Ranch Investor Podcast

host Colter DeVries and industry pioneer Todd Churchill

Episode 14 | Building Wealth Across Generations: Mastering Ranch Expenses for Lasting Investments


Join us in Episode 89 of “Ranching Reimagined” 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.

Todd Churchill:0:00

Ruminant animals are the foundation of human civilization, and so, for thousands and thousands of years, success and security was driven by one thing how much grass.

Colter DeVries:0:12

Welcome to the Ranch Investor podcast. I am your three year host, Colter DeVries, accredited land consultant with the Realtor Land Institute and accredited farm manager with ASFMRA. I’m excited to bring you the experts on a weekly basis to hear what’s trending, what’s happening, what’s going on in Montana, Wyoming, the West and ranches across the United States.


The Ranch Investor podcast is the most downloaded and informative industry specific content that intrigues while entertains.

Colter DeVries:0:47

Let’s just get started with who is Todd Churchill? What’s your background, what’s the starting story here?

Todd Churchill:0:55

Todd yeah, that could take an hour, but we’ll do the short version. I grew up on a farm with a 500-ed feed lot in. New. Moly, illinois. My grandfather bought the farm but he was an attorney and didn’t really spend much time there. And my dad started spending his summers out there when he was I don’t know nine or 10. And the next door neighbor to the farm was an old cowboy from Colorado, bought my dad a pony and a saddle and got him a job at the sale barn running his pony up and down the alleys moving cows. And my dad fell in love with horses, started showing and training cutting horses when he was a teenager. He took over the farm when he was 16, when it was, I think, 80 acres, and has been involved in some fashion in the cattle and farming business ever since. He actually went to law school as well and has a law practice in Moline that my younger brother went to law school and joined him. So I grew up in a very ag-focused, entrepreneurial family with horses, cattle, crops. But to me agriculture was driving a tractor straight, dealing with cattle in the feed lot and playing with bats and toxic chemicals. So I went to college in Minnesota and went into public accounting and really didn’t expect to be involved in agriculture. There wasn’t the way we did ag at the time. It wasn’t particularly compelling for me, I didn’t feel drawn to it. So I went to school at St Olaf College in Northfield, minnesota, went into public accounting and then, after a couple of years there, left in 97 and started one of the first part-time CFO practices in Minneapolis. And because I was a farm kid, I ended up with a portfolio of food and ag clients. Didn’t really plan on that, it was just what I knew, and so one of those in the late 90s was a startup meat processor called Lawrence Meats Became somewhat famous or notorious because Michael Pollan devoted a whole chapter in the Omnivorous Dilemma book to the way that this processing plant was designed. Mike and Rob Lawrence they had bought out their parents little locker plant, like every small town in America had until maybe 10 or 15 years ago, that processed a couple beef or pigs a day, had a deli catering business. But they had much bigger visions. They really believed that there was going to be tremendous demand for very high quality fresh meat processing, for specialty meats, grass-fed beef, bison, pastured pork, organic meats, and nobody had really built a plant that was designed, that was big enough to create a product that looked every bit as good on a retail shelf as anything coming out of the big players, but it was small enough to be flexible and responsive to the needs of what we call branded meat companies. And so I was kind of a consulting CFO there. We got that first 10,000 square foot plant, built in 2000. And because I learned the niche meat business well, I had the opportunity to start one of the first grass-fed beef companies in the US, which was called Thousand Hills Cattle Company. That got launched in 2003 because I had a good friend who was an integrative physician in St Paul and he had a large concierge medical practice and all of his clients. He was literally prescribing grass-fed beef to all of his clients. The problem was the quality was terrible. It was frozen. They had to go buy it from some farm somewhere. When you buy a whole animal, you never really know what you’re getting. And he said if you can figure out how to do a very high quality grass-fed beef that was fresh, I can get you into the premium grocery stores in the Twin Cities. And we launched Thousand Hills in 2003. And it took off fast. We kind of caught the wave of popularity with grass-fed beef, but our focus was not convincing you that you should eat this beef because it’s good for you. I only had to do that the first time. After that I wanted to create a product. That was such a great eating experience that it didn’t matter if it was good for you or healthy. This was the steak, this was the 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 that business pretty well. By 2015, we were killing about 6,000 head a year. Sold it to my business partner who’s still running it, still doing a great job with it. Has kept that going. But by 2015, when I sold, the Australians had figured out that they’d been selling grass-fed beef for decades to the US, really cheap. Because we import lean meat to blend with our fat trim coming out of feedlots and that’s how we make our 80% lean or 85% lean burger that Americans love. We actually can’t produce that product. People get mad because we’re importing beef, but what most people don’t understand is that our feedlots cannot produce a hamburger. It’s too fatty. The grind coming off of a feedlot steer is going to be maybe 50% to 60% lean. Well, you can’t make a burger out of that. It’s too much fat. So we have to buy some lean meat from South America Australia, new Zealand to blend with that fat trim to make the perfect burger, which is going to be 80% to 85% lean. Well, so the Australians have been supplying the US market that way for years. They just weren’t getting credit for the fact that it was grass-fed. Because they have a national animal ID system, it was pretty straightforward for them to get all of their cattle certified grass-fed and, in many cases, certified organic, and by 2015, my customers could buy Australian 100% grass-fed ground beef, delivered to the West Coast at less than half of what I was selling mindful. Now, they couldn’t get steaks because the steaks weren’t very good, but the grind was pretty much indistinguishable, and so I decided it was time to sell and to do something a little different. Parallel to that, in the mid-90s, as a family we decided to stop investing in farmland in Illinois. We paid, I think, $3,300 an acre for some land in 1993 and thought that was really expensive in hindsight. Prices just kept on climbing. But we decided to start buying ranch land in Oklahoma and move our cutting horse business and our cattle business to Oklahoma, and so we’ve had a ranch and a pretty prominent cutting horse quarter horse breeding program near Wayne, oklahoma, just south of Oklahoma city about 60 miles since the mid 90s and so I come from this family background that’s very involved in traditional ranching and cutting horses and feedlot cattle and grain production and then I’ve kind of taken a spin on it and tried to provide what. I’m curious by nature and so most people in the beef industry told me in the early 2000s that it wasn’t possible to do high quality grass fed beef, that grass fed beef is always gonna be tough and gamey and lean and there’s nothing you can do about it if you don’t feed them corn.

