Farming Through the Low Points (Boom and Bust Part 2)

This is a continuation of a look into our farm’s history and my reflections after reading the K.C. Fed’s paper on cyclical agricultural prosperity. I admit. It’s a little nerdy. I’m trying to keep it fun though.

Look back at part 1 to see at some of the cool stories of our family history. I know just as many stories of hard times. In the ’80’s the debt on the hog floor (built in the ’70’s boom) dragged the farm down. The story is more complicated than that, as locals know, but let’s just say Grandpa made the best of a bad situation. I know it caused a pinch in the farm’s finances but money was always tight…because grandpa would always and immediately reinvest earnings back into the farm. He would improve his herd genetics, upgrade equipment, build fencing, build ponds…you with me here? He reinvested earnings…sometimes to the frustration of my grandmother. They were mostly on the same page…except a few times when she wanted a new oven, a couch or some carpeting. She built her own kitchen cabinets. I assume that was more budget than hobby but we still use them.

Sidebar – I have to pause here to explain the relationship between my grandparents as an uncle once explained it to me. My grandma was, in my grandfather’s mind, his trophy wife. The arrangement, made by her, was simple. She would keep the house, he would be a farmer. She was not a farmer. She certainly did not milk cows. She was beautiful. That was that. Apparently grandpa found that to be a favorable arrangement though he did have a sense of humor. Grandma never knew how many people to cook lunch for. Grandpa would feed the men working on the farm, certainly, but who knows who else would be dragged to the table with him. Also, grandpa considered gardening to be a part of the household. Every year he plowed up a big patch of garden for her. Or he would bring home a truckload of peaches to be canned. Grandma had a sense of humor too, though hers was more subtle.

Things are different in our house as I wash dishes and Julie milks the cow. However, as I learn more about my grandfather I marvel at his strength. He bought a tractor before anybody else had one and borrowed money to do it. Grandpa ran a number of businesses, all to support a central theme. He did row cropping, kept pigs and cattle (and brought in Limousin genetics early on), ran a feed and fertilizer business on the farm, sold Badger equipment and always worked to improve his own land, herd genetics and equipment. Along the way he positively impacted an awful lot of people (and ticked off a few). I feel like I’m weird because I ask cattle to eat grass. I can’t imagine how he felt…his entire life. Just know that grandpa feared the debt he held…and for good reason. He had seen downturns in agriculture and was always planting his earnings back into the farm. I think he would be astounded at current land valuations and heading for cover. He probably wouldn’t be selling land but he would be taking full advantage of the cattle price.

To continue, exports are necessary to pay for imports. You can only pay for products with production. If exports dry up, we are in trouble. More so if debt is involved as in the hog floor above. Grandpa stayed out of trouble by selling feed, fertilizer, equipment and livestock and working to minimize debt. But the ’80’s were hard all the way around. Again from the Fed paper:

During the 1970s, surging exports underpinned a new plateau in agricultural commodity prices, and farm revenues reached a record high. From 1971 to 1973, agricultural commodity prices jumped 75 percent and remained elevated throughout the decade.

But then…

A weak global economy, world debt problems, a strong exchange value of the dollar and trade barriers—including a Russian grain embargo—cut U.S. agricultural exports (Drabenstott). In 1986, agricultural exports bottomed at $47 billion, half the levels posted five years earlier.

Our farm bears few scars of the bad times as evidenced by the fact that there is an unbroken chain of family ownership going back to the 1840’s but neighboring farms didn’t fare as well. The father of one neighbor saved during the prosperity of the 1910’s and bought land heavily during the Great Depression. His risk and prudence set his family up for lasting, generational wealth that benefits them to this day. But there were necessarily folks who either didn’t save in the good times, had it worse than others (losses to illness or war, bad business bets, etc.), sought other opportunities with their capital or otherwise gave up on farming. But, apparently, the largest problem was debt. Once again referencing the K.C. Fed:

During the 1920s and 1930s, the collapse in farm incomes and land prices led to a wave of farm bankruptcies. Facing higher interest rates and lower incomes, many farmers struggled to service the debt they accumulated during the 1910s farm boom. The result was a surge in farm foreclosures during the 1920s and 1930s (Stam and Dixon). According to the U.S. Census Bureau, at its worst, almost 6 percent of U.S. farms were sold in 1933, with 70 percent of the sales due to foreclosure.

The ’80’s saw another wave of farm transfer. If you look at the local plat book there are fields that are owned by the local banks and have been since the ’80’s. What happened? More of the same.

The debt accumulation of the 1970s contributed to the economic calamity of the 1980s. By 1982, when interest rates spiked as the Federal Reserve tightened monetary policy, farmers had more debt than they had capacity to service with their existing cash flows. The result was a farm financial crisis, a rise in farm bankruptcies, and the 1980s farm bust.

With shrinking profits and higher real interest rates, farm asset values and capital expenditures plummeted. After peaking in 1981, the average price of farmland dropped more than 40 percent by 1987, returning to 1960s levels. The farm bankruptcy rate spiked, topping levels experienced during the Great Depression. Capital expenditures on machinery, equipment and land improvements dropped 70 percent below the 1970s highs.

This was exasperated by increased productivity on farms.

Agricultural production expanded as farmers planted “fence row to fence row” and productivity gains emerging from the 1970s “Green Revolution” boosted yields. Weak demand and bin-busting supplies placed downward pressure on agricultural commodity prices, and gross farm revenues fell to 1960 levels. With elevated production costs, farm profits declined. By 1983, returns to operators were roughly 10 percent of the 1970s high.

I would like to point out that this is nothing new. It also happened before the turn of the 20th century (emphasis mine):

The most serious problem by far was low prices.  One can approach this problem in a number of ways, but, simply put, low prices resulted from the fact that the supply of farm goods was growing much more rapidly than the demand for farm goods, which meant that farmers had to accept lower prices for their products over time.  Now it is true that the general price level in the United States was falling through much of the late nineteenth century, but, even in this period of general deflation, farm prices fell more than prices in other sectors of the economy, which hurt farmers in a relative sense.

Low prices hurt farmers particularly hard because many were debtors.  In a deflationary economy, it is especially difficult to repay debts because the real cost of a debt rises as money becomes harder to come by.  During the late nineteenth century, as more and more farmers commercialized their operations, specialized and mechanized, they often took on significant levels of debt, which became harder and harder to repay.  As a result, many lost part or all of their farms, leading to a great rise in the number of tenants and sharecroppers, on the one hand, and the movement of many farmers out of agriculture altogether, on the other.

