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Published by the

KING RANCH® INSTITUTE FOR RANCH MANAGEMENT

Texas A&M University-Kingsville700 University Blvd., MSC 137

Kingsville, TX 78363361-593-5401

361-593-5404 fax krirm@tamuk.edu

http://krirm.tamuk.edu

Clay P. Mathis, Ph.D., Robert J. Kleberg, Jr. & Helen C. Kleberg

Endowed DirectorAshley Patterson, Editor

MANAGEMENT COUNCIL

Chair: James H. Clement, Jr., King Ranch, Inc.

Caroline Alexander Forgason, Robert J. Kleberg, Jr. & Helen C.

Kleberg FoundationGus T. Canales, A.T. Canales Ranches

Dave DeLaney, King Ranch, Inc.Bob McCan, McFaddin Enterprises

Erik Jacobsen, AgReserves, Inc.Neal Wilkins, Ph.D., East Foundation

Fred Bryant, Ph.D., Caesar Kleberg Wildlife Research Institute

Shad Nelson, Ph.D., Texas A&M University-Kingsville

Wagon Tracks “Associate Instructors: Integral Members of theKRIRM Team” By Dr. Clay Mathis

Willing to Adapt and ChangeIn Wyoming, father-son pair Michael and Mark McCarty believe an open-mind can be a rancher’s greatest assetBy Kindra Gordon

Callaghan CommitmentNear Laredo, Texas, a focus on stewardship remains integral to the historic Callaghan RanchBy Kindra Gordon

Excellence in Ag Leadership Project SummaryWhy is it so di�cult to increase the U.S. share of the global beef market?

Cover Art “Always By My Side”By: Mark Persyn, Mark Persyn Fine Art www.markpersyn.com

FEATURES

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“Associate Instructors: Integral Members of the KRIRM Team”

From the Director, Dr. Clay Mathis

is a veterinarian for the Professional Rodeo Cowboys Association (PRCA), has been head of Veterinary Services the San Antonio Livestock Show and Rodeo for the last 20 years, and was a finalist for the 2016 PRCA Veterinarian of the Year. In addition, he is the equine veterinarian for King Ranch and has served on the King Ranch Board of Directors.

Dr. Espy has a solid resume of experiences and service to the veterinary profession and equine industry. However, it is Dr. Espy’s ability to relay that experience to others that may be his greatest gift. Dr. Espy is a gifted teacher with a practical approach. He is highly respected by in the equine industry and is a true asset to KRIRM.

Stan Bevers – Ranch Economist and KRIRM Associate InstructorStan Bevers owns and manages Broken B Cattle along with his wife and other family members. He also serves as a ranch management consultant and speaker across the country on topics ranging from ranch analysis and management to cattle and grain marketing. He received his B.S. in Agricultural Education in 1982 from Cameron University in Lawton, Oklahoma, and his M.S. in Agricultural Economics from Texas A&M University. After receiving his master’s degree in 1989, he served as an extension economist with the Texas A&M AgriLife Extension Service headquartered in Vernon, Texas. After a tenure of 27 years, Mr. Bevers retired as a professor and extension economist.

Upon starting his extension career in the Texas Rolling

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The King Ranch® Institute for Ranch Management (KRIRM) educational model has always centered on experiential learning. As a result, our ranch management graduate students participate in many learning opportunities outside of the classroom setting. Students complete workshops and practicums with instructors that focus on multiple subjects critical to successful ranch management. The instructors for these courses are leading experts in their respective fields and create an unmatched learning environment for our students. Dr. Ben Espy and Mr. Stan Bevers have been working with and teaching KRIRM graduate students for several years, providing the insights and teaching context that only experienced experts can deliver. Each of these men contribute irreplaceable value through mentoring KRIRM graduate students. You can learn more about our associate instructors on our webpage, but in this newsletter I will highlight their expertise value as an integral part of the KRIRM Team.