Colter DeVries:9:15

I wanna come back to this grass fed. Let’s stay on this for a minute. But first, since this is branch investor, why Oklahoma?

Todd Churchill:9:23

Oh well, if the goal is to win the National Cutting Horse Association for Charity, 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 for productive ranch land, not necessarily scenic ranch land. So there’s a, you know, there seems to be. I don’t know exactly what it is, but once men achieve a certain amount of wealth, there’s something hardwired, that’s instinctual, that we just have to buy a ranch, we have to own 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 that I don’t think we’re even really conscious of, but it’s a powerful driver. Once people have the means to do it, they want to own in some fashion, a ranch that has cattle on it, and if you have the money, you know why not buy one? That’s also beautiful, that has some recreational value, that gives you incredible views, and those are typically gonna be in the, in the Intermountain West, and so you know, we see ranch land in those markets increasing tremendously in value. But that value has is completely decoupled from its operational productivity. Its value is driven by the fact that there will always be more people that have just recently acquired the wealth and they feel compelled, for ways that they 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 live out there. I wouldn’t say own, because the bank owns it at that point. But, to have the illusion of control and the lifestyle Correct and you know I tell clients 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 before as a part-time CFO, but my focus now is on large ranch and farms. Merge that practice in with Clifton, larson, al and we’re the eighth largest CPA firm. I’ve been there for three years and I run our outsourced accounting group. So I run the team of people that provide outsourced CFO controller and bookkeeper services for our large ag producers and do a lot of work with ranches and farms and meat processors.

Colter DeVries:12:32

Well, that’s going to be. The next topic is CFO work your CPA work, cfo work, your CPA background. You have enterprise analysis for QuickBooks, which comes up on this podcast a lot and it comes up in my conversations with owner operators and lessee operators and a lot of times. Yesterday I had three big calls about this passive syndication investment that I’m working on and talking to people about the land as its own entity, as an investment, not as operating asset. These are generational operators and you’d think I’m speaking Mandarin to them. They cannot. It doesn’t translate that the land is a separate entity and it is an investment asset, not an operating asset. It’s tough. That’s a tough conversation. It is to win people over with because it’s just so far out of their realm, because they’re like well, what about the principal? I mean, what about my principal payment and my equity? 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 that provides completely different rules for agriculture than for any other business, and so a lot of what is recommended by advisors, attorneys, cpas, farm management consultants is really designed to optimize for tax strategy, which is a good thing, but that seldom gets you a successful multi-generational result. If you truly want to have a multi-generational land investment, you have to be brutally honest with you. If you’re never going to sell it, it doesn’t matter how much the land is appreciating. Then what matters is you have to figure out how to use that land to create enough operating free cash flow that you can afford to pay your family members and other non-family members to operate it, and that is a very difficult thing to do. It’s harder in the cattle business than any other part of agriculture, because the cattle industry is the only one. Nobody who achieves any significant wealth is compelled to go own a million chickens, laying hens or chicken broilers in a barn.