Back to the story. Things got pretty tight on the farm several times but I never heard Grandpa Tom complain. I mean that. I never heard my grandpa complain. Plastic knees, prostate cancer or blown engine in a tractor…he just took it all in stride. Grandpa said they weren’t aware of the Great Depression, they had plenty to eat. Because of his father’s illness and a mentally handicapped older brother, grandpa was head of household and couldn’t go to war for WW2. The only problem I ever heard of was in the ’80’s but grandpa was able to cover the loan for the hog equipment – though I don’t know how – and I never heard him talk about it. At the same time I watched an uncle refinance his land repeatedly until finally selling his best ground to get out from under it. Farmers were so discouraged through the ’80’s they stopped buying. Either they were convinced that the downward trend would never end or they were buried under a mountain of debt. That’s how my coal miner father became a land owner. Farmers weren’t showing up to buy so, on grandpa’s suggestion, after a whole lot of prayer, thought and worry, mom and dad did.

Obviously my grandpa is a hero to me but he wasn’t the only area farmer to survive the ’80’s. In fact, a number of farmers were able to expand. Just like in other downturns. To contrast that, Julie’s great-grandma Alice married a Fillager late in life. The Fillager family owned 1,000 or so acres 1893. Much more land later.

Fillager

The Fillager siblings didn’t have children of their own so the estate was auctioned off little by little following funerals. Some of that wealth was donated (war bonds), hence the Fillager clinic in Greenfield. I have friends who own Fillager ground (and everyone was convinced there was gold buried on the property so they kept after him for years, “Did you find the gold yet?” He denies finding any. Of course.) Some of that Joseph Fillager land was owned by Julie’s grandparents until the ’80’s. Julie’s parents had several acres until around 2002 but they sold and moved to town. Julie has a great-aunt who still owns a large portion of the farm. Otherwise, it’s all gone. Over 100 years of unbroken family legacy…no family to give it to.

There were financial mistakes made along the way. There was also a genetic dead-end as no Fillagers had kids! Same thing happened on the other side of Julie’s family. Julie’s grandpa grew up poor. His stepmother did not. My understanding is she was part of a prosperous farming family. Her brothers stayed home and farmed and expected her to do the same. Nobody had time for family. Later in life Ruth found a family in need of a mother. Julie’s great-grandma Ruth left the prosperous farm behind and, in the process, lost her claim on the estate (please correct me in comments if I am mistaken here). I guess her siblings held the farm together while they lived but the family legacy ended. There was no next generation to own and work the ground. I’m not even sure where their farm was now. Or Julie’s grandpa’s farm. I don’t think there are even houses at those locations now.

Clarence and Ruth (Mitchell) Ashby

All good things come to an end. It happens. I have the next generation thing covered but how can I keep our heritage in place through the downturn that is eventually coming? And what can I do to positively impact my neighbors so the whole community can weather the storm? Nobody wins if the banks own all the land, not even the banks. They are in the business of loan origination (money creation) not land management. And short-term tenants are hard on the land. In the book Family Wealth the author is discussing drawbacks of perpetual trusts (and I don’t think it’s a stretch to suggest that this thinking holds true to land owned by banks).

…[lands held in perpetual trust] were often poorly administered, because they had no owner who cared about their improvement, since he or she would never own them outright. Many life tenants sought to receive the maximum annual return possible without regard to such a policy’s long-term effect on land’s productivity.

Low prices could crush us…could crush me indirectly. Our friends at the Fed are freightened of deflation. They are working to do everything they can to keep the money flowing through the economy, not just in terms of currency supply but also in terms of velocity. But if it’s not enough…well…then what? What if the dollar strengthens and American agricultural products are more expensive (because of currency valuations) than those of other countries? I’m no mercantilist but I can see the effects on our current way of life. Even the supposedly favorable ratio of debt to equity carried by current farmers could turn sour in a hurry. I have to work to minimize my exposure to those risks by focusing on providing value to customers, lowering my production costs, minimizing my exposure to debt and putting away some cash for a rainy day.

But I’m getting ahead of myself. Farming has seen some rough times. Debt has drowned many farming families. I’ll do what I can to lay out our plan in my next post.

When to Harvest Money (Historical Highs and Lows of Farming Part 1)

I found a 2011 paper by the Kansas City Federal Reserve titled, Agriculture’s Boom-Bust Cycles: Is This Time Different? What a thought-provoking read. Let’s skip to the end. No. This time is not different unless you mean worse. Now, let’s look through their paper together and talk about a few interesting things. (So interesting I had to break this up into several parts.)

The Fed’s paper looks at agricultural boom and bust cycles over the last 100+ years. Not only can I see evidence of those cycles on my own farm, I can see evidence of them in my plat book. In fact, if we leave the paper behind for a moment you can see a timeline that illustrates the changes over time here (link). Notice the entry from 1889-1919 is called simply “Farm Prosperity”. Some of this was, apparently, the result of increased farm productivity. Farmers were able to grow and sell surpluses rather than just work for subsistance as noted in the transcript of a speech by Peter A. Coclanis:

During the period between the Civil War and World War I, we find other changes in the agricultural sector as well. American farmers became much more commercialized in this period, offering more and more of their annual output for sale on local, regional, national, and international markets. Put another way, there were fewer and fewer subsistence farmers and fewer and fewer farmers striving for, let alone achieving self- sufficiency.

This period of prosperity is obvious on our farm. The main part of our house was built in 1911 by Dick Chism (my great, great uncle). Our big barn was built in 1914 by men hired by uncle French and my great-grandfather Charlie (all brothers).

FamilyAmerican farmers were productive at that time and the world (which was at war) needed our agricultural products…anything from wheat to mules.

The British Army also purchased a large number of mules from the USA. The mule has amazing stamina and endured the terrible conditions in the front-line better than the horse. At the end of the war the army owned 213,300 mules.

But the Great War ended. Cars became cool. Europe could focus on feeding themselves again. Not only did a large portion of our agricultural exports cease, our need for livestock feed fell off because we had fewer animals in harness (and thank God). So more of the ground used to grow livestock feed could be used to grow grains for human consumption. This led to huge surpluses in crops and a crash in agriculture. From the K.C. Fed Report:

Farm prosperity, however, was short-lived as global food production rebounded, export demand collapsed, and farm incomes fell. With the conclusion of the war, export demand faded. By 1922, U.S. agricultural exports returned to pre-war levels, slashing agricultural commodity prices by 40 percent from 1919 to 1921. Returns to operators plummeted.

Moreover, the industrialization of U.S. agriculture through the adoption of the tractor and other mechanized equipment reduced the need for feed grains for draft animals. The combination of weak exports and increased food grain production led to another collapse in agricultural commodity prices and profits during the early years of the Great Depression.

But nothing brings high prices like low prices (the inverse is true too) and nothing generates demand for food like hungry people. And when the world went to war again we were busy feeding the world. Farming became valuable again. Again from the Fed notes:

Similar to the 1910s, World War II sparked another farm export and income boom. A surge in wartime food demand boosted U.S. exports through the 1940s. After bottoming at $4.3 billion in 1941, real agricultural exports quickly rose to $25 billion by 1944. Similar to World War I, a wave of livestock exports fueled U.S. export growth during the war, while crop exports increased moderately.