Dr. Benjamin Espy – Equine Veterinarian and KRIRM Associate InstructorDr. Benjamin Espy received a biology degree from Duke University in 1991, and DVM from Texas A&M University in 1996. He is a board certified specialist in equine reproduction, infertility, and neonatology. Dr. Espy currently has a thriving equine practice based out of San Antonio, Texas, but has also practiced in Lexington, Kentucky, from 1999-2006 at Hagyard Equine Medical Institute, a 42-doctor equine referral practice. He is also past chairman of the American Association of Equine Practitioners (AAEP) Owner Education Committee, served on the Board of Directors for AAEP and the American College of Theriogenology. Dr. Espy

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By Kindra Gordon

In Wyoming, father-son pair Michael and Mark McCarty believe an open-mind can be a rancher’s greatest asset

maintain a law firm in Cody.Of the lease arrangement, Mark says, “I grew up in

a purebred operation, but always wanted to be a large commercial producer. �e Two Dot Ranch was my opportunity to pursue that.”

Keeping the Family RanchMeanwhile, the McCarty’s also maintained their family ranch, but in 2000, change was a foot once again. �ey sold that ranch, and purchased a turn-key ranch for their family operation located 10 miles south of Cody. �e ranch was purchased from Desert Ranches under the tutelage of Burke Teichert.

It was operated with May-June calving, something the McCarty’s were unfamiliar with. But Mark reports that as they took on the operation, their eyes were opened. �ey began to realize March calving and feeding hay as they had been doing could be made more efficient by switching to summer calving. As a result, Mark says, “We changed nothing at that place and changed everything at the Two Dot.”

He calls that one of their best decisions. Today, that family-owned ranch purchased from Deseret is home to 500 mother cows. Meanwhile, the Two Dot Ranch north of Cody where Mark, his wife Emmanuelle and two young sons Sebastian (12) and Matthieu (8) live, is stocked with 1,700 mother cows. All cows calve in May and June, with the exception of replacement heifers which are calved in March at the Two Dot ranch facilities.

Both cowherds are comprised of commercial Angus genetics and Mark says, “We try to operate as much as possible for year-round grazing.”

When asked what his ranch will look like 5 to 10 years from now, Mark McCarty doesn’t have a concrete answer. It’s not that the Cody, Wyoming,

rancher hasn’t thought about it, it’s just that he doesn’t want to be pigeon-holed to a certain plan.

McCarty believes staying flexible within the ranching realm is key. He says, “You’ve got to appreciate what grandpa did, but you’ve also got to be willing to adapt and change all the time.”

�at mindset has been prominent throughout McCarty’s life. He grew up on a purebred Gelbvieh operation near Cody, while his dad Michael (“Mick”) blended ranching with a law career. Mark’s grandfather (Michael’s father) was also a rancher and lawyer. Mark attended Colorado State University, graduating in 1994 and turned down a position with ConAgra in order to pursue a ranching opportunity.

He tells, “We decided our original family operation wasn’t big enough, so my dad and I proposed a lease/management agreement on the Two Dot Ranch 16 miles north of Cody.” �e agreement went through in 1996 giving the father-son pair the reins to an operation encompassing 180,000 acres, 72,300 of which is deeded with the remaining balance state and BLM lands. �e original ranch owners were from Switzerland, but in 2000 the ranch sold to Fayez Sarofim from Texas, who still owns the ranch today.

Mark and his father created a partnership entity they call McCarty Ranching, giving Mark the day-to-day management responsibilities while Mick continued to practice law and assisted initially with capital and being a knowledge resource. Today, the duo continues to operate their ranching enterprise together while Mick and his daughter Mary Helen Reed also

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Creech’s second project involved an analysis for the family-owned ranch. Mark explains that because of the many elk that intermingle with the herd, they have had two quarantines due to Brucellosis. �e quarantines limit the ability to move and market cattle and can take up to a year before the herd is deemed clean.

McCarty wanted to determine if they ever faced another quarantine if it would be more economical to liquidate the herd and transition to yearlings, or if restocking with broken-mouth bred cows every year and getting a calf and marketing the cow for slaughter would be a better choice. Creech determined that the broken-mouth bred cow scenario would be more economically viable, so McCarty says should a quarantine happen to them again, he’s ready to test the concept.

Looking ahead, McCarty says he’s got more ideas churning because he’s learned that to survive and thrive, adapting to change is the name of the game.

