Hazard Cattle Company

By Karl Wolfshohl
Progressive Farmer Contributing Editor

Mark Hazard offers the same advice to young ranchers that he and his dad have followed for decades: Build wealth while you're young. Enjoy it later.

This isn't idle talk. He has said it often while seated across the desk from cattlemen applying for loans. Hazard was president of Cadence Bank, in West Point, Miss., from 1987 until 2010. But he first learned the basic principles from his dad, Gordon "Doc" Hazard, in their stocker business.

The Hazard Cattle Company has made itself consistently profitable with stockers during the years. Doc Hazard, a veterinarian, started it in the 1940s. (See "Efficiency at Work," page B-20) Mark Hazard is a lawyer as well as a banker and cattleman. He is part of a family corporation that includes his three siblings, who live elsewhere, and Doc.

Mark recommends the following: Work your way into not having to borrow money to buy your land and cattle. Own them outright as soon as possible.

"Once you get to the point where you can own your own cattle, the market cannot break you," Mark says. "Once you sell them, replace them with the same number of head, and take out your expenses. If you sell them high and take off your expense money, which for us is around $100 a head, and buy back the same number of cattle on the same market, what's left over is your profit. We call this replacement accounting," he says.

"You can't use it for taxes, but it's the way we judge whether we made a profit after our expenses."

Mark admits that as a banker, there's more money to be made by lending to heavy borrowers; but looking back he is most proud of those who started young and clawed inch by inch toward their goals.

"I had my best success at the bank getting young guys to take a job in town and start off with their cattle on rented land," he says. "They are now living on the farms they bought, and they own the cattle. They got a loan and knew that cattle would make the payment. They lived off what they were making in town. Everything they made off the farm they left in the farm. It's a super savings account for them, something they can pass along to their children."

Over the years, Mark has come up with his own set of basic principles of successful ranching. Some of these go back to his years as a banker, but all are rooted in his dad's wisdom and his upbringing:

1. If it rusts, don't own it. "You have a better chance of making money with four ex-wives than with four tractors," Mark says. "Cattle cannot gain fast enough to overcome the depreciation. Everything we have on our farm we want to appreciate in value." While Mark's wife and mom drive nice cars, he and his dad are behind the wheel of pickups that have seen better days. "We've got a cattle trailer that's 40 years old and three hammers, and that's about it!" he quips. "Everything we need done, we hire. We buy hay, and people spray our weeds for us."

2. Avoid heart attacks. "I contend that it's impossible to borrow enough money to make yourself rich," he says. "Creep forward through accumulation rather than leaping forward by taking on excessive debt. If you're stressed out all the time about making your bank note, you're going to have a heart attack. Cut down your debt as quickly as you can, and try to own something as quickly as you can, whether it's land or cattle."

3. Don't force what doesn't fit. "Do what your climate and land allow you to do," he says. "In Mississippi, row-crop farmers spend millions a year trying to kill crabgrass and johnsongrass. I don't get it. The Good Lord gave us those for free, and they're good for the cattle."

4. Stay away from negativity. "In every coffee shop I've been in, nothing is ever going to work. You've got to be innovative and try different things."

5. Keep it simple. "What we're doing is not rocket science," he says. "All we're trying to do is sell grass through cattle. It's not hard."

"Young guys I know who started off this way 20 years ago are right where they want to be now," Mark says. "They kept their jobs until the ranch and cattle were paid for, and now they don't have to work the job if they don't want to. The key is to not take farm money and do town things with it, just live on what they make in town."

Scoring high on the three Cs of lending—character, collateral and cash-flow—helped cattlemen of all ages get loans from Mark during his years as a banker. He says these are still key to remember today.

First, character. "Is your word good?" Mark asks. "What kind of experience do you have? Are you a good manager? That's the main thing. Show me a plan based on facts for one year and the future. Write it down."

Second, collateral. Mark says his bank would loan a stocker operator up to 75% of the cost of calves, and sometimes, though rarely, up to 80%. "This protects against market risks, and it's a lot easier to get up in the morning and feed our cattle than to feed the bank's cattle," he says. Since he wants young ranchers using their land and cattle as a way to build wealth, "I want them to put everything they make out of their cattle operation back into it and live on what they are making working in town. If they borrow $50,000 from me this year, they should borrow a lot less next year."