Colter DeVries:15:16


Todd Churchill:15:17

Arkansas. Hollywood doesn’t make movies about farm work. Oh no, they don’t. There’s nobody who achieves wealth, goes and builds 30 saubarns. It’s just. There’s something about the pastoralist, I mean rumored. Animals are the foundation of human civilization and so, for thousands and thousands of years, success and security was driven by one thing how much grass do you have access to? This is far before. This predates any Greco-Roman concept of land ownership. How much grass, how many rumored animals can you manage? Because rumored do this amazing thing that people, pigs and poultry can’t do they turn solar energy, stored and collected in a leaf of a plant, into meat and milk, and they’re mobile. Those two things is that’s why we have human civilization. And they do it on non-arable lands. They do it on well, exactly Because, by definition, those leaves are growing in an environment where annual plants won’t grow. We’ve already turned every possible 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 energy battery. It stores extremely well, it transports well and it’s concentrated energy. Rumorants can feed us with just sunlight and water, but you have to be able to move, to follow where the grass is, because grass doesn’t grow the same place, reliably, consistently, year after year. So the moment that we adopt a personal property right mindset and we start building fences now, the success in life is not optimized by owning more cattle that you can move to wherever the grass is. Success is optimizing the production of the land that I control, and that inevitably leads us to grains instead of to rumours, because grain is always gonna provide a long term, better security and a better return. If I can grow it, and I don’t have to be able to grow it every year because grain stores so well Stores and markets very easily. That’s right. So what’s happened is that in the cattle industry, you’re always competing against people who will devote wealth they made in other ways to owning cattle, and that doesn’t happen in any other livestock sector.

Colter DeVries:18:18

That’s like the old saying, never get into a business that so many are willing 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, when everyone that owns cows, that owns ranches, will expand the cow herd if they have enough rainfall to grow enough grass to do it.

Colter DeVries:18:46

And this I mean we’re gonna get into now some technical. You have so many landowners who are thinking expansion, expansion, control of grass, as you said, so that I can grow my herd. They’re not thinking of internal expansion, though. Right, 14 cross-pins is rather than buying 14,000 new acres. How about that? Yeah, right.

Todd Churchill:19:08

We know from our work. You know I’ve been good friends with Dr Allen Williams, who started Understanding Egg a number of years ago and leads the Soil Health Academy with all of the ranchers that he’s consulted with over the last 20 years. We know that anyone that changes their grazing management to adaptive multi-paddock grazing essentially we wanna give all of our cattle only access to a small portion of our grass, graze it intensely for a short period of time and then leave it and make sure they can’t get back to that grass again until it’s fully regrown. In five years we’ve doubled the caring capacity in every ranch everywhere in the world. This works and all we’re really doing is replicating what rumored animals instinctively do if there’s no fences.

Colter DeVries:20:01

And does this play into the QuickBooks plugin that you have that was developed in New Zealand? Because it does so. My wife and I we went on a honeymoon to New Zealand and we did a hot air balloon ride over the Canterbury Plains and I’d always known that New Zealand was well ahead of the United States in grazing management, resource management for livestock, because they are an island nation and island nations are very volatile with their budgets. As a nation they’re very dependent on exports and I believe the story is that there came a day where New Zealand realized they were subsidizing their farmers too much and they could not stand to bear that cost any longer, given they are an export nation with primarily one market at China a dry powdered milk going to China, and so all these rotational intensive grazing operations are mostly dairy down there. But from the view of a hot air balloon, you just saw all the pie slices over the center pivots, every square foot of grass was optimized, every farm, every farm was clean. You didn’t see all the junk equipment, the the boneyard out back, and I think that has a big piece of plays into subsidies. If you’re not optimizing and maximizing your resources, you’ll keep a boneyard of junk and we all have those around farms and ranches because in some way the ability to keep that junk is subsidized by the United States taxpayers.

Todd Churchill:21:47

Oh, absolutely it is. And you know subsidies has changed the game, and so New Zealand is a great, fascinating thing to study. What happens when you take away government subsidies, and it for the last 25 or 30 years, I would say. Nearly all of the innovations in grazing have come, and genetics, polywire, high-tental electric fence all of that has come out of New Zealand. So when you take away the subsidies, the innovation that’s created is amazing, because you can’t just exist, you have to figure out how to do something differently. And their environment, their unfair advantage worldwide as in agriculture, is they have reliable rainfall and they have very limited temperature windows. So in in Minnesota it’s going to be 30 below zero, with the wind shield probably 10 below zero. Real temperature it’ll. It could be 100 degrees in the summer. That’s 110 degrees swing. In New Zealand you might have a 40 or 50 degree swing. So with that predictability you can grow grass extremely reliably and grass is cheaper to grow than annuals. And part of the reason they don’t have the equipment boneyards.

