'mfifth generation Montana
rancher, by the way, todd, andso my network, msu and and uh
class C schools.
You know your schools have lessthan a hundred kids um, a lot
of good friends across montanand Wyoming and my general
(25:56):
commiseration because they theylove to call me and bitch about
the weather, the markets and thegovernment.
Uh, as probably as they'releaving the FSA office I think
they're.
They're bitching about thosethree things, but I my, my uh
response is generally well, ifyou, if you operate
conservatively because you're ina commodity business, so it's a
(26:17):
low-cost leader if you justoperate conservatively, manage
your risks, keep at it.
Over the long term, you'regoing to be fine, right, you,
you're not gonna.
You're not going to become JeffBezos, but you're also not
going to be a beggar on thestreet, you'll be fine yep, the,
the.
Todd Churchill (26:37):
The key is you have to stop evaluating your
success based on uh, your profitor your return per animal, and
you have to evaluate it per acreper you.
You have to your.
Your kpi is denominated in your.
In how much forage do youproduce?
How much return are you getting?
(26:59):
So there's two things youoptimize.
One is how much forage can youproduce and two, how do you
monetize that forage withoutselling it off?
Your, your ranch is hay,because all you're doing then is
you're just, you're just miningthe nutrients in your soil and
of course, you're getting paidfor those nutrients, but you're
rarely making anything.
You're rarely even makingenough to afford the replacement
(27:21):
cost of those nutrients thatyou're shipping off what comes
first?
Colter DeVries (27:25):
uh, the chicken or the egg, the kpis or the
enterprise analysis?
Todd Churchill (27:30):
uh, enterprise analysis comes first.
The first thing that I, that Ithat I, when I walk through this
with a client, the the firstthing actually is getting a
commitment to have a disciplinedfinancial review process, and
that means that either monthlyor quarterly, as your part-time
ranch cfo, we are going to spenda couple hours talking about
(27:55):
the business instead of aboutcows or land, or we're going to
work on the business, not in thebusiness, and holistic resource
management has done a great jobwith this.
Ranching for profit has done agreat job with this, and we all
say the same things.
You got to think about this asan owner.
You got to think about it likeyou own a manufacturing business
(28:17):
that you weren't emotionallyinvested in.
You know, if, if you, if you'rethe third generation to own a
hundred million dollarmanufacturing business and you
make car parts and, uh, andyou're only making five hundred
thousand dollars a year onhundred million dollars in sales
, you're going to look for otheroptions.
(28:37):
If somebody will pay you ahundred million dollars for your
business, one times grossrevenue, and you can go do
something different, you're,you're probably going to do that
because you don't have thatemotional investment.
Um, that's, you can't have thatconversation and ranching or
farming, because, uh, we haveconvinced ourselves that
(29:03):
continue to own this land andpass it down is is the the most
sacred thing in our existence,and I'll ever mortgage the home
for right, never mortgage thehome for you that's right
and I have a great, a greatstory.
A friend of mine who's a clientum, on the day that that his
(29:24):
parents transferred the ranch tohe and his wife, his dad said
to him congratulations.
His mom said to his wife I'm sosorry, because you will now be,
your life will be dictatedcompletely by this.
Uh, this all pervading need tohand this off.
(29:50):
And that's great.
Being a steward is an awesomething.
It's a, it's a great and anoble calling.
But what what we do in,especially in the ranching
community, is we're saddled withthe burden of being a steward
and nobody teaches us the skillsor the tools to be an effective
(30:12):
steward.
So I'm a big fan of managingwhat I've been given for the
benefit of my kids and theirkids.
But if all you do is give yourkids the burden without the
tools to manage it well, you'renot helping anybody and you're
(30:38):
not actually doing anybody anyfavors In your experience.
Colter DeVries (30:43):
we're talking about some pretty serious
paradigm shifts right now.
One paradigm shift is that thisis objectively, unemotionally a
business, so I'm going to needyou to get over your homestead
or mentality that this is thelegacy that your blood, sweat
and tears are in the land.
Todd Churchill (31:03):
For just a moment.