The paper goes on to note that exports remained high following the war and into the ’60’s. In what must have been around 1937 (at age 16) my grandpa borrowed money directly from Oliver to buy a new Oliver 70…the first tractor in the neighborhood.

Sidebar – This story is a part of my own life because around 1984 my grandma wanted to buy a dress. Grandpa said they didn’t have the money for a new dress (we’ll discuss the ’80’s next time). In spite of the cash flow issue grandpa went to a farm auction and came home with a rusty old Oliver 66. Grandma, at least slightly angry, said, “Tom, what is that?” Grandpa, knowing he was caught, said, “um…that’s for Christopher. It’s…ummm…like the tractor I started with.” Some time later we went to the farm for a visit. Before I got out of the car grandma was on the porch yelling for me. “Christopher, go to the machine shop and see the tractor your grandfather bought for you!” You can imagine my shock! Apparently grandpa was shocked too. He stood, defeated and staring at his feet as I ran off to the shed. I have had that tractor for nearly 30 years now. Dad restored it when I was a kid. Truth be told, it’s more of dad’s tractor than mine…or it’s a memory we share. He has something apart on it even now.

Shortly after grandpa bought that first tractor, my great-grandfather and all of his sons sold their horses. The story goes that my great-grandpa got sick (had a stroke?) and grandpa Tom had to take over the farm. He got the tractor and earned $1/acre plowing the neighbor’s fields. Everybody saw the productivity gains available with the tractor and grandpa’s business only lasted one season. My great-grandfather wasn’t having any of it. By reputation, he was a little hard-headed and demanded that men work hard because men should work hard. (That notion may be countered by the story that my great grandpa bought a car but couldn’t drive it. So he told my pre-teen grandfather learn to drive.) I guess my great-grandpa Charlie recovered enough that the two of them decided to go out and plow in the spring, grandpa Tom with the tractor, his father with the horses. By the time lunch came around my great-grandpa decided it was time to unhitch the horses forever. Grandpa Tom claimed to have little use for horses, just as his sister is shocked that we milk cows (lol). Guess they were done doing things the hard way.

pond

Grandpa went bananas building ponds and bulldozing the world around 1955. At one point he even moved a creek bed! I have heard that neighbor teens (who are all grandparents now) would gather and swim at the beach on the pond. Water lines were trenched all over the farm (and are now overdue for replacement). In the ’60’s my grandpa’s cousin built an addition on to the house. We have some nice pictures of my parents wedding reception in that room as well as family reunions and Christmas dinners every year. That’s the room our wood stove is in now. All that stuff and all of those memories were built by a time of agricultural prosperity.

Reception

When dad first came to the farm grandpa was still farrowing pigs on pasture. There is a story of a big rain flooding the pastures surrounding my house and washing away pigs. So in the late 70’s grandpa and his hired man built a concrete hog floor and a pig nursery at the home place. This was top of the line stuff at the time. The floor and slurry pond are still there, though overgrown, and we use the pig nursery as a chick brooder (and it’s awesome!).

Look at all the wealth that has been accumulated on our farm over the last 100 years. The infrastructure changes line up perfectly with the boom periods outlined by the K.C. Fed. But I have left out the busts.

Every boom is followed by a bust. The views are great on top of the mountain but the fruit is grown in the valley. At least if you are optimistic about low points. At certain points, my ancestors took money off of the table. Rather than spend that money they made infrastructure improvements and parked that wealth in the farm itself. This is like planting a tree knowing you will never rest in its shade. This is planning for abundance in future generations.

Barn

Come back next time and I’ll tell you about the low points in our own farm’s history, how grandpa held things together and I’ll share some of the neighborhood history. I can point out 20 barns nearby that are roughly the same age as ours. Not very many are still owned by the builder’s family. The Fed paper says there is a reason for that. Debt.

Should I Sell All of My Cattle?

It is interesting how people find my blog. Various search engines bring in a lot of traffic. Someone was searching the internets for an answer to the title question. That has inspired me to write a little bit.

Should I sell all of my cattle in 2014?

There are a lot of variables in that. It’s like asking if you should go ahead and buy that Plymouth DeSoto.

I’m not interested in owning a Plymouth DeSoto at any price. But they do have value…which means they are valued. Should you buy one? I dunno. Do you want one? Do you have the money? Where are you going to park it? What will your spouse say? What is the plan?

But there is so much more to it than that. In essence the reader is asking, “Is it better to have cash or cows right now?”

I’m going to switch gears and talk about eggs and dollars briefly. Dollars are a product. Eggs are a product. But dollars are infinitely liquid, eggs are less so. For example, anybody can give me $4 and I’ll give them a dozen eggs. But not everybody will accept a dozen eggs in exchange for $4.

Dollars are infinitely liquid, cows are less so. It is unlikely that I could trade my cows for a Plymouth DeSoto. But you can’t eat dollars. So the question becomes, after you sell your cows, what will you do with the dollars? Do you just want to stack them up in your house? Maybe build a couch out of $100 bills? That wouldn’t be very comfy. And I doubt there are any real women in red dresses that would lounge seductively on a stack of paper.

100Couch

Click image for source. No, really. It’s worth your time.

So what do you do with the money? I mean, before you do something you should decide what it is you are actually going to do. You probably don’t want the dollars. You want the convenience of the dollars…their near-universal acceptance. You might hold dollars for a period of time but you aren’t going to make a couch with dollar bills. You are eventually going to buy something with them…and probably not a brunette in a red dress. Cows? Grass? Pasture? Dollars? Plymouth DeSoto? The idea is to put your resources to their best and highest use. If not cows, then what? Could make for a fun night at the casino but is that what you want? Because if you swap out the cows for cash and don’t have a plan…well, you may as well have a good time. What is the marginal utility of a hangover?

Rather than focus on getting out of the cattle business you need a plan for getting into the next thing. Trading cows for cash may accelerate your efforts…if you are going somewhere. If he/she has some culls to spare, this is a chance to get a great price on sub-par genetics! Maybe A. Person meant to type, “Should I sell all of my cattle and buy cattle of a higher quality.” OK. I have heard of a number of ranchers who have sold out of the cow/calf business because they believed calf prices were abnormally low (so calves produced were not covering costs). They sold family herds that had taken generations to build to buy heavily into cheap stockers. Then when the market skewed the other direction they quit raising stockers and bought a nicer herd of cows than they had owned previously…making money on every trade…always looking for the class of cattle that were relatively undervalued. Not just selling the cattle, trading one appreciating asset for another with dollars in the middle.

But let’s assume A. Person doesn’t want to sell out completely. As I mentioned earlier, high cattle prices are the time to cull out the worst of your herd. When prices go down again (and they will…and maybe by a lot…and maybe for a long time since this cycle has been up for a long time), buy in quality again. If that’s the plan, sell some cows now.