Colter DeVries:23:08

They’ve never built an equipment intensive ag industry that was focused on growing grains they optimize for grass and I don’t know a lot about the quick books plugin, but I what I’ve heard. My assumptions are that it’s an enterprise analysis and, yeah, 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, if I’m working with a manufacturing company that makes metal parts for something they’re they’re they’re going to have by the time they have a 10 million dollar revenue business, they will have a pretty sophisticated understanding of what does it cost them for the raw materials, what does it cost them for their labor, what does it cost them for all their indirect costs. And they put a lot of thought in years of trial and error into allocating all of those costs back to everything they make. So they they know with great precision, down to a penny, or maybe even a you know a fraction of a penny, what is their cost to make each part that they make and they may have. You know, they may make 600, 500, 000 different different items and they know with pretty good precision what every one of those things cost them. And then you go into the farming world and you have a 10 million dollar business and they all they have is a checkbook, it’s cash basis, because that’s all that tax tax attorney is is requiring, and they don’t track their inventory. All they know is that my cash either going up or going down, and and the. The brutal reality is that US commodity markets, grain markets and and certainly the cattle market, it will always, always return in terms of an average pay price. It will pay the average cost of production for the average producer. So it will pay enough to keep the average producer from quitting, but it doesn’t pay them anything other than their, their cost of production that’s what, that’s what I’ve.

Colter DeVries:25:34

You know my uh commiserations with my generational owner operators I’m fifth generation Montana rancher, by the way, todd, and so my network, msu and and uh class C schools. You know your schools have less than a hundred kids um, a lot of good friends across montan and Wyoming and my general commiseration because they they love to call me and bitch about the weather, the markets and the government. Uh, as probably as they’re leaving the FSA office I think they’re. They’re bitching about those three things, but I my, my uh response is generally well, if you, if you operate conservatively because you’re in a commodity business, so it’s a low-cost leader if you just operate conservatively, manage your risks, keep at it. Over the long term, you’re going to be fine, right, you, you’re not gonna. You’re not going to become Jeff Bezos, but you’re also not going to be a beggar on the street, 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 profit or your return per animal, and you have to evaluate it per acre per you. You have to your. Your kpi is denominated in your. In how much forage do you produce? How much return are you getting? So there’s two things you optimize. One is how much forage can you produce and two, how do you monetize that forage without selling it off? Your, your ranch is hay, because all you’re doing then is you’re just, you’re just mining the nutrients in your soil and of course, you’re getting paid for those nutrients, but you’re rarely making anything. You’re rarely even making enough to afford the replacement cost of those nutrients that you’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 I that I, when I walk through this with a client, the the first thing actually is getting a commitment to have a disciplined financial review process, and that means that either monthly or quarterly, as your part-time ranch cfo, we are going to spend a couple hours talking about the business instead of about cows or land, or we’re going to work on the business, not in the business, and holistic resource management has done a great job with this. Ranching for profit has done a great job with this, and we all say the same things. You got to think about this as an owner. You got to think about it like you own a manufacturing business that you weren’t emotionally invested in. You know, if, if you, if you’re the third generation to own a hundred million dollar manufacturing business and you make car parts and, uh, and you’re only making five hundred thousand dollars a year on hundred million dollars in sales, you’re going to look for other options. If somebody will pay you a hundred million dollars for your business, one times gross revenue, and you can go do something different, you’re, you’re probably going to do that because you don’t have that emotional investment. Um, that’s, you can’t have that conversation and ranching or farming, because, uh, we have convinced ourselves that continue to own this land and pass it down is is the the most sacred thing in our existence, and I’ll ever mortgage the home for right, never mortgage the home for you that’s right and I have a great, a great story. A friend of mine who’s a client um, on the day that that his parents transferred the ranch to he and his wife, his dad said to him congratulations. His mom said to his wife I’m so sorry, because you will now be, your life will be dictated completely by this. Uh, this all pervading need to hand this off. And that’s great. Being a steward is an awesome thing. It’s a, it’s a great and a noble calling. But what what we do in, especially in the ranching community, is we’re saddled with the burden of being a steward and nobody teaches us the skills or the tools to be an effective steward. So I’m a big fan of managing what I’ve been given for the benefit of my kids and their kids. But if all you do is give your kids the burden without the tools to manage it well, you’re not helping anybody and you’re not actually doing anybody any favors In your experience.

Colter DeVries:30:43

we’re talking about some pretty serious paradigm shifts right now. One paradigm shift is that this is objectively, unemotionally a business, so I’m going to need you to get over your homestead or mentality that this is the legacy 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 who you are. That’s who you are as a culture to you are, as a heritage. You know. All I want is for you to take an hour once a month and set that aside. You’re going to pick it back up again.