�ey do have irrigated hayland, and put up 2,000 ton of hay annually. Mark says in a typical year they’ll usually only feed a half ton of hay per animal through the winter.

�rough their McCarty Ranching enterprise, four employees are on the payroll to assist with the Two Dot operation, while one full-time employee assists with the McCarty family-owned ranch. Mark notes that during busier times, they’ll hire additional day help.

Another strategy that has been beneficial has been retaining cull cows through the winter on sugarbeet crop aftermath leased from area farmers. Mark says those cows gain as much as 3 lbs. per day and are then marketed in late February or early March when the cull cow market spikes, generating a good financial return.

Analyzing the FutureAlways one to analyze and look ahead, hosting a student intern from the King Ranch® Institute for Ranch Management during the summer of 2016 provided Mark the opportunity to gain answers to two big questions. Lee Creech interned with McCarty Ranching and analyzed two projects– both of which produced surprising results.

�e first question Creech analyzed was whether or not the Two Dot’s current haying operation was profitable. Before having the answer, Mark decided they would discontinue haying, sell the equipment, turn the irrigated land into pasture and purchase hay supplies. But Creech’s analysis indicated raising hay on the ranch was cheaper than purchasing it. As a result, McCarty says they have stayed the course, and have a renewed focus on increasing their forage production for hay supplies.

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Making a switch to May and June calving for the mature cowherd is one of the best

changes Mark McCarty says he’s ever made to his ranch management.

Mark McCarty and his dad Mick were able to grow their

ranching efforts in 1996 when they acquired a lease/

management agreement on the 180,000 acre Two Dot Ranch

16 miles north of Cody.

Founded in the late 1850’s in southern Texas, the Callaghan Ranch, originally known as Callaghan Land and Pastoral Company, was initially a sheep operation

named for its founder Confederate veteran Captain Charles Callaghan. Now, more than 150 years later, the Callaghan Ranch, located about 30 minutes north of Laredo, endures and has earned a reputation as one of the largest, historical ranches in Texas.

�e working ranch’s history includes once grazing 100,000 sheep and 20,000 Hereford cattle on more than 250,000 acres. Today, the ranch enterprises include cattle, horses, oil and gas, and wildlife and package hunting. In fact, the ranch may be best known for its hunting enterprise, featuring world renowned white-tailed deer hunting and outstanding bobwhite and blue quail populations.

Also integral to the Callaghan Ranch history is the Finley family. Joe B. Finley, Sr. and his wife Florence came to the ranch around 1920, with him serving as general manager until he purchased the ranch in the late 1940s. �eir son Joe B. Finley, Jr., eventually took the reins, and he and his wife Mary raised five daughters on the operation.

In addition to his ranching passion, Finley, a World War II

veteran stationed in the Pacific, was extremely civic-minded. He is credited with contributing to advancements in animal health as chairman for the Texas Animal Health Commission and president of the United States Animal Health Commission. He was also instrumental in the founding of the United Independent School District (UISD) in Laredo, Texas, and served as a trustee for 32 years. A Laredo elementary school now bears his name.

In 2011, Finley passed away, and Mary is now charged with ensuring the ranch’s legacy for future generations.

Strategic PlanningIn 2014, King Ranch® Institute for Ranch Management (KRIRM) graduate Darrell White, a native of Waco, Texas, was tapped to become general manager of the 90,000-acre family operation. Working with Mary and her family, White has aimed to analyze every angle of the operation to identify opportunities to make improvements in natural resource management and also meet business objectives.

White notes that maintaining the historical integrity of the ranch for the next generation is important to the Finley family, but so too is ensuring that the ranch

By Kindra Gordon

Near Laredo, Texas, a focus on stewardship remains integral to the historic Callaghan Ranch.

Cattle being gathered on the Callaghan Ranch, which encompasses 90,000-acres located north of Laredo, TX.

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operates profitably. He expresses admiration for the family’s commitment to keeping the ranch together for the future.

White said that the ranch’s focus is being placed on developing a strategic plan for today and 10 years from now. Via collaborations with family and employees, he says the goal is to create autonomy and flexibility for ranch operations and ultimately develop a ranch team capable of positioning the ranch for continued success in the future.