Or maybe none of his cows bred this year. Sell them.

Or maybe he has noticed his cows can’t perform in the absence of corn, Ivermectin and alfalfa cubes. Sell them.

Or maybe he is just looking for a new opportunity. Sell them.

In fact, if you are asking the question at all…the answer is yes. Do it. You obviously want to sell them. Go. Carpe some diem. Don’t look back. Embrace a brighter tomorrow for you. Just get the cows out of your way. There is no obligation with cows. It’s not a marriage. They aren’t children. There is no business contract. Do what you need to do to move onward and upward. Devise your plan, make it happen and cherish the consequences!

Maybe that’s just me though. That’s kinda how I tend to run. Always looking for deep water to jump into and dealing with the results.

Should I sell my own cattle? Nope. They are part of the plan. Should I train up my son to take over control of the cow herd when he turns 15? Sounds great to me. I’ll move onward and upward to the next thing. He will be the “Head Farm Steward” and I will move into an advisory role. Awesome. I have a plan for that…should it come to fruition.

Should you sell your cattle? The better question to ask is, “What am I going to do next?” because my response is, “What’s the plan?”

Going Easy on The Cows, Hard on the Future

Are my cows bred? I dunno. Some of them are really starting to show. Others? Well, I dunno. 19 bellows and stands at regular intervals. She’s not going to make the team. 27 and 70? Dunno. I have never seen any sign of heat from 70. Ever. At all. But she’s not showing. At all. I don’t think she’s a freemartin so I don’t know what’s up. I guess I should just invite the vet to preg check them for us.

So what if some aren’t pregnant? Well, then they don’t get to stay on the team. I bought these cows off of hot feed, not from a grazing herd. The odds are against them genetically. That’s why every grazing expert you talk to says to buy cows from an established grazing herd. It is expensive to return cows to eating grass. Isn’t that an odd thing to say?

I am not in the business of providing cow retirement. I don’t need cows to eat grass. I need cows that can reproduce while eating grass. I need to increase beef production per acre while reducing the amount of fuel that goes into each pound of beef. That’s what I need. Rather than spending money on tractors, balers, rakes, conditioners, barns, hay elevators, wagons, (this list could go on for a while so let’s just sum up and say “iron”) I am investing in cows. Some investments turn out great. Some investments don’t. But over time I can breed toward a greater tendency for success.

“But”, asks my father, “what do the cows need? Surely a little oats to warm them on cold nights wouldn’t be a bad thing.”

It wouldn’t. Not if these were pet cattle. But I’m not raising pets.

What does a cow need? Boil it down to the absolute essentials. Forage, water and a little salt. Barns are not for cows. Barns are for storing feed and for feelings…as in “I feel better that my cows don’t have to stand in the rain.” Or barns are for status…as in, “Look at those nice buildings. That’s a successful farmer!” That’s what you see from the road. What you don’t see from the road is the amount of time and resources used to build and maintain the buildings, the debt gained to have the buildings and the vacation days burned to repair the buildings after a wind storm.

BarnDamage

I’m not interested in status. My kids think I’m cool. Good enough. The more stuff I own the more stuff I have to fix. I don’t want to fix stuff. I want to play with my kids, read books and sell cows. But I do store a little feed. To some degree, I regret having hay in the barn. Who works for who in this deal? Do I work for the cows or do the cows work for me? I sweat, sneeze and cough in May, July, August and sometimes September to put hay up there. Then meter it out as winter passes, a little at a time, to …well, to do what exactly? My cows are still grazing grass we grew last summer. I guess I give them a small portion of their daily feed in hay as a treat. Same as my dad suggesting that they would like a little oats.

Shoot.

Let’s be completely fair about hay though. I don’t think anyone would argue that I should own zero hay. I would like to go years without feeding any hay though. We are expecting a serious ice storm this weekend. With events like that coming it makes sense to have a little hay on hand (and the barn roof repaired). But feeding hay every day when I have acres of fescue out there doesn’t make sense, except that my pastures currently need a little help. They were overgrazed and under-rested for decades. But they’ll come around. Will I come around? Or will I continue feeding a little hay in the winter out of habit?

Fencing is another example of my needs vs. cow needs. I have several neighbors with 7-wire high-tensile fences. Those are dang-near deer proof! Oh, how I would love to rip out my fencing and start fresh…properly follow keylines, get rid of the barbed wire and make the farm look nicer! But do I need that? My cows are rarely against the perimeter fence anyway. The perimeter fence is really just insurance. I bought several rolls of high-tensile fence a few years back but haven’t built the fence. I would rather have the cash…so I could have more cows. Cause this is a cow business. Not a fence business.

Will all of my cows respect a lesser fence? Will all of my cows thrive on pasture stockpile? Will all of my cows reproduce without supplemental grain? Nope. They won’t. But the ones that don’t are not a good fit for our program…obviously.

What kind of cows do I want? Do I want infertile cows? Nope. Do I want to haul in grain? Nope. Do I want to put up (or even buy in) hay? No more than I have to. Not every cow can make it without grain. Not every heifer will breed early and often. Those who don’t make the cut won’t stick around to drag down the herd of the future.

From today’s Pharo Cattle Company update (I realize it’s an ad. But it’s also right on.):

When you need a bull, who are you gonna call? There are hundreds of seedstock producers who would love to sell you a bull, so how do you decide where to go? Do you look for a place with pretty white fences, big buildings and busy feed trucks? Do you look for someone who places expensive four-color ads in all the beef magazines? Do you look for a producer who displays over-fat cattle at the stock show? Or… do you simply look for the cheapest bull that meets your basic color requirements?

If you’re in this business for the long haul… you need to purchase your bulls from a seedstock producer who demands more from his cattle than you demand from yours. If they don’t demand more from their cattle, they will NEVER be able to improve the genetics of your cattle. Unfortunately, nearly all seedstock producers have a pampered herd of high-maintenance cows.

The goal is to capture solar energy and convert it into beef and increased soil fertility. The goal is not to own big barns and big tractors. Will a little grain and hay hurt? Well…yes. It will cost me money (that I could use to buy better cows) and it will cost me time and storage resources and, worst of all, it will cost me the chance to find cows that will thrive without. We are seeking solar power. That means some cows won’t make the cut. And good riddance.

Now, how can I figure out which cows are pregnant without getting elbow-deep in the question?

Isolated and Fragile

I had a chance to visit with an old friend of my father’s I haven’t really seen in 20 years. He was a biologist for the state and is a large part of the reason I have a degree in biology. The last time I saw him was nearly 17 years ago (at my wedding rehearsal dinner (not so much a dinner as a 4th of July party with a bluegrass band at my parent’s house)) and I talked his ears off about the amphibians I had collected the previous week in the Columbia River Gorge (Ask me about dicamptodon or ascaphus!). This time I tried to avoid talking his ears off about grazing cattle.