Colter DeVries:31:28

So the next, the next paradigm shift that I’m thinking about is you’re asking guys who will damn it. Todd, I’m a really good mechanic. I fix tractors. I’m very good with animal science. I know my cows better than anyone. I’m a worker. I like to wake up at five o’clock and get right outside and come back home at about six or seven. That’s I do labor very well. And now you’re asking me to do some 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 the technicality?

Todd Churchill:32:09

Everybody being human means well, yeah. So to answer that, I always ask a 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 of problems do you naturally want to solve? Do you wake up in the morning wanting to solve thing problems? I got a tractor that won’t start. I got cows that need to be fed. I’ve got hay that needs to be made. 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 feel good at the end of the day because I got that kind of stuff done. Nobody has to tell me to do that, nobody has to ask me to do it, I’m just going to do it. And then there’s then there’s people problems. Some people wake up in the morning and they’re excited about building better relationships with people. Those are going to be counselors and service representative, people that work in retail. You know they. They wake up in the morning and they spend all day solving other people’s problems. And then you have people that that are wired to solve abstract problems and and this is where we run into problems because you can’t retain ownership. Ownership of land is really an abstract thing and you can’t solve. You can’t succeed multi generationally Owning land If you don’t haven’t developed the skills or are hardwired to think that way. Ironically, taylor shared does a great job of showing this in Yellowstone, because it’s not your skill as a cattleman that allows you to keep your ranch, it’s your skill in in understanding how ownership of a ranch is an abstract thing and you really have to figure that out.

Colter DeVries:34:19

Well, now you have to be able to separate it. And now we are truly fair and balanced on this podcast because you’re the first one to come on and 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 the ownership piece of it Now. So I, I think, and I think you always get some really interesting insights from smart people who aren’t, who didn’t grow up in a multi generational farming and ranching.

Colter DeVries:34:49

You see the forest because you’re not in the trees.

Todd Churchill:34:51


Colter DeVries:34:52

Yep. So one thing I’m thinking of with this enterprise analysis, this QuickBooks plugin, that that you have from New Zealand, yep, and you’re a specialized CPA CFO yeah, I would, I when I was ranching. What I loved about it is it fed my value system. That was innate. It wasn’t a chosen value system, it was inherited and the value system was busy, be busy, just be busy, be productive. And so when I took on a project, I would take on another, and another, and another, and pretty soon you’d be managing 12 projects. You’re juggling and you’re probably not getting ahead on any one of them and you start taking shortcuts. And this plays well with my ADHD. I mean, my ADHD loves to start new projects and I don’t know if a damn one of them ever got finished, certainly not to the, to the specifications of an outsourced contractor that they would have done a better job fencing than I had, certainly, but I felt like I had value because 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 the bathroom. That, that type of personality, I think, plays well on farms and ranches. The owner operator, maverick, you’re not going to tell me what to do. Sitting down to do the this enterprise analysis to take time where I have to focus. That is as overwhelming as a five paragraph email that’ll sit in my inbox for probably two or three months before I even want to open it and start on the first paragraph, todd.

Todd Churchill:36:46

Yeah, no, that that’s exactly right, and you know, my work is primarily encouraging clients to just start the process of discipline in themselves, to spend an hour or two a month, that’s it. That’s not a huge ask. Thinking about some of these things and I’m going to, I’m going to help you, walk, walk you through that, and the things that I want to talk about are do. The first thing I want to look at is what’s your, what’s your financial plan For your farmer ranch for this year, broken out by enterprise. How much is your cow calf enterprise going to make versus your yelling enterprise, versus your hay enterprise, versus your, your freezer beef enterprise, versus selling some replacement havers? And the truth is that nobody really knows. Very, very few people have any data about that, and so we start by putting that farm plan in place or ranch plan in place, and we, to do that, I need to know what. What are your enterprises? We have to identify what those are and then we have to figure out how do we take all of your costs and allocate them fairly to the right enterprise and honestly, because all of us have our pet projects that we really don’t want to know if they’re not making us any money, and so not everybody wants that at this 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 you know my practice is based on the people that want to. Not only the first thing is they’re motivated to never be in a position where they have to sell their, their ranch or their farm. That’s a multi generational asset. They’re managing it in trust as a steward for future generations. However they’re they’re in a marketplace where they’re raising a commodity and they’re they’re competing against other people who are willing to jeopardize their long term ownership in order to subsidize their operating business. That’s just the brutal reality of ranch, absolutely, and so cheap labor. Yeah, if if you’re going to, if you’re going to succeed and survive, you have to have a different. You have to have an unfair advantage. The number one unfair advantage in ranching is running it like thinking it about it like a business and making your operating business cash flow. If we can get that done, then you’re very likely to be able to pass on the land to the next generation.