I don't want you to lose that,because that's just part of who
you can't just stop being whoyou are.
That's who you are as a cultureto you are, as a heritage.
You know.
All I want is for you to takean hour once a month and set
that aside.
You're going to pick it back upagain.
Colter DeVries (31:28):
So the next, the next paradigm shift that I'm
thinking about is you're askingguys who will damn it.
Todd, I'm a really goodmechanic.
I fix tractors.
I'm very good with animalscience.
I know my cows better thananyone.
I'm a worker.
I like to wake up at fiveo'clock and get right outside
(31:48):
and come back home at about sixor seven.
That's I do labor very well.
And now you're asking me to dosome financial.
Todd Churchill (31:57):
You're asking to think a little bit, yep Well,
and harder.
Colter DeVries (32:03):
which is harder?
The, the legacy or thetechnicality?
Todd Churchill (32:09):
Everybody being human means well, yeah.
So to answer that, I always aska question being human means
that you wake up in the morning,you have to solve problems.
That's that's.
You can't escape that.
The question is what kind ofproblems do you naturally want
to solve?
Do you wake up in the morningwanting to solve thing problems?
(32:31):
I got a tractor that won't start.
I got cows that need to be fed.
I've got hay that needs to bemade.
I need to get the salt out.
I need to go check water tanks.
Those are thing problems.
I'm going to go interact with,with my world in a tangible way
and I'm going to fix stuff.
And, mike, I'm going to feelgood at the end of the day
because I got that kind of stuffdone.
(32:52):
Nobody has to tell me to dothat, nobody has to ask me to do
it, I'm just going to do it.
And then there's then there'speople problems.
Some people wake up in themorning and they're excited
about building betterrelationships with people.
Those are going to becounselors and service
(33:12):
representative, people that workin retail.
You know they.
They wake up in the morning andthey spend all day solving
other people's problems.
And then you have people thatthat are wired to solve abstract
problems and and this is wherewe run into problems because you
(33:36):
can't retain ownership.
Ownership of land is really anabstract thing and you can't
solve.
You can't succeed multigenerationally Owning land If
you don't haven't developed theskills or are hardwired to think
that way.
Ironically, taylor shared doesa great job of showing this in
(34:02):
Yellowstone, because it's notyour skill as a cattleman that
allows you to keep your ranch,it's your skill in in
understanding how ownership of aranch is an abstract thing and
you really have to figure thatout.
Colter DeVries (34:19):
Well, now you have to be able to separate it.
And now we are truly fair andbalanced on this podcast because
you're the first one to come onand speak highly of the TV
series Yellowstone.
Todd Churchill (34:30):
There's a lot of there's a lot, there's actually
a lot of truth about theownership piece of it Now.
So I, I think, and I think youalways get some really
interesting insights from smartpeople who aren't, who didn't
grow up in a multi generationalfarming and ranching.
Colter DeVries (34:49):
You see the forest because you're not in the
trees.
Todd Churchill (34:51):
Correct.
Colter DeVries (34:52):
Yep.
So one thing I'm thinking ofwith this enterprise analysis,
this QuickBooks plugin, thatthat you have from New Zealand,
yep, and you're a specializedCPA CFO yeah, I would, I when I
was ranching.
What I loved about it is it fedmy value system.
(35:17):
That was innate.
It wasn't a chosen value system, it was inherited and the value
system was busy, be busy, justbe busy, be productive.
And so when I took on a project, I would take on another, and
another, and another, and prettysoon you'd be managing 12
(35:39):
projects.
You're juggling and you'reprobably not getting ahead on
any one of them and you starttaking shortcuts.
And this plays well with my ADHD.
I mean, my ADHD loves to startnew projects and I don't know if
a damn one of them ever gotfinished, certainly not to the,
to the specifications of anoutsourced contractor that they
(36:00):
would have done a better jobfencing than I had, certainly,
but I felt like I had valuebecause I had.
Oh my God, I'm so busy, todd,I've got all this going on.
I can't.
I can't even stop to go to thebathroom.
That, that type of personality,I think, plays well on farms
(36:21):
and ranches.