I did it anyway. He is a polite listener and I really had to pry to get him to talk about his own interests. Marty is now retired and spends his days volunteering to help retain native diversity in Southern Illinois forests. He also is a decade into a prairie restoration program on some land his family owns.

I should have taken notes.

Obviously it is important that we manage for pasture diversity. Marty further suggested that I should be looking for local sources of native grasses to help re-establish those in my pastures. There is a clump of big bluestem that grows in the cemetery. I don’t have the foggiest notion where I could come up with Eastern Gamagrass though. Hopefully, by proper management and resting a portion of my pastures each year, I’ll see some of those natives come back out of the seed bank in the soil. By “proper management” I mean managing my pastures for what I want, not managing to limit what I don’t want. If I want additional native forages and pasture diversity I have to let the natives achieve maturity. Gamagrass may take 3-4 months to go to seed so I can’t just let the cows lop it off every few weeks. So if I want that, I have to plan for it.

Speaking of things I don’t want, I live in the part of Illinois that was recently on the news because of the massive dust clouds coming off of the farm fields in the wind, causing road closures. Some of this is due to drought. Some due to fall plowing. But mostly, it’s because there is nothing protecting the dirt, binding and holding it in place…and few windbreaks. The trees have all been cut out of the fence rows because they shade out the corn. So I invited Marty to dad’s back deck to look into the woods with me. Dad’s house is built in a 15 acres stand of trees near another 20 acre stand of trees. There are clumps of trees all around and a solid, unbroken canopy following a big creek from North to South for miles and miles. Talking to dad, he keeps the woods because he likes the woods. He thinks (and I agree) we need to have areas set aside for wildlife and recreation. But it is difficult to realize the economic advantages of turkey, deer, squirrels, raccoons and coyotes and keeping these areas forces us to operate at some economic loss…loss that is multiplied if we work to manage the forest by cutting out invasive species and removing sick or dead trees. So I asked Marty:

  • What is the economic advantage of retaining these trees?
  • Where is the incentive to cut out invasive species?

Marty survived a career of working for the government. One might think he would be looking for a government solution but he’s not (well, not overtly). Marty volunteers, apparently, massive quantities of time to cutting Japanese bush honeysuckle out of our forests. Marty says if it isn’t done – if we allow Japanese bush honeysuckle and autumn olive and other exotic invasives to persist – we are allowing our forests to decline and die. At this point, we can’t afford to lose our native forests (dominated by oak and hickory trees) so we have to actively destroy the invasives (by using glyphosate) allowing the sub-canopy to regenerate native species. He further said that our part in this process is particularly important because our tree stands tend to be isolated and fragile. (I believe Marty said “fractionated”, not “isolated”…)

600 words into the post and I finally get to the title. There is so much I want to do with those three words. “Isolated and Fragile”. In my head I’m swearing in disbelief like Lee Ermey in Full Metal Jacket. In one little phrase everything falls into place.

I don’t want to be isolated and fragile. That’s why I read blogs. That’s why I blog. That’s why you are reading my blog. That’s why I’m married. That’s why I bought the farm next to my folks. That’s why we are encouraging our kids to work with us. Heck, that’s why we had kids. I don’t want to be isolated when I’m elderly. Beyond social issues, that’s why our farm isn’t our only investment. That’s why my job isn’t our only income.  Isolation leads to fragility.

And that’s the problem with those fields. The dirt is blowing away because there is nothing to hold it down. The soil is fragile. The dirt exists in isolation. There is no polyculture. No grass. No chickory. No dandelions. No clover. No dung beetles. No worms. The crop residue is minimal, most of it has already been digested by the soil. There is no structure to the soil, it was plowed in the fall to help it dry out more quickly in the spring. Just grains of dirt, sitting all alone.

Getting back to Marty, he believes that if the native plants are shaded out by the invasives, we’ll lose that native diversity. Once it’s gone, it’s gone. The stands of trees are too isolated and if the seed is not present there is no way a Yellow Lady’s Slipper Orchid can grow. The isolated stand of trees becomes diminished by the loss of a single species. This can also happen with acorns. If saplings are shaded out or smothered by Japanese bush honeysuckle and the mature trees climax and decline, what will replace them? Pioneer trees may be carried in by birds but how far do acorns get carried? And how many decades will pass before the native oak/hickory stand is again dominant even by way of intervention by man? And how many decades or centuries will be required to return the forest to a condition that will support orchids?

Now, I realize my fellow permaculturists may have a bone or two to pick with the notion that “invasive” species need to be managed…especially the native species that have been labeled “invasive” by the man because they are too good at their job. The argument could be made that they are only growing to fill a void and that cutting them out doesn’t fix anything. I don’t think that’s incorrect thinking…and I shared those thoughts with Marty. I’m not sure Marty was entirely sold on the idea but he repeated that these stands of trees are only a few acres in size. They are isolated. They are broken apart, mismanaged and lacking health. His efforts aren’t to fix a problem so much as retain local diversity. The problem is bigger than Japanese bush honeysuckle and Yellow Lady’s Slipper Orchid. But that’s where he can help.

So Marty is actively participating in making the world a better place. He’s not roping off a section of forest and letting nature take its course. He’s not lobbying for the government to do something (well, maybe he is…but he’s not stopping there). Obviously I took a lot home from that conversation.

I could go on and on about these ideas but I think you can see what I’m saying here. Isolation and Fragility are things I am working to avoid with my land, with my family, with my finances…but it took a conversation about forestry for me to really acknowledge it.

How to Win Every Game Ever and Even Life Itself!

How’s that for a flash title?

My kids ask me how I seemingly always win. Let’s be clear. I don’t always win. Munchkin is anybody’s game. But if you involve a sheep or a Mario or a Settler of Catan, I do pretty well. Or at least my kids think I do. Some of this is due to luck. Some of it is due to experience (30 years with Mario), but most of it is a recognition of strategy. I know where I’m trying to go before I begin. I figure out what I need to do. I’m prepared for bad dice rolls. The kids don’t stand a chance…yet.

Also included in the title is the notion that I feel that I’m ahead on points in life itself. That is not a joke. I have already won. I married Julie. Nanny-nanny boo-boo. Besides, I’m always harping about vision. Knowing where I am going…figuring out I need to do to get there. I am prepared in case of curve balls. You can see why these kinds of games appeal to me.

We are enjoying playing Agricola. When you first set up the game you will likely be intimidated by the apparent complexity of the board but it’s really not so bad. Here is a finished game played in family version. It takes up a lot of room.Agricola

Each round you send your people to work for you. They can gather clay, rock, lumber or reed. They can bake bread, fetch livestock, expand your family, sow crops…you get the idea. Any action you take this round prevents someone else from taking that same action this round. Additional resources pile up weather you take them or not so you might try to hold off taking that big pile of wood this turn because it will be even bigger next turn…if nobody else takes it. Whatever else happens, you have to have enough food available to feed your people at harvest time.