White credits his training at the KRIRM with honing his skills for his current ranch role. He says, “When you graduate from the Institute, you have the foundation to think your way critically through many challenges. Systems thinking is also emphasized, so you learn to think that way—how one decision might affect another component in the system.”

White, whose undergraduate degree is in wildlife sciences, also appreciates the business skills he gained while at KRIRM. He says, “Most people are trained in range or animal or wildlife science, but you can’t think in a box. You must manage all of the resources sustainably and meet the business objectives as well.”

Future PlansWhite says there are several aspects that make the ranch unique as well as challenging. As one example, the vast majority of the ranch is brush, which poses challenges in balancing management goals to fit cattle, horses and wildlife. A management plan for brush control is being implemented. A team of KRIRM students analyzed the cost and return of brush control on the ranch, and based on their recommendations, the ranch has implemented those efforts, while also keeping wildlife habitat top-of-mind.

White says another special aspect of the ranch is that through the generations, many of the ranch employees have commuted from Muzquiz, Mexico, an area four hours west with similar terrain, cattle and horses. �ese workers have legal documentation and most only speak Spanish. He says the ranch will strive to continue to keep that heritage intact.

As the ranch plans for the future, White anticipates

the wildlife enterprise will continue much as it has in the past. �e ranch hosts 700-plus guests annually who pursue white-tailed deer, blue quail, bobwhite quail, hogs, javelina, varmints and fishing. He notes that some hunters have enjoyed hunting on the Callaghan for more than 30 years and are now bringing their children.

Regarding the cow-calf operation, White says currently the ranch is aggressively growing the cow herd after severe herd reductions due to drought. �e different herds are comprised of Hereford, Santa Gertrudis, Brahman and Braford genetics, with several bloodlines that go back several generations on the ranch. White notes that they will always maintain some of the

historical Hereford genetics, but going forward they are looking to also add hybrid vigor.

He believes adding some Bos indicus bloodlines may help add longevity and doability to their herd, which must survive in the brush and in extreme heat. “We’re asking our cows to eat more brush, prickly pear and mesquite than most,” White says. Eventually, White says that may lead to development of the Callaghan Composite, a beef animal that does well on brush and the short native grasses and has the ability to travel a long way to feed and water. He anticipates the ranch will move toward a herd of Red Mott Face females, and then use Charolais or Angus sires to produce a terminal cross.

White notes that in just a few short years, the ranch has made major strides in better positioning the ranch for the future, but he adds, “In ranching, there’s always more to do.”

�at said, he credits the ranch owners for being progressive and pushing for innovation, new technology and efficiency. White also credits his wife Laura and young son Reece for being on this journey of change with him.

All total, it’s moving the ranch towards its ultimate goal, which

is a commitment to providing future generations of Finley’s the heritage of their past combined with opportunities to continue to steward the resource and play integral roles in the ranching industry.

KRIRM graduate Darrell White became manager of the Callaghan Ranch in 2014. His family includes

wife Laura and son Reece.

A hunter is pictured with one of the famed white-tailed deer found on the Callaghan Ranch. �e ranch is

well-known for its hunting enterprise, featuring world renowned white-tailed deer hunting and outstanding

bobwhite and blue quail populations.

Summary �e U.S. beef industry continues to place emphasis on exports to stabilize prices and increase producer profitability. A global economy provides vast opportunities for U.S. beef which offers a premier, grain-fed protein unlike other beef on the market. However, the process of getting U.S. beef access to foreign consumers has proven difficult due to geopolitics, non-science based trade barriers, lack of administration support, mixed producer buy-in and more. �is systematic approach looks at the conflict to identify specific leverage points where the greatest progress could be made.

IntroductionAs the global population climbs, the world’s middle class expands and in turn, the global beef market grows. Ultimately, more consumers world-wide can afford to purchase animal proteins. �is increased demand creates opportunity for all protein industries. �erefore, increasing the global market share for U.S. beef is a top priority.