The owner operator, maverick,you're not going to tell me what
to do.
Sitting down to do the thisenterprise analysis to take time
where I have to focus.
That is as overwhelming as afive paragraph email that'll sit
in my inbox for probably two orthree months before I even want
(36:42):
to open it and start on thefirst paragraph, todd.
Todd Churchill (36:46):
Yeah, no, that that's exactly right, and you
know, my work is primarilyencouraging clients to just
start the process of disciplinein themselves, to spend an hour
or two a month, that's it.
That's not a huge ask.
Thinking about some of thesethings and I'm going to, I'm
going to help you, walk, walkyou through that, and the things
(37:08):
that I want to talk about aredo.
The first thing I want to lookat is what's your, what's your
financial plan For your farmerranch for this year, broken out
by enterprise.
How much is your cow calfenterprise going to make versus
your yelling enterprise, versusyour hay enterprise, versus your
, your freezer beef enterprise,versus selling some replacement
(37:30):
havers?
And the truth is that nobodyreally knows.
Very, very few people have anydata about that, and so we start
by putting that farm plan inplace or ranch plan in place,
and we, to do that, I need toknow what.
What are your enterprises?
(37:50):
We have to identify what thoseare and then we have to figure
out how do we take all of yourcosts and allocate them fairly
to the right enterprise andhonestly, because all of us have
our pet projects that we reallydon't want to know if they're
not making us any money, and sonot everybody wants that at this
(38:12):
level of accountability.
Colter DeVries (38:16):
I don't, I don't necessarily want to see the
facts and the data.
Todd Churchill (38:19):
Yeah, right, Right.
A lot of people don't, and youknow my practice is based on the
people that want to.
Not only the first thing isthey're motivated to never be in
a position where they have tosell their, their ranch or their
farm.
That's a multi generationalasset.
(38:41):
They're managing it in trust asa steward for future
generations.
However they're they're in amarketplace where they're
raising a commodity and they'rethey're competing against other
people who are willing tojeopardize their long term
ownership in order to subsidizetheir operating business.
(39:04):
That's just the brutal realityof ranch, absolutely, and so
cheap labor.
Yeah, if if you're going to, ifyou're going to succeed and
survive, you have to have adifferent.
You have to have an unfairadvantage.
The number one unfair advantagein ranching is running it like
thinking it about it like abusiness and making your
(39:26):
operating business cash flow.
If we can get that done, thenyou're very likely to be able to
pass on the land to the nextgeneration.
Colter DeVries (39:42):
And that is a recurring conversation with,
especially so, I'm 36 and mygeneration, who are now
transitioning to decision makers.
Some won't be a decision makeruntil they're 66, but some are.
That's right.
And the chief concern is oh mygosh, how do we buy more land
(40:07):
and make the P&I with cattle?
And my feedback is always younever will Correct.
Focus on the operating marginsof your depreciating assets of
the operating entity tractors,cows, people.
That's focus on the profits youcan drive from there, because
(40:28):
the land is out of reach today.
It will always be out of reach.
Accept that and figure out howyou make a more profitable
business out of the operatingentity.
Todd Churchill (40:40):
Correct, and to do that you have to be able to
produce some kind of anaccounting plan.
You got to have some kind of aplan that says each of these
enterprises are going to be ableto do this.
So, at a very basic level, aranch is in the business of
growing forage and theenterprises tell me one, how
(41:03):
much forage am I growing?
And two, what's the highest andbest use of that forage to
monetize it, to turn it into thehighest value in a way that
doesn't impair the long-termland ownership?
So I've advocated for yearsthat I don't want my clients to
(41:28):
devote any more than about 60%of their forage base to cows,
because we're alreadyemotionally attached to our
ranch and to our heritage, weget emotionally attached to our
cows and so you will not sellcows soon enough in a drought
(41:49):
versus yearlings you can't buythis herd, todd.
I know everybody says you can'tbuy this, and that's true.
You can't.
You know there is incrediblevalue in having an adapted cow
herd that you've picked over theyears, and the number one way
you can preserve that cow herdis making absolutely sure that
(42:11):
you don't feed any more than 60%of your forage to those cows.