Then there are key strategies to employ to help you maximize your points. Keep in mind there are only 14 rounds and 6 harvests…and harvests come faster and faster as the game goes on. Stone houses are worth more than clay huts or wood houses. Grain is easy to sow and harvest but grain is only useful up to a certain point. There is zero return in points on your investment in plowing more than 5 fields. Fencing is cheap and will wait till later. More people helps you get more resources and more points…as long as you can feed them.

So…what comes first? Well. If you don’t plow fields, build stone houses or fence barns in you won’t get many points. But if you don’t eat, you’ll have to beg for food. And nobody wants that. It takes away 3 points at the end of the game.

I feel the early part of the game comes down to one key strategy: Create a flexible food generation machine. A fireplace allows you to make food from anything. If that is not available, build an oven and bake bread. Once you can feed your family, everything else falls into place.

OK, Chris. You like Agricola. That’s nice. How about we bring this back to the real world?

Agricola does not allow me to assign a specific one of my meeples to a specialized task but real life allows that additional complexity. Julie, the kids and I are not interchangeable. Any of us could get stone, clay or reed. No doubt. But we can do so much more! And each of us are different…different motivations…different desires…different strengths. How can I leverage these differences to give our family an advantage in the game for generations of players still to come?

The current strategy (still early in the game) is to build a revenue-generating engine. If we miss payments at the bank we lose points. We can’t afford to lose points. We don’t particularly want to make payments. So we have to work hard, right now to secure our financial future. All of us chip away at the same set of chores day after day…feed, water, gather eggs, haul firewood, cook, clean, fold. There is no assigned cook. There is no assigned dishwasher. There is no assigned egg gatherer.

gathering eggs

But the time will come when our farm grows to the point where Julie and I will have to step back a bit. We will have to specialize. We may move from field work to administration, accounting or sales. The current strategy is focused on accumulation (knowledge, skill, resources). The later strategy will be utilization. Efficiency. The kids may take over portions of the farm to run as their own business units. One may keep pigs, one may be an auto mechanic, one may raise cut flowers.  The current unification and generalization makes sense. The later diversification and specialization may make sense. But the strategy will evolve as the game continues.

The difference is that the kids, Julie and I play Agricola against each other. In real life, we are a team. A winning team.

Lowest Cost Production III: Efficient Until it Hurts

In a recent posting I was suggesting we, as cattle producers, need to lower costs. I also wrote this ridiculous run-on sentence:

Is it more efficient to plant, fertilize and spray herbicide on corn and beans, harvest those crops, screen them, haul them to town, dry them in a bin, grind them into feed, haul that feed back to the farm where you feed chickens in long houses with high rates of death so we can manually pack the birds into crates, haul them to a processing plant, hang them on a shackle, dress the bird out on a conveyor, part the bird up and sell the tenders at the deli than it is to do basically the same process with cattle?

So why on Earth is chicken cheaper than beef? I have already demonstrated that I can raise slightly more meat per acre with chicken than with beef. Just imagine if I could raise 6 batches of 20,000 birds working year round? Then we can focus on mechanization of the process. I could just build a house, have my wife and kids clean out the dead birds a couple of times/day and every 2 months we could cash a check. In return, we could cover our pastures in 6″ of broiler litter each year! Beyond the increase efficiency, I would be handling feed in larger quantities, receiving chicks in larger numbers…economies of scale apply all around. But the birds would never see the sun. And they would probably stink. But a little efficiency here and there add up and pretty soon it is more efficient to plant, fertilize, spray, harvest, screen, haul, dry, grind, haul, feed, catch, haul, hang, dress, part and cook chicken than it is to do basically the same process with cattle. Largely, though, this is because cows aren’t built to digest grain and are therefore harder to mechanize.

In yesterday’s article I worked out that I need 2 acres of crop ground to support 500 broilers plus a third acre to raise those birds on sustainable pasture. If I built a 20,000 bird broiler house my ratio would be much closer to 2 acres per 500 birds, maybe less if I grow them to a mere 3 pounds. In fact, we may need less than two acres per 500 birds because I’m guessing that the feed ration is made from processed grains and by-products, not whole grains (which may even make the feed free!). I would also have to deal with the significant debt and maintenance of a long broiler house. It is difficult to determine what the true profit margins are for broiler farmers. This article indicates it’s pretty low but no financials are revealed. This article, though, paints a bleak picture and says the farmer keeps 3-5 cents for each pound of chicken produced out of which he has to pay a $550,000 mortgage…and buy groceries, make a car payment and plan for the future. I mean, it stinks for the poor schmuck but it’s great for consumers because we can buy a fully-cooked 2.5 pound rotisserie chicken at the grocery store for $6! And we only have to pay the rube $0.15 for the bird! (And here I have the audacity to raise my birds to 5 pounds and charge $15 for each one and not even give them a single dose of antibiotic!) Please don’t misunderstand me. I’m not suggesting we should pity the chicken farmer. He may be doing quite well at $0.05 per pound. He may be living out his dreams. And maybe $6 chickens are just what the world needs.

But from where I’m sitting (and based on the high rate of turnover in the industry), it looks financially bleak for our chicken farmer friend. If he decides working 12 hour days to make $5,000 every two months  isn’t what he wants to do (BTW, the payment on a $550,000 mortgage is more than the chickens earn him each month)…well, what else is he going to do with those chicken buildings? The banker may have something to say about his desire for a career change. In fact, they may suggest he just borrow more to build another chicken house. Take care of twice as many birds. Then he can make some real money! Remember this conversation in Food, Inc.? He may find himself married to chickens…at least until the “mort” in mortgage happens.

So let’s review the comparison I made in the previous article. You could borrow a bunch of money, erect a 40×200 structure of concrete and steel, put in power and water lines, heat and cooling and never take a day off again in your entire life while depending on cheap fuel prices to continue ripping, planting, harvesting, drying, grinding and delivering grain to your chicken masters…OR you could buy or rent a little land, build a little fence and run some solar-powered cows you may or may not own. If you need a day off, build your daily pasture allotment larger than normal. If you need to make a little more money, build some chicken tractors and raise chickens SEASONALLY. Or quail. Or pheasant. Or layers. Or not. Let’s just stick with the cows. Are you going to get rich? Nope. But the chicken house doesn’t look like the road to riches either. In fact, the moving target that is “rich” may be a mirage. Another day. Besides, your neighbors may not want to live downwind of a chicken house. Who wants to be rich while polluting the commons and being hated by neighbors?

Now for some news: You can manage your cattle differently than your grandpa did. You can bunch them up into a tight herd, fitting more cows on fewer acres while building and improving soil and forages. You can have your grass and eat it too. It’s true! Use dense hooves to trample uneaten grass in to feed the soil. Just allow the ground to rest between grazings and make a few (just a few) dollars on little more than harvested sunlight and rain. And you can do it with just a couple of hours each day. And the more cows you have doing this work the more impressive the results are…within certain constraints.

