Animal Processing Fees Increase 63%

The Background

Although we have been growing out animals at Turning Leaf Ranch since 2016, we did not start marketing to the public until somewhat recently.  One of the first challenges we faced when we began marketing was finding a USDA processor that was open to the public, and took small loads of animals.  We have used Creston Valley Meats in Paso Robles since we began selling to the public, and their quality work and quality packaging have been a boon to Turning Leaf Ranch.  It is remarkable that Creston Valley Meats had prices significantly lower than their competitors, and could take our animals with minimal lead time (a few weeks advance notice, rather than three to six months advance notice).

However...

We recently took a load of animals to the processor, eight of them to be exact.  When we arrived, we were notified that the processing fees had increased, and not by a small amount.  Originally, it costed $126 dollars to process a small- to medium-sized sheep or goat.  With the new fee increases, it now costs $205 to process a small- to medium-sized sheep or goat.  The sudden and dramatic change has disrupted our entire operating plan and procedures.  The animals we thought would be processed for a bit over $1000 instead cost us $1700 after some additional fees.

The Turning Leaf Ranch Philosophy

For some producers, this increase in processing fees may be readily absorbed by the size of their animals.  By feeding grains, concentrates, and even growth hormones, and raising animals in pens rather than on pasture, animals grow rapidly, and may reach 130, 150, or more pounds in live weight in a relatively short time frame.  With this size, an increase of $79 amounts to as little as $0.50 per pound of live weight.  But Turning Leaf Ranch is 100% grass fed, and pasture raised.  Animals raised on grass grow more slowly, and animals raised on pasture burn more calories, and carry less fat than animals raised in small pens.  The growth curve for grass-fed, pasture-raised animals is significantly longer than animals raised under other regimes, and the cost of feed tends to be higher, and less cost-effective than feeding concentrated pellets, grains, and other rations.  Feed conversion tends to be lower, and thus requires more feed per pound of meat.

Why would we commit to such a backward-sounding methodology?  At Turning Leaf Ranch, we aim to raise animals in a way that is consistent with their innate natural needs and tendencies.  We believe, and our customers have confirmed, that this will produce a superior quality product, and have a more gentle (or even helpful) effect on the land.

Our Plans Going Forward

After extensive review of our existing operations, we have decided to make the following changes to help mitigate the impact of the recent price increases we face:

1. Purchase excess hay for 2021, and sell the excess at a mark up to other producers.  This will reduce our feed bill, and will immediately increase margins.
2. Process animals at an older age, and higher weight.  This greatly helps offset the processing fee increase, and the extra time spent growing the animals costs significantly less than the price per pound benefit of processing larger animals.
3. Be more selective in the animals we raise.  If an animal is not performing well on grass, we will need to sell it to a different farm, where it will perform better than our grass-based system.  Our operation will focus on animals that have high feed conversion ratios for our grass-fed and pasture-raised standards.  It also frees up money to offset the costs of raising the other animals.
4. Sell fewer animals.  Since we will have to be more selective with the animals we raise going forward, we will need to sell fewer of them to focus on the ones that do well in our system.  Although this sounds like a step back from our current level of production, the increase in animal weights will partially offset this.  It is possible that we may only see a marginal decrease in weights, even though were have a lower number of animals sold.
5. Reduce our herd size, to maximize the value of pasture.  If our pasture resources are spread out among too many animals, then each animal utilizes only a small fraction of the available forage, and the rest is made up by purchased hay.  By reducing our herd, we aim to concentrate pasture resources on fewer animals, meaning more weight gains are made by inexpensive pasture forage, and less by costly bought-in hay.
6. Grow more of our own forage during the summer.  Although this sounds like an obvious fix, it is actually a somewhat marginal option.  Our water cost is extremely high, especially when compared to other farming operations, and growing our own forage must be done carefully and selectively, to avoid spending more on water than we save on feed.
7. Continue our transition to a tree-based system.  At Turning Leaf Ranch, we are slowly transitioning our pastures from 100% grass into a tree-based system with grass in the spring, and tree fodder in the late summer and fall.  This is a long-term project, but we have been making significant moves in this direction for several years.  We will continue to invest in fast growing, highly nutritious trees that will further increase the photosynthetic capacity of the farm well into the summer, and produce low cost, high quality feed without having to buy in as much hay.

Note: We do not intend to raise prices, since we believe we can get back to profitability using the strategies outlined above.