Third, cash-flow. "How will the operation cash-flow until you get the cattle sold?" Mark wants to know. "Where's the operating money coming from? Cash pays back loans; collateral doesn't.

"Look at fixed costs versus variable costs," he offers. "If you don't have any equipment, you don't have to worry much about fixed costs, although you've got to have land to buy cattle."

As for variable costs, he suggests a major way to reduce labor: rotational grazing. The cattle walk to their feed; nobody hauls hay.

"When things are cheap, all the magazines and smart guys say you really have to watch your expenses," Hazard says.

"That's only half true. You've got to watch your expenses especially when cattle are high. That way you can save money, because cattle are going to get cheap again, and you'll need the reserve."

Efficiency at Work

Doc and Mark Hazard assemble 1,200 to 1,800 steer calves annually to graze fescue and warm-season annual grasses on 3,000 acres. Mark also has a separate heifer business. The father-son team share the work, even though Doc is knocking on 90.

In January and February, order buyers purchase light, sale-barn calves for the operation. After an initial break-in period, they keep the steers on fescue in winter and early spring, and then rotate them onto native annual grasses in warm weather. They ship the cattle at 800 to 850 pounds in September, giving their fescue two or more months to recover before winter sets in and more loads of calves arrive.

Of several options available for selling their cattle, the Hazards normally sell directly from their farm to a particular order buyer because he's dependable.

"We do a basis contract going forward, agree on how many loads, on what day," Mark says. "Shrink has to be written on the contract. From the day we sign the contract till the day we deliver the cattle, we can call in and say we'll take this price, minus our basis, which is about 7 cents for truckage and some discount for not being a No. 1 calf."

The men have returned a profit for decades because of certain efficiencies.

"We've got to see whether every decision we make will be profitable for our operation," Mark says. The men budget, look at futures prices and calculate their own basis to decide whether it's time to buy. Once they do, they try not to worry about what prices are doing.

"There's no need to worry about the market, like there's no need to worry about the weather," Mark says. "There's not a thing we can do about them."

The Hazards purchase what they call a "No. 1½ Okie." It's a steer weighing 300 to 400 pounds. These tend to be English or English-cross cattle, not quite as thickly muscled as a No. 1.

"If we buy the best cattle, they're never going to get any better than No. 1," Mark says. "I can buy a No. 1½ Okie for about a dime behind his better cousins, but when I sell him, he's only 2 to 3 cents behind. If he has good conformation, I don't worry too much about the color. We just stay away from things we know are not going to grade out."

As careful as they are about the cattle they buy, they are equally conservative about where they spend management dollars. The best returns come from:

-- Vaccinations and deworming: "We vaccinate for diseases, but a lot of people vaccinate for a disease just because they've heard of it," Mark says. "If we've never had a certain disease, we don't think there's a need."

-- Watching new arrivals: They castrate and brand incoming cattle on arrival, but save dehorning until the first deworming when calves come out of the conditioning lot. The Hazards spend the first 30 minutes of the day in the new pen, to see which calves are standing with their head toward the ground, which are coughing, which are a little off. Sick animals are quickly separated and treated for at least four days. After treatment, they go to a recovery pen.

-- Gentle handling from the start: Newcomers are kept in pens with feed, hay, clean water and shade. They are gentled with range cubes. After four weeks in the new pens, calves go out on fescue pastures.

-- Feeding a protein supplement: Every pasture has a concrete slab with a 2-ton feeder filled with protein supplement made of two parts cottonseed meal and one part salt. The amount of protein in the grass determines how much supplement the cattle eat.

-- Keeping up with parasite control: The Hazards deworm at least four times a year. They say one study showed calves that hadn't been dewormed gained 15 pounds less per month than dewormed calves.

-- Taking out horn flies: A heavy infestation of horn flies will drain a half to one pint of blood every day. A pint of blood is a pound. There's no way to put weight on cattle in the summer if you're losing to flies.

-- Using the right corrals: Narrow corral pens make the cattle work easier, Mark says. Their corrals are 18 feet wide and 60 feet long. Solid walls on the crowding chute help. Cattle get onto the truck quickly and gently, in about 15 to 20 minutes, holding down shrink.

(AG)

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