I started this series by weighing MY chicken operation against MY cattle operation. And the figures I reveal show that I should be growing chickens across all 60 acres, not across a mere two acres. But that is a lot of work. I fit birds in where it is appropriate and when I want to. Pigs too. Both of these act as additional profit centers and diversify my risk and income potential. None of these activities are my master.

Compare that to a commercial chicken house.

So, back to my original posting. If we are going to take on a low-margin, land extensive enterprise like raising cattle, we better find ways to keep our costs low. The good news is that cows were originally designed with grass in mind. And a blade of grass is a solar collector. Just add water. No tractors are needed. No feed grinders. I don’t even need to own a truck. I suppose, if it came to it, I could walk my cows to the local slaughterhouse. Heck with the concrete, rebar and unpayable, intergenerational debt. I do not desire to be a slave to chickens, to mechanization or to bankers…any more than I am.

What SHOULD a Cow Cost?

What SHOULD a cow cost? I don’t know. But I think it’s worth figuring out…cause I don’t have enough cows and I also can’t afford to waste cash. It’s not that 11 cows aren’t enough for me, personally. It’s that 11 cows aren’t enough for 60 acres. But I’m afraid this blog post can’t answer the question. It can only explore the idea.

Flora

In Feb. of 1976 live cattle were selling for $0.42. If you want to use the BLS Inflation Calculator, start in 1976 with $0.42 and you’ll see the current price should be $1.71. But cattle are selling for an all-time high price of $1.40. So…does that mean cattle are behind on inflation? Maybe we started at the wrong place.

OK. 1981 was a particularly bad year for inflation. Let’s start with 1982. Cattle were $0.62. Start the BLS calculator in ’82 with $0.62 and it will calculate $1.50. We’re still not there.

And that’s what I do with my free time. I didn’t spell it out longhand, I just gave you a handy link. But I could show you my work if you want. My junior-high math teacher would be shocked. I think an 11 year old me would be shocked.

February cattle are listed on CME at $1.40. That means cows are currently priced 7 years behind inflation (if you base on the 1976 price). So are cattle expensive based on historical prices or are cattle discounted compared to official inflation statistics? I don’t know. I really don’t. But I tend to think a 1976 cow is reasonably comparable to a 2014 cow. Actually, I might pay more for a straw from a 1976 Shorthorn Bull as he’s probably closer to grass than most of the currently available breeding stock. Maybe that’s why modern cows are slightly discounted…they aren’t as good.

Let’s approach it a different way. My farm in 1976 was basically the same as it is today. The same sun shone overhead. Similar rainfall patterns were observed. But in 1976 average farm values in Illinois were $1,062 ($4,347.98 adjusted for inflation). 2013 average Illinois farmland prices are $7,900. Carrying the math forward from the BLS page referenced earlier indicates land prices are currently priced 15 years ahead of official inflation!

Fencing

Let’s try again. In Feb of 1976 the S&P 500 was at 99. Today it is at 1838.06. It is now where inflation should have carried it by 2050. So is the S&P priced 36 years ahead or is everything else behind the times?

Maybe I’m looking at it all wrong. Maybe the “official” rate of inflation is understated. Maybe it is more like 6% or 8% as reflected in land and S&P. Then again, maybe demand for cattle is simply down and/or worldwide supply is up so prices are down compared to where real inflation rates would lead us to believe they belong. I don’t know. I’ll keep trying.

An ounce of gold is exactly the same as it was 38 years ago. No rust, no insect damage, it hasn’t gotten stale…no difference whatsoever. In Feb of 1976 an ounce of gold cost $130. Today (as I write this) an ounce goes for $1252. That means either gold is currently priced in 2040 dollars or real inflation is in that 6% – 8% range. If the S&P and Gold give a true picture of inflation, land could be 9 years behind the curve! Cows would be even further behind!

But I don’t care if the official inflation rate is the real inflation rate or not. I see the threat and have to work to preserve and grow my limited amount of capital. I have to plant my money where it will grow. If cows are at an all-time high…well…what goes up must come down. But if cattle are priced behind the centrally planned destruction of the dollar…well…maybe there is an opportunity. If real estate has gotten ahead of inflation maybe it’s time to rent. Maybe I should convert my 2050-priced stocks and my 2029-priced land into 2014-priced dollars to buy 2007-priced cows! I don’t really own any stock and I’m not selling the land. Anyway, I paid a price for my land that reflects the past, not the future…because the market was less crazy when I originally bought.

So I guess it comes down to faith. Do you believe the Federal Reserve will work to continue inflationary policies? Do you think they will be successful? Do you think people will still want to eat beef in the near future? Do you think that beef will necessarily come from North America?

Those last two are difficult and are at the heart of my recent post on lowest cost production. However long the time horizon, will beef be seen as a luxury item or as a necessity? More about this another time.

How much is a cow worth to the future of the farm? They really do a lot of work for us. $1.40? I don’t know. They create a lot of work too. Does the farm present other opportunities that are priced at a larger discount? I may have to scale back my herd expansion plans and focus on growth in other areas…at least in the short term. I mean, the labor participation rate is the lowest it has been since 1977. Land prices are higher than they have ever been. Cattle are higher than they have ever been. The S&P is higher than it has ever been. High prices and high rates of unemployment are not compatible. Will prices come down before employment goes up? Will my own employment rate go down? What happens then?

So back to the original question.  What SHOULD a cow cost? Which is another way of asking, “Is this the right time to buy cattle?” I don’t know. That depends. It may depend on faith. How much faith do you have? Faith in the Federal Reserve? Faith in the hamburger? Faith in the Almighty.

One final note:
If you find errors in my math, don’t bother telling my junior-high math teacher. She’ll just roll her eyes. Again.

Lowest Cost Production

Production, not consumption, makes our world a better place for all. Some of this looks like a chicken and egg discussion but it really is not. Irwin Schiff illustrated this well years ago and I encourage you to read what he wrote (link). In his story the inhabitants of the island caught and ate fish every day but it took them all day to do it. That’s expensive fish…costing them a day’s wages. Then one guy got a bright idea. He made a net (production) so people could work fewer hours to catch their fish (consumption) and could, ultimately, go on to do better things with their time like run for office or open banks (lol). Consumption is an ongoing deal and happens naturally. Efficient production requires risk, effort, imagination and capital.