Buy some stockers or keep,retain ownership of your calves
as yearlings, because you're notsacrificing that gene pool in a
drought.
And what everybody does thathas 110% of their forage base is
(42:31):
devoted to their cows becausethey're a little overstocked is
you get a drought year and youhold on to those cows hoping
it's going to rain and itdoesn't.
And then now, now you'vedamaged your future grass
growing capacity, you'vepermanently negatively impacted
your caring capacity and you'regoing to sell the cows anyway
(42:54):
and you're going to have to go alot deeper than just 60%, than
just 40% of your herd at thatpoint.
Colter DeVries (43:01):
And that that plays well into a University of
Wyoming study, long term study,that for drought planning and
market volatility markets 6040,60% cow cow, 40% stockers is
what what they show the optimalright blend is.
And then that also kind ofplays well into I forget the
(43:23):
books, the, the consultants whotalk about two thirds, least one
third deeded.
Yeah right.
Todd Churchill (43:30):
That's kind of your mix.
That's also that.
That's a good.
That's, in my opinion, that'sthe way that you optimize.
The other thing that does isyou're a lot closer to being
able to dabble with some freezerbeef options.
You want to do grass fed beef?
You want to do some grain fedbeef?
You want to.
You want to try to do somedirect marketing.
(43:51):
You want to supply some youknow some, some cattle for a
premium program like the Audubonprogram that I, that I source
cattle for.
In fact, we just we're bringingsome cattle, some cows, from
Montana end of this month backto Minnesota for processing, for
a pilot project for a verylarge beef buyer that is that
that has asked us to source cowsfrom Audubon certified ranches.
(44:14):
Well, let's.
Colter DeVries (44:15):
Let's get into that, because I did.
I earlier mentioned I wanted tohad a couple more grass fed.
It seems like since you startedand you were the anomaly, the
out outlier that you had asuccessful grass fed program.
For every one of you, there's40 who could not make it work.
They've come and gone and italso seems like it's a Hail Mary
(44:39):
Like oh gosh, you know we canwrite, we start a grass fed
direct to consumer local beef.
We could probably buy theneighbors ranch and I don't.
I get my millennial daughter inlaw to run this.
Todd Churchill (44:55):
Where do?
Colter DeVries (44:55):
people go wrong.
Why has it been?
Todd Churchill (44:59):
Well, couple of reasons.
One is that most people don'thave access to a processor that
can do what aging and cryovacand they can't sell a fresh
program.
The second thing is that justbecause you don't feed grain to
your cattle doesn't make it agood eating experience.
The vast majority of peoplethat are selling grass fed beef
(45:24):
on a whole carcass basis andkilling those animals at a
custom locker, where they'rekilling them and hanging them
for 10 days to two weeks andthen freezing them immediately,
are not producing a great eatingexperience.
They're not going to get repeatcustomers, so you know does?
Colter DeVries (45:41):
does auto bond call it a value add?
Another program doesprogramming up help at all?
I mean we can program up withNHTC and get it.
I mean, and I've definitelyheard over the last three years
with crazy beef prices, thatprogramming up doesn't pay.
(46:03):
But what is the the?
Risk.
Yeah, what you're a factorthere for auto bond.
I'm not familiar with theprogram.
I only remember the auto bondguy getting grilled at the WSE.
Yeah right.
Todd Churchill (46:18):
So let's talk about generalities first.
So there's a cattle cycle.
You know, one to two years outof 10 calves are worth a bunch.
Those years, the premiums don'thelp you, but the premiums
really do put a floor in thevalue of cattle on the down
years in the cattle cycle, andthere's more down years than up
(46:41):
years.
That's the way the cycle.
The cycle works.
Because what?
And that just gets back to whatwe talked about at the
beginning.
You know, the emotional driveto own cows is is not subject to
the traditional economicsignals of supply and demand.
The only thing that slows downthe desired own cows is drought.
(47:05):
Now it remains to be seen.
You know, my pet theory is thatall all these guys that have a
desperate need to own ranchesand cows, I'll grew up watching
gun smoke and Roy Rogers, andabsolutely so.