Colter DeVries:39:42

And that is a recurring conversation with, especially so, I’m 36 and my generation, who are now transitioning to decision makers. Some won’t be a decision maker until they’re 66, but some are. That’s right. And the chief concern is oh my gosh, how do we buy more land and make the P&I with cattle? And my feedback is always you never will Correct. Focus on the operating margins of your depreciating assets of the operating entity tractors, cows, people. That’s focus on the profits you can drive from there, because the land is out of reach today. It will always be out of reach. Accept that and figure out how you make a more profitable business out of the operating entity.

Todd Churchill:40:40

Correct, and to do that you have to be able to produce some kind of an accounting plan. You got to have some kind of a plan that says each of these enterprises are going to be able to do this. So, at a very basic level, a ranch is in the business of growing forage and the enterprises tell me one, how much forage am I growing? And two, what’s the highest and best use of that forage to monetize it, to turn it into the highest value in a way that doesn’t impair the long-term land ownership? So I’ve advocated for years that I don’t want my clients to devote any more than about 60% of their forage base to cows, because we’re already emotionally attached to our ranch and to our heritage, we get emotionally attached to our cows and so you will not sell cows soon enough in a drought versus yearlings you can’t buy this herd, todd. I know everybody says you can’t buy this, and that’s true. You can’t. You know there is incredible value in having an adapted cow herd that you’ve picked over the years, and the number one way you can preserve that cow herd is making absolutely sure that 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 not sacrificing that gene pool in a drought. And what everybody does that has 110% of their forage base is devoted to their cows because they’re a little overstocked is you get a drought year and you hold on to those cows hoping it’s going to rain and it doesn’t. And then now, now you’ve damaged your future grass growing capacity, you’ve permanently negatively impacted your caring capacity and you’re going to sell the cows anyway and you’re going to have to go a lot deeper than just 60%, than just 40% of your herd at that point.

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 optimal right blend is. And then that also kind of plays well into I forget the books, the, the consultants who talk 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’s the way that you optimize. The other thing that does is you’re a lot closer to being able to dabble with some freezer beef options. You want to do grass fed beef? You want to do some grain fed beef? You want to. You want to try to do some direct marketing. You want to supply some you know some, some cattle for a premium program like the Audubon program that I, that I source cattle for. In fact, we just we’re bringing some cattle, some cows, from Montana end of this month back to Minnesota for processing, for a pilot project for a very large beef buyer that is that that has asked us to source cows from Audubon certified ranches. Well, let’s.

Colter DeVries:44:15

Let’s get into that, because I did. I earlier mentioned I wanted to had a couple more grass fed. It seems like since you started and you were the anomaly, the out outlier that you had a successful grass fed program. For every one of you, there’s 40 who could not make it work. They’ve come and gone and it also seems like it’s a Hail Mary Like oh gosh, you know we can write, we start a grass fed direct to consumer local beef. We could probably buy the neighbors ranch and I don’t. I get my millennial daughter in law 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’t have access to a processor that can do what aging and cryovac and they can’t sell a fresh program. The second thing is that just because you don’t feed grain to your cattle doesn’t make it a good eating experience. The vast majority of people that are selling grass fed beef on a whole carcass basis and killing those animals at a custom locker, where they’re killing them and hanging them for 10 days to two weeks and then freezing them immediately, are not producing a great eating experience. They’re not going to get repeat customers, so you know does?

Colter DeVries:45:41

does auto bond call it a value add? Another program does programming up help at all? I mean we can program up with NHTC and get it. I mean, and I’ve definitely heard over the last three years with crazy beef prices, that programming up doesn’t pay. But what is the the? Risk. Yeah, what you’re a factor there for auto bond. I’m not familiar with the program. I only remember the auto bond guy 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 out of 10 calves are worth a bunch. Those years, the premiums don’t help you, but the premiums really do put a floor in the value of cattle on the down years in the cattle cycle, and there’s more down years than up years. That’s the way the cycle. The cycle works. Because what? And that just gets back to what we talked about at the beginning. You know, the emotional drive to own cows is is not subject to the traditional economic signals of supply and demand. The only thing that slows down the desired own cows is drought. Now it remains to be seen. You know, my pet theory is that all all these guys that have a desperate need to own ranches and cows, I’ll grew up watching gun smoke and Roy Rogers, and absolutely so. I don’t know if that is done With that generation or if it’s, if it’s harder, if it’s more instinctual 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 I would tend to agree.