Increasing the U.S. share of the global beef market has been a long-term issue, with various levels of success throughout the years. �ere are numerous variables that come into play to answer why it is so challenging to increase exports and ultimately increase the U.S. share of global beef market. In 2016, exports added approximately $294 per head in value according to CattleFax. Yet, conflict remains over if the industry should focus efforts domestically or target international markets. �e U.S. beef producers who oppose trade distract from pro-trade efforts in Washington, D.C. and

elected officials hear contradictory trade positions from within the agriculture industry.

Other variables which undermine pro-trade progress are geopolitical responses to limit the U.S. economy and/or U.S. beef industry and activity of adversarial non-governmental organizations. Also, the U.S. is in direct competition with other beef exporters such as India, Brazil and Australia, but does not have a level playing field to access foreign consumers.

Structure of the Problem (Figure 1)�e entire system depends on the “Weather Conditions”, “Value of Dollar” and “Animal Disease Outbreak”, all of which are beyond industry control. Current political climate and administration support play critical roles in this system; leaving progress of the beef industry subject to the agenda of elected officials.

Figure 1 illustrates a systems model of the focusing question, “Why is it so difficult to increase the U.S. share of the global beef market?” On the left side of the map, the cyclical nature of the cattle market is reflected with a balancing loop. “Total Value of U.S. Exported Beef” increases the “Incentive to Produce Beef”. In turn, cattlemen respond to increased prices by increasing “U.S. Herd Size”. �ere is a delay to this increase that eventually causes a decline in “Market Price for Producers”. �en excess “Lbs. on Market” increases the “U.S. Beef Market Share”. �e volatile nature of the cattle market makes it difficult for producers to quantify the benefit their operation receives from international trade.

In partnership with the National Cattlemen’s Beef Association, we initiated the KRIRM Excellence in Ag Leadership program in 2014 to bolster the development of high potential leaders in the ranching industry. Major components of

the program have included individualized leadership coaching, and training in human resources management, strategic planning, and systems thinking. The program also requires that leadership participants work as a team in an e�ort

to employ their enhanced leadership skills. The annual John B. Armstrong Lectureship on Systems Thinking is held in August each year, and teaches techniques to gain a deeper understanding of persistent challenges we face, as well as tools for identifying leverage points for overcoming those challenges. During the fall and winter, participant teams in

the current leadership cohort were presented with three challenging questions, one of which was: Why is it so di�cult to increase the U.S. share of the global beef market? The following report shows how the team approached the problem,

identi�ed the cause and a�ect relationships that perpetuated the challenge, and identi�ed leverage for overcoming the di�culty of increasing global beef market share. This is simply an example of how a Systems Thinking approach can be

employed to overcome di�culties at any level, and why it is an integral component of successful ranch management.

Project Team: Chris Kirby, Candace Weeda, Clayton Huseman, Keith Nantz, and Laurie JohnsonWHY IS IT SO DIFFICULT TO INCREASE THE U.S. SHARE OF THE GLOBAL BEEF MARKET?

2016-2018 Excellence in Ag Leadership Program participants

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Market complexity is partially the reason why many American cattle producers are anti-trade.

On the right side of the map, the limiting factors are diagrammed. When “U.S. Beef Market Share” increases, “Geopolitical Resistance to U.S. Beef” increases as well. A political resistance ripple increases multiple factors, including “Tariffs”, “Non-Science Based Trade Barriers” and “Need for Traceability”. Age restrictions in China for example, are a non-science based trade barrier. All of these variables contribute to a total increase in “Cost/Length of Trade Negotiations” which limits the opportunity for the U.S. beef industry to have “Access to Foreign Consumers”. Ultimately, access determines “Total Value of U.S. Exported Beef” and whether the “U.S. Beef Market Share” is able to grow. Access to foreign consumers also allows “Desire for Product Differentiation” to increase which then expands the “Grain Fed Beef Market Size” and drives up the “Total Value of U.S. Exported Beef”. �e right loop represents some of the greatest challenges in today’s beef discussion, but it is important to recognize this is also where the industry has the most room to grow market share.

Suggested InterventionsRecognizing the entire system depends on factors outside of industry control, two high leverage points within industry control were identified.1. Implement traceability: Implement a traceability

program for U.S. producers. Other beef exporters, such

as Australia, have an advantage today because the U.S beef industry is unable to provide a traceable supply. Traceability is a low hanging fruit that would give U.S. beef producers access to China -- viewed as the international market with greatest potential.

