8 Key Points To Investigate When Buying A Cattle Ranch

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Swan Land Company
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One of the most interesting parts of being a ranch broker is that no two ranches are alike.  However, this creates complexity when it comes to understanding the operations of each property.  Our team of seasoned ranch brokers can help sift through the information, or misinformation, about each property to help buyers find and understand the ranch that fits their individual needs.

A few key points to understand when buying a cattle ranch are the type of operation and suitability for the property, carrying capacity, soil condition and forage health, management of the property, water rights, stock water, irrigation water, and the quality of improvements. 

Type of Operation

As each ranch is unique in its attributes, it is also unique in its location and climate.  Each micro-climate zone in the Rocky Mountains will be suitable for a slightly different type of operation to maximize the efficiencies of the land and the livestock.  Some ranches may comfortably accommodate cattle year round, while other high-elevation ranches may be more suitable for summer-grazing operations.  Irrigation and winter-feed production will often be the limiting factor to determining the type of operation that best suits a particular ranch.  As with any business, the scale of operation has a great influence on economic feasibility.  Because margins are often tight on working cattle ranches, it is important to evaluate several operational scenarios on a ranch property to see if the ranch has enough size and scale to make a particular type of operation preferable over another. 

Carrying Capacity

The first piece of quality information is to understand the carrying capacity.  Carrying capacity is measured in Animal Units (AU) and Animal Unit Months (AUM).  “By definition, the AUM is the amount of forage needed by an “animal unit” (AU) grazing for one month. The quantity of forage needed is based on the cow's metabolic weight, and the animal unit is defined as one mature 1,000 pound cow and her suckling calf. With this knowledge, the proper combination of land, time and number of animals may be chosen to ensure the sustained, long-term productivity of the pasture. The optimum number of animals on the pasture makes efficient use of the forage without waste, but still leaves enough forage to allow quick and complete recovery.”  (The Cattle Site)

It is important to obtain historical AU usage of the ranch.  This will help understand the reliability of the pasture and/or winter feed, and help identify any limitations.  One of the most common pieces of misinformation we see in this business is the over representation of the carrying capacity of a given ranch.  To combat this issue, whether it is our listing or the listing of another brokerage firm, we gather the best information available to validate a ranch’s carrying capacity.  This enables our buyers to make a decision based on sound principles. 

Soil Condition and Forage Quality

When it comes to sustainable cattle ranching, soil and plant health is one of the most important inventories to monitor and manage.  This also is important, before a ranch is purchased, to determine if an extended rest period is needed or if soil amendments are required, both of which will have an impact on short-term profitability. 

The plant diversity found on a ranch, the presence of weeds and non-native species will be an indication of past management practices and help determine if overgrazing and poor management practices are currently or have historically been employed.

Our ability to spot noxious weeds and undesirable grass species helps us inform our buyers of potential issues.

Ranch Management

It is important to consider who will operate the ranch. Having a good manager in place who is able to carry the vision of a new owner forward is often the best way to ensure continuity of operations.  If the seller is the operator, they may be willing to stay on as a manager for a period of time.  If not, a new manager will be needed.  It is essential to have a trust-worthy, hard-working and knowledgeable ranch manager.  We have direct contact with many skilled ranch managers who are looking for long-term ranch management opportunities.  Matching the right manager with the right property and owner helps ensure a smooth transition to new ownership of the ranch.

Water Rights    

Water rights can be complicated and each state has varying water right laws.  We are able to gather the necessary information to help our buyers understand the quality of the water rights.  Additionally, our experience with seasoned water right attorneys helps our clients when further review is required. 

Stock Water

It is important to analyze the quality of the available stock water and the distribution of watering locations.  This would include water sourced from wells, stock water reservoirs, and streams.  It is not uncommon to discover that water is toxic to cattle in wells, stock-water reservoirs and other slough-based waterways during certain periods of the year.  This knowledge helps buyers understand whether or not it is feasible to provide an alternative water source or other ways to manage around the situation to protect the health of the livestock.  Additional improvements needed to these water systems will affect future profitability and injections of capital that buyers need to be aware of. 

Irrigation Water             

Irrigation water is often an important component to a ranch.  The quality of the irrigation water rights will affect the feasibility of growing certain crops.  Whether the water is sourced from annual runoff through streams, or pumped from wells in the ground, the flow and volumetric-quantity limitations is important to understand.  Also, essential to understand is the priority in which water rights are exercisable with relation to the particular drainage/aquifer.  This knowledge will help determine how long the water will likely be available during the irrigation season to grow winter feed and other income producing crops. 

Improvements               

Like most businesses, a cattle operation requires some improvements to facilitate the handling of livestock and storage of grain and feedstocks.  Well-designed and efficient cattle-handling facilities are an essential component when it comes to running a cattle operation.  Well-constructed corrals and working facilities in the proper location will help to maximize the productivity of your operation.   In addition to structures and working facilities, fences and roads should also be surveyed.  Well-laid out pastures with good fencing are essential for rotation of cattle and maintaining consistent grazing conditions within each pasture, as well as keeping cattle separated from irrigated crops.  Roadways throughout the ranch that are in good condition allow for easy inspection of the ranch and herd, and are extremely beneficial when transportation of cattle is necessary. 

These are just a few areas that should be evaluated before buying a cattle ranch.  Other considerations include easements affecting the property.  Are there state, private, USFS or BLM leases available to increase the grazing capacity?  Is the ranch in an area where brucellosis is a concern?  What is the access to shipping and sale facilities?  

If you are interested in purchasing a cattle ranch, whether you are located in Montana, Wyoming, Idaho, Utah, Nebraska or New Mexico, the brokers at Swan Land Company are extremely knowledgeable in assisting in the purchasing and sale of cattle ranches.  Contact us or give us a call at 866.999.7342.