Todd Churchill:47:53

I don’t think that’s gonna go away. I Think the desired and it was never any different. I Mean, if you look at, if you look at the way at the ownership pattern of large ranches In the late 1800s, in the mid 1800s there was, there were Easterners that owned all the ranches, the cowboys did the work, but very relatively few acres were owned by operators. It was an asset class no different than it’s then. It’s considered today and you you have to understand that history If you, you simply cannot retain ownership of large-scale ranch land For multiple generations, if you don’t really understand what drives the, the decision that other people who have way more money than you do To come, what compels them to go buy a ranch in the out, a long ways away from work, that it’s so far removed from anything they’ve ever done in their life. Why is that? And it’s so unique, it doesn’t happen in any other industry. You don’t have in any other industry people that don’t know anything about it, that are just compelled to invest their money in it. You have to understand that, the psychology behind that phenomenon, if you’re going to succeed as a multi-generational rancher.

Colter DeVries:49:25

So multi-generational rancher. Is it time to go neat so you can either scale or niche, differentiate scale or sorry, differentiate niche or scale multi-generational ranchers. Is it time to consider partners such as the autobahn? And what is that?

Todd Churchill:49:43

yeah? Well, I, I think yes. So you’re either going to have to drive more income per ton of grass or you have to go acquire control of more grass and the the problem with acquiring control more grass is you’ve already illustrated is that you’re bidding against people that Don’t need. They don’t pay for that grass with what the grant they can make from it in the future. They made their money doing something that has nothing to do with grass and they’re they’re Redeploying that wealth into buying control of grass. You cannot outbid them. So what you have to do is you have to get a lot more creative. How do I one use the grass, the acres? I have to grow twice as much grass. Everybody can do that in five years with just change in management to how do I get more value out of the grass that I grow? And that’s that’s going to mean getting closer to the consumer. If, if, if you’re raising Cavs and selling weaned calves, you’re a long ways from the consumer. And even if you’re, and even if you’re Audubon certified or certified organic or Gap five, so many other things have to have to be done right to retain that value in that weaned calf by the time it gets on somebody’s plate that there’s relatively a very small percentage of the end consumer premium paid Ends up back at you because you’re just a long ways from them. If you can take that animal the 900 pound, a 900 pound euling you get a bigger chunk of the premium because you’re closer. Now. If you take that animal all the way to a finished weight, whether that’s grass fed or grain fed, you’re you’re now in a position to ask for a greater percentage of that consumer premium. And if you, if you are involved in the processing so that doesn’t mean you have to own the processor, but you have the capacity to produce not a live animal but a packaged product Well now you can command an even greater premium. And, and you know, ultimately, if you’re, if you’re selling directly to your eater and you’re not going through a retail store or a restaurant or a distributor, then you get all of the premium. So, but each one of those things requires developing additional skills and in most cases they’re people skills and they’re abstract skills. And if you don’t have somebody on your team, in your family or or hired that wakes up in the morning and can’t wait to go solve people problems, you shouldn’t start a business that requires expertise In solving people problems to succeed. So I did this at that at wse, and I asked everybody to raise their hand. Is you know who wants to solve Feed and cattle problems? And everybody raised their hand. And who wants to solve people problems? 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 be realistic about is that Branch multi-generational ranchers have self 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 come west. Um and so, uh, it’s, it’s very hard to succeed at that because we’re not starting with, we’re not with the right personality.

Colter DeVries:53:21

Yeah that that man. A lot plays into that, because you just presented another new culture, that the uh, the antisocial personalities went west Right, and I’ve always said that it’s also the, the peasants of europe. So my fifth generation, uh 1883, is when you know my legacy came over from From uh frislin, the netherlands. Sure, they didn’t leave a killer business. No, exactly, they didn’t leave because they had lots of options there, yeah, and that type of mentality of scarcity Travelled with them and then that type of mentality of scarcity, kind of peasant living on the margins, make do with what you have. That got passed down generationally. 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 explore adding value to your cattle by using a third-party certification. Um, for a couple reasons. One is that it was written by ranchers for ranchers and it it requires the least dumb thing. You have to do the fewest dumb things to to to be qualified. Because it’s not really. It’s primarily focused on bird habitat and there’s a tremendous overlap in all the things that you want to do to create bird habitat, or all the things that you want to do to double the forage production on your ranch, and so there’s there’s virtually nothing in that protocol that you wouldn’t want to do, even if you don’t care about bird habitat. If you just want to double your grass production and your carrying capacity, now it and it, so it. It doesn’t really matter. You know, if you talk to all the other, the primary benefit is the bird habitat. The secondary benefit is the additional Forage production. If you talk to a rancher, I think it’s the other way around. I’m what my primary objective is to double my grass. If I can do that in a way that I also end up creating bird habitat, that’s a great serendipity. I like birds and if I can get some sort of of premium At some point in the future For that great, because I’m not actually spending more money. I’m not doing things that I wouldn’t otherwise do economically in order to get this certification. So and I think that’s different than all of the other ones, certainly different than certified organic. It’s different than 100% grass fed. It’s different than the gap where I’m. I’m deliberately not doing things 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 and we’ll wrap it up here pretty quick Todd In my mind, as the good old boy operator, you’re asking me to change, and with change comes Uh perceived risk. And in my mind I’m kind of going through, uh, that risk, risk quadrant. There are no knowns, unknown, knowns, known unknowns and unknown unknowns right, and so who? Who bears the risk in this? What is the risk? And am I, am I going to be compensated for that?