I don't know if that is doneWith that generation or if it's,
(47:27):
if it's harder, if it's moreinstinctual and harder wired in
there.
Colter DeVries (47:32):
I think it's gone three-fold, from Roy Rogers
and Jean Autry and John Wayne.
I think Taylor Sheridan has.
Todd Churchill (47:40):
They agree, there's a whole new generation
now.
Yeah, yeah right.
Colter DeVries (47:44):
Taylor Sheridan has taken the spaghetti Western
and made it Three-fold yep, I Iwould tend to agree.
Todd Churchill (47:53):
I don't think that's gonna go away.
I Think the desired and it wasnever any different.
I Mean, if you look at, if youlook at the way at the ownership
pattern of large ranches In thelate 1800s, in the mid 1800s
there was, there were Easternersthat owned all the ranches, the
(48:16):
cowboys did the work, but veryrelatively few acres were owned
by operators.
It was an asset class nodifferent than it's then.
It's considered today and youyou have to understand that
history If you, you simplycannot retain ownership of
(48:38):
large-scale ranch land Formultiple generations, if you
don't really understand whatdrives the, the decision that
other people who have way moremoney than you do To come, what
compels them to go buy a ranchin the out, a long ways away
from work, that it's so farremoved from anything they've
(48:59):
ever done in their life.
Why is that?
And it's so unique, it doesn'thappen in any other industry.
You don't have in any otherindustry people that don't know
anything about it, that are justcompelled to invest their money
in it.
You have to understand that,the psychology behind that
phenomenon, if you're going tosucceed as a multi-generational
(49:23):
rancher.
Colter DeVries (49:25):
So multi-generational rancher.
Is it time to go neat so youcan either scale or niche,
differentiate scale or sorry,differentiate niche or scale
multi-generational ranchers.
Is it time to consider partnerssuch as the autobahn?
And what is that?
Todd Churchill (49:43):
yeah?
Well, I, I think yes.
So you're either going to haveto drive more income per ton of
grass or you have to go acquirecontrol of more grass and the
the problem with acquiringcontrol more grass is you've
already illustrated is thatyou're bidding against people
(50:06):
that Don't need.
They don't pay for that grasswith what the grant they can
make from it in the future.
They made their money doingsomething that has nothing to do
with grass and they're they'reRedeploying that wealth into
buying control of grass.
You cannot outbid them.
So what you have to do is youhave to get a lot more creative.
How do I one use the grass, theacres?
I have to grow twice as muchgrass.
(50:27):
Everybody can do that in fiveyears with just change in
management to how do I get morevalue out of the grass that I
grow?
And that's that's going to meangetting closer to the consumer.
If, if, if you're raising Cavsand selling weaned calves,
(50:48):
you're a long ways from theconsumer.
And even if you're, and even ifyou're Audubon certified or
certified organic or Gap five,so many other things have to
have to be done right to retainthat value in that weaned calf
by the time it gets onsomebody's plate that there's
relatively a very smallpercentage of the end consumer
(51:08):
premium paid Ends up back at youbecause you're just a long ways
from them.
If you can take that animal the900 pound, a 900 pound euling
you get a bigger chunk of thepremium because you're closer.
Now.
If you take that animal all theway to a finished weight,
whether that's grass fed orgrain fed, you're you're now in
(51:29):
a position to ask for a greaterpercentage of that consumer
premium.
And if you, if you are involvedin the processing so that
doesn't mean you have to own theprocessor, but you have the
capacity to produce not a liveanimal but a packaged product
(51:50):
Well now you can command an evengreater premium.
And, and you know, ultimately,if you're, if you're selling
directly to your eater andyou're not going through a
retail store or a restaurant ora distributor, then you get all
of the premium.
So, but each one of those thingsrequires developing additional
skills and in most cases they'repeople skills and they're
(52:11):
abstract skills.
And if you don't have somebodyon your team, in your family or
or hired that wakes up in themorning and can't wait to go
solve people problems, youshouldn't start a business that
requires expertise In solvingpeople problems to succeed.