2. Increase access to foreign consumers: �e industry must allocate more financial resources to increase trade lobbying efforts to drive international access, foreign market development and product differentiation. �e world’s growing middle class is a significant opportunity for U.S. cattlemen to increase profitability. U.S. beef needs more access to foreign consumers, without being penalized with unfair trade policy.

ImplicationsEach of these suggested interventions increases the global population’s beef consumption. A traceability system is the critical intervention to this system and has potential to generate immediate return. Traceability will give the U.S. additional leverage when negotiating trade agreements for improved market access. It is important to note foreign access includes receiving a premium for U.S. grain-fed beef, which increases total value of the product. Today’s world is a global marketplace and U.S. beef must reach the tables of more people to maintain a viable industry.

WHY IS IT SO DIFFICULT TO INCREASE THE U.S. SHARE OF THE GLOBAL BEEF MARKET?Project team from left to right: Keith Nantz, Laurie

Johnson, Clayton Huseman, Candace Weeda, and Chris Kirby.

Figure 1. A systems diagram outlining the structure of the challenges and highlighting leverage points to increase U.S. share of the global beef market.

�e Excellence in Ag Leadership Program was initiated in 2014 to help identify and train high

potential leaders in the beef industry.

Upcoming Events

Commit to Lifelong Learning

Upcoming Events

Visit krirm.tamuk.edu, or follow us on Facebook, Twitter, and Instagram to learn more about our upcoming events and program.

June 9-10, 2017Human Resource Management for RanchersLectureship: Ardmore, Oklahoma

July 31-August 3, 2017Gus T. Canales Lectureship on Prescribed Burning

August 14-17, 2017John B. Armstrong Lecutreship on Systems �inking

Photo By Kelli Brown

September 22-23, 2017Managerial Accounting for Ranchers

Plains in 1989, Bevers became part of a national effort to standardize how beef cow-calf operations were evaluated from both a production and financial standpoint. This effort resulted in what’s known today as Beef Cow-Calf Standardized Performance Analysis (SPA). He has personally conducted or been involved in the SPA analysis of more than 350 herds located across the ranching states. In a more recent effort to further the SPA foundation, he developed Key Performance Indicators for cow-calf operations to measure their efficiency. Along with his extension career, he served as a professional consultant on many ranches from New Mexico to Montana. Stan Bevers is the leading expert on cow-calf ranch analyses in the United States.

In 2012 Stan was invited to work with KRIRM graduate students to complement the training they were already receiving in accounting and ranch business management. The first two-day workshop was so valuable to KRRIM students that “Accounting with Stan” became an annual component of the KRIRM curriculum. Because Mr. Bevers has worked with hundreds of operations in the area of ranch accounting and performance analysis, he has seen the common mistakes made surrounding ranch business management. Stan is highly-skilled and teaches KRIRM students the right way to set up a managerial accounting system to not only create the appropriate financial statements, but place equal importance to utilizing the accounting system output to measure performance Key Performance Indicators and make sound business decisions.

Stan Bevers and Ben Espy are valued members of the KRIRM Team. Our students receive a better rounded education because of the knowledge and experience that these associate instructors possess and so passionately teach. We are grateful to Ben Espy and Stan Bevers for their role in training our students.

Dr. Benjamin Espy Stan Bevers

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700 University Blvd, MSC 137 Kingsville, Texas 78363

Save the Date!John B. Armstrong Lectureship on Systems ThinkingAugust 14-17, 2017 || Kingsville, Texas

Systems Thinking is a language for learning and action that helps us understand more deeply how organizations and complex systems really function. Understanding the interconnectedness of all aspects of a business operation can be critical to successful management. Ranching is a complex business that requires managers to simultaneously evaluate and consider the consequences of decisions on the ranching operation as a whole. This lectureship teaches principles, processes and tools that empower natural resource managers to better understand and communicate interrelationships in dynamic natural systems.

Date: August 14-17, 2017Location: Kingsville, Texas Instructor: Mike Goodman, Innovation Associates Organizational LearningFee: $500

Learn more and register online at krirm.tamuk.edu/lectureships/systemsthinking