I am working to insert myself into the cattle business. Just typing that causes me to laugh at my own pretentiousness but that’s what I am doing. I am working to produce cattle efficiently. This requires capital, it involves risk and varying (but never insignificant) amounts of effort. And it requires imagination. Before I move on I want to re-emphasize the word “efficient”. Profit is not a bad thing. Profit is not the measure of greed. Profit is the measure of efficiency. You and I can both produce beef. That’s fine. But I can sell mine below what yours costs because I’m more efficient. But what neither you nor I can do is determine the price. I may be able to sell a few head at $9/pound but none at $900/pound so I have no control, really, over price. I can’t force a customer to buy my beef instead of your beef. I also can’t force my customers to buy beef instead of chicken. I only have total control over production costs. My profit is the difference between the selling price (which I have little control over) and the production costs (which I have absolute control over). If I am going to succeed in the cattle business (remember that 5,000 cow thing?) I am going to have to find ways to profit from cattle production. I mean, I would much rather do nuthin’ for nuthin’ as work for nuthin’. And keeping cattle is work (though, fun work…but is it enough fun to waste the most productive years of my life with?).

But what other costs are involved in cattle ownership? I mean, look. If I have a nice herd of 20 cows and I go out to buy a $4,000 bull that I’ll keep for 3 years I have increased the cost of each calf by $66…not counting the feed that monster will eat or the repair bills he will cause. But we have only just started. Forget the bull. Let’s look around my zip code and see what else I’ll need to keep cattle (if you want to do the math check equipment costs on Tractor House). Apparently I’ll need a couple of loader tractors with front-wheel assist, a newer 4WD 3/4 ton truck, a livestock trailer, a silage wagon, some way to cut silage, a silage pit or a silo, silage blower and silo unloader (God help us!), a hay baler, a mower-conditioner, a hay rake, a trailer to haul hay bales on, ring feeders, feed bunks, head gates, an extra 4WD truck, cell phones, shotguns, rifles, 7-wire fencing, tillage equipment to tear up the fescue, a drill to plant better pasture, a wiper bar for thistle, some sort of sprayer and a big tractor to pull the tiller and drill. In our part of the country we call ourselves farmers and not ranchers and that job title comes with an immense mountain of additional iron supplementation I won’t go into here because it doesn’t effect the price of the cow…it effects the price of the corn…which effects the price of the cow. Because cows just have to have corn…otherwise they don’t get so big and fat. And we need big, fat cows whatever the cost! But all of that equipment will share shed space in the new sheds we have to build for our cow accessory collection. You should note that the whole collection must be painted one color cause that’s better than the other color and gets us more free hats and jackets and the like. And I can’t neglect the new car for my wife and she needs streaks of lighter color in her hair so her friends will say her hair looks cute as they have a $4, four hundred calorie chocolate coffee on their way to the weight watchers meeting. And my kids are going to want to play baseball and soccer and every boy should be in scouts, right? And we’ve been wanting to go to Disney.

So now what does that calf cost? Let’s see…feeder cattle are at $1.68…times 500 pounds…so I get a near all-time high $840 for each calf I sell. Minus transportation costs. Minus auction percentage. Minus, minus, minus. Shoot, just the bull accounts for 7% of the sale price of the calf crop. And each heifer has to have 4 calves to cover the costs of her own development and the average cow doesn’t last that long. How do I make any money at this with all that other nonsense going on?

Today’s post is strongly insprired by Kit Pharo’s Winter 2014 newsletter I received in email this morning (you can, and should, subscribe for free here.) In the lead article he shares his fears that we are pricing our product out of the market. More and more consumers are eating chicken over beef. Why? Because chicken is cheaper. That statement should just about make your head explode. Is it more efficient to plant, fertilize and spray herbicide on corn and beans, harvest those crops, screen them, haul them to town, dry them in a bin, grind them into feed, haul that feed back to the farm where you feed chickens in long houses with high rates of death so we can manually pack the birds into crates, haul them to a processing plant, hang them on a shackle, dress the bird out on a conveyor, part the bird up and sell the tenders at the deli than it is to do basically the same process with cattle?

Read the last 5 words again. Think back to piano lessons. Remember the bass clef? Name the spaces. All. Cows. Eat. Grass. Today not all cows eat grass. We are feeding them like they are hogs or chickens. And that’s why beef is so expensive. We have selected for tall, heavy cows. Cows that can’t maintain body condition on grass alone. Cows that need a little boost of grain to put on enough fat that they cycle on pastures that are simultaneously over- and under-rested because of non-stop grazing and animal selectivity.

We need to re-examine our procedures. Why are we doing what we are doing? We need to take it to bare-bones again to become more efficient producers. North America is a grass-growing paradise! We could be profitable raising cattle at half of current prices! But we would have to sell our tractors for that to happen. And that would hurt consumption. Lower prices lowers GDP (we can’t have that!)…but it feeds more people. We are so strongly oriented toward pure dollars we have lost sight of what we’re here to do. We are not here to use as much fuel as possible while poisoning the soils. We are here to feed the soil and feed the people. And cattle do that much more efficiently than do chickens. But you look weird walking your pasture instead of riding on a 4-wheeler. You look lazy sipping tea while your neighbors put up hay. They might think your baler is broken. And you certainly can’t call yourself a farmer if you don’t own a tractor!

So what do we really need to raise cattle? Sunshine. Rain. Salt. Fencing is really, really nice. Comes to it, we don’t need a big house or a woman with artificial hair coloring to produce beef. We could just live in a tent with our animals. Happens all around the world. Maybe add in some cast-iron cookware. Read Ben K. Green’s books to remember where we came from as a cattle-producing nation. But the house is nice. We enjoy our cast-iron even indoors. It’s handy to have a tractor. It sure would be nice to have a new 3/4 ton 4WD truck in the driveway and the kids want a pony. This is not to say that I believe farmers should take a vow of poverty. I am, however, suggesting that we farmers are impoverishing ourselves by pursuing consumption, rather than working toward efficient production. (That idea goes far beyond just farmers.) Supporting all of this extra consumption forces me to ask more for my product…or seek income elsewhere. Income elsewhere is probably easier. Well, not probably.

It’s hard work to keep a herd of animals healthy whatever the weather throws at us. I knew that before I started. I’m not here to ask for your sympathy. I’m here to say we have an obligation to attempt to lower our production costs, not simply to make more product available for consumption at lower prices, but also because we, as cattlemen, are uniquely suited to healing our soils, increasing fertility, diversity and water capacity. If you haven’t, I encourage you to check out the book Cows Save the Planet. Compare, in your mind, all of the fuel that goes into producing a pound of chicken to the lack of fuel involved in growing grass. Why is chicken cheaper? Any number of reasons…everything from government subsidies to unsustainable energy costs. But when you get down to it, it is largely because we are asking cows to be something they are not and to eat junk they don’t need so we can sit pretty in a new pickup truck.

From Broke to…Less Broke

12 years ago our little K car died in Jerseyville leaving us stranded in the dark and cold. I don’t know what we were doing out on a cold January evening. I can’t begin to imagine what we thought we needed. I do know that I had a job, we had a mortgage and we had an infant son and an old maroon K-car that my great aunt had either sold or given us. 

Money was tight and we didn’t have any cash on us. If money was so tight, why were we out