(52:32):
So I did this at that at wse,and I asked everybody to raise
their hand.
Is you know who wants to solveFeed and cattle problems?
And everybody raised their hand.
And who wants to solve peopleproblems?
Well, nobody wants to solve.
Oh no, that's why I'm a rancher.
Leave me alone.
I don't like.
That's exactly right.
Colter DeVries (52:50):
Well, with others no, and and that's the
other thing that we have to berealistic about is that Branch
multi-generational ranchers haveself selected against people,
people, the people people left.
Todd Churchill (53:03):
They didn't even try to come west.
They didn't even try to comewest.
Um and so, uh, it's, it's veryhard to succeed at that because
we're not starting with, we'renot with the right personality.
Colter DeVries (53:21):
Yeah that that man.
A lot plays into that, becauseyou just presented another new
culture, that the uh, theantisocial personalities went
west Right, and I've always saidthat it's also the, the
peasants of europe.
So my fifth generation, uh 1883, is when you know my legacy
(53:42):
came over from From uh frislin,the netherlands.
Sure, they didn't leave akiller business.
No, exactly, they didn't leavebecause they had lots of options
there, yeah, and that type ofmentality of scarcity Travelled
with them and then that type ofmentality of scarcity, kind of
peasant living on the margins,make do with what you have.
(54:05):
That got passed downgenerationally.
Yeah, it's still really strong.
Todd Churchill (54:11):
Yeah, well, todd , I need.
Colter DeVries (54:14):
I need the elevator pitch for the autobahn
certification.
Todd Churchill (54:19):
So autobahn certification is, in my opinion,
the easiest way to exploreadding value to your cattle by
using a third-partycertification.
Um, for a couple reasons.
One is that it was written byranchers for ranchers and it it
(54:39):
requires the least dumb thing.
You have to do the fewest dumbthings to to to be qualified.
Because it's not really.
It's primarily focused on birdhabitat and there's a tremendous
overlap in all the things thatyou want to do to create bird
habitat, or all the things thatyou want to do to double the
forage production on your ranch,and so there's there's
(55:01):
virtually nothing in thatprotocol that you wouldn't want
to do, even if you don't careabout bird habitat.
If you just want to double yourgrass production and your
carrying capacity, now it and it, so it.
It doesn't really matter.
You know, if you talk to allthe other, the primary benefit
is the bird habitat.
(55:21):
The secondary benefit is theadditional Forage production.
If you talk to a rancher, Ithink it's the other way around.
I'm what my primary objective isto double my grass.
If I can do that in a way thatI also end up creating bird
habitat, that's a greatserendipity.
I like birds and if I can getsome sort of of premium At some
(55:44):
point in the future For thatgreat, because I'm not actually
spending more money.
I'm not doing things that Iwouldn't otherwise do
economically in order to getthis certification.
So and I think that's differentthan all of the other ones,
certainly different thancertified organic.
It's different than 100% grassfed.
(56:05):
It's different than the gapwhere I'm.
I'm deliberately not doingthings that that I would
otherwise likely do.
Colter DeVries (56:20):
So, as the good old boy operator and uh, he'll
be mindful of your time andwe'll wrap it up here pretty
quick Todd In my mind, as thegood old boy operator, you're
asking me to change, and withchange comes Uh perceived risk.
And in my mind I'm kind ofgoing through, uh, that risk,
(56:42):
risk quadrant.
There are no knowns, unknown,knowns, known unknowns and
unknown unknowns right, and sowho?
Who bears the risk in this?
What is the risk?
And am I, am I going to becompensated for that?
Todd Churchill (57:02):
right, and it's a great question.
And because, because theottoman proto program didn't
start with a, a Marketer, itdidn't start with somebody
saying, hey, the customer willpay me a 30 premium.
Well, and that's how I startedthousand hills.
The customers want 100, grassfed, no antibiotics, no hormones
(57:26):
, all right, um, what?
What do I have to do to induceuh rancher and Uh to to retain
ownership of those calves?
Keep them around, feed them,don't feed them any grain and
ship them to me when the 1300pounds?