Todd Churchill:57:02

right, and it’s a great question. And because, because the ottoman proto program didn’t start with a, a Marketer, it didn’t start with somebody saying, hey, the customer will pay me a 30 premium. Well, and that’s how I started thousand hills. The customers want 100, grass fed, no antibiotics, no hormones, all right, um, what? What do I have to do to induce uh 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 1300 pounds? And uh, what am I going to have to pay to induce that person to do that? Because that’s not, that’s not really in their best interest economically. So the conversation is always centered 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’s just the other way around. There’s nothing that ottoman is asking you to do that is going to require you to spend more money. Um, in fact, all all ottoman is asking you to do is to change your mindset about a number of things. Um, as an example, when you mow a hayfield, don’t mow the headlands first and work your way in, because then you trap all the birds and kill them. You can start in the middle and work your way out. That all the birds get flushed out to the edges. Never thought of that, but it it makes perfect sense and it doesn’t actually cost me anything. It’s an.

Colter DeVries:58:40

It’s a minor irritation the first couple times I do it, and Then it’s just becomes natural um yeah, I don’t want a virtue signal any here, but I I tried not to chop up as many birds and baby deer as I could when I was mowing. Yeah, of course as I was listening to kick the hay habit by right by jim garish, pissed off about what I was doing, right exactly that.

Todd Churchill:59:05

That is exactly right. So, um, I guess, final plug. You know I obviously I’m a rancher philosopher and we’ve mostly talked about my philosophies about ranching, but, um, what I love to do is help my clients develop the accounting systems that that give us data to support these philosophical conversations, and we use figured figures a great tool to do that we. If you don’t want to do any of the 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 a Fundamental you know, financial fundamentals for ranching school that wse is putting on. They haven’t really announced it 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 those two days.

Colter DeVries:1:00:01

Well, I will put it in the show notes. I think we’ll also link it to your website, but uh, so it makes it to the Transcriber and show notes to this how can people get it? Get in touch with you, reach out to you, learn more? What’s your contact info? Where to go.

Todd Churchill:1:00:18

Next contact info is todd to do d Dot Churchill ch. You are ch ILL at CLA connect com, if you just. You can find me on linkedin at Todd Churchill. You can google me, todd Churchill, thousand hills, and find all kinds of videos and all kinds of stuff I’ve done speaking in the past. I’m easy to find. I’m easy to find. Google knows everything about me.

Colter DeVries:1:00:45

Well, thanks for coming on and I I appreciate your time and, if there’s anything I can help you with in the future, be a resource. I’d like to repay the opportunity and I want to.

Todd Churchill:1:00:55

I want to talk to you more about this indication approach that you’re, that you’re working on for ranch ownership, because I Work with 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’re doing and and I think there’s tremendous opportunities to bring a little more thoughtfulness to that whole, that whole piece of this.

Colter DeVries:1:01:17

I’m. I was actually uh gonna stop the recording, but and tell you I’d like to send you the, the ppm.

Todd Churchill:1:01:26

Yeah, great.

Colter DeVries:1:01:28

We’d love to take a look at it. Get your thoughts on the draft.

Todd Churchill:1:01:32

Yep Sounds good.

Colter DeVries:1:01:34

Thanks, todd, we’ll be in touch on that.

Todd Churchill:1:01:36

All right.

Colter DeVries:1:01:37

Have a good weekend. Great, great visiting, thank you for tuning into the ranch investor podcast. We at ranch investor are very interested in hearing your thoughts, your opinion, your wants, desires, hopes and dreams. Everything on ranch syndications, ranch investment, ranch real estate syndications and dpp’s direct participation programs.


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Ranching and Grass-Fed Beef
Optimizing Cattle Industry and Financial Analysis
Farming Paradigm Shifts in Financial Planning
Value-Adding Ranching With Auto Bond Certification
Discussion of Ranch Syndications and Investment