And uh, what am I going to haveto pay to induce that person to
(57:46):
do that?
Because that's not, that's notreally in their best interest
economically.
So the conversation is alwayscentered around the premium has
to be big enough to justify my,my lost opportunity cost or or
my additional expenses.
The ottoman's back, ottoman'sjust the other way around.
(58:07):
There's nothing that ottoman isasking you to do that is going
to require you to spend moremoney.
Um, in fact, all all ottoman isasking you to do is to change
your mindset about a number ofthings.
Um, as an example, when you mowa hayfield, don't mow the
headlands first and work yourway in, because then you trap
all the birds and kill them.
(58:27):
You can start in the middle andwork your way out.
That all the birds get flushedout to the edges.
Never thought of that, but itit makes perfect sense and it
doesn't actually cost meanything.
It's an.
Colter DeVries (58:40):
It's a minor irritation the first couple
times I do it, and Then it'sjust becomes natural um yeah, I
don't want a virtue signal anyhere, but I I tried not to chop
up as many birds and baby deeras I could when I was mowing.
Yeah, of course as I waslistening to kick the hay habit
by right by jim garish, pissedoff about what I was doing,
(59:02):
right exactly that.
Todd Churchill (59:05):
That is exactly right.
So, um, I guess, final plug.
You know I obviously I'm arancher philosopher and we've
mostly talked about myphilosophies about ranching, but
, um, what I love to do is helpmy clients develop the
accounting systems that thatgive us data to support these
(59:27):
philosophical conversations, andwe use figured figures a great
tool to do that we.
If you don't want to do any ofthe accounting, you can
outsource all of it to us.
I'm actually going to be out in, uh, livingston February 20th
and 21st teaching at aFundamental you know, financial
fundamentals for ranching schoolthat wse is putting on.
(59:48):
They haven't really announcedit yet, but Hold the date on
your calendar for that.
That's going to be really fun,um, and we're going to dig into
all this stuff then over thosetwo days.
Colter DeVries (01:00:01):
Well, I will put it in the show notes.
I think we'll also link it toyour website, but uh, so it
makes it to the Transcriber andshow notes to this how can
people get it?
Get in touch with you, reachout to you, learn more?
What's your contact info?
Where to go.
Todd Churchill (01:00:18):
Next contact info is todd to do d Dot
Churchill ch.
You are ch ILL at CLA connectcom, if you just.
You can find me on linkedin atTodd Churchill.
You can google me, toddChurchill, thousand hills, and
find all kinds of videos and allkinds of stuff I've done
(01:00:39):
speaking in the past.
I'm easy to find.
I'm easy to find.
Google knows everything aboutme.
Colter DeVries (01:00:45):
Well, thanks for coming on and I I appreciate
your time and, if there'sanything I can help you with in
the future, be a resource.
I'd like to repay theopportunity and I want to.
Todd Churchill (01:00:55):
I want to talk to you more about this
indication approach that you're,that you're working on for
ranch ownership, because I Workwith a lot of people that are
new to ranch ownership.
They want to own a ranch,they're going to buy one, and
but they don't know what they'redoing and and I think there's
tremendous opportunities tobring a little more
thoughtfulness to that whole,that whole piece of this.
Colter DeVries (01:01:17):
I'm.
I was actually uh gonna stopthe recording, but and tell you
I'd like to send you the, theppm.
Todd Churchill (01:01:26):
Yeah, great.
Colter DeVries (01:01:28):
We'd love to take a look at it.
Get your thoughts on the draft.
Todd Churchill (01:01:32):
Yep Sounds good.
Colter DeVries (01:01:34):
Thanks, todd, we'll be in touch on that.
Todd Churchill (01:01:36):
All right.
Colter DeVries (01:01:37):
Have a good weekend.
Great, great visiting, thankyou for tuning into the ranch
investor podcast.
We at ranch investor are veryinterested in hearing your
thoughts, your opinion, yourwants, desires, hopes and dreams
.
Everything on ranchsyndications, ranch investment,
ranch real estate syndicationsand dpp's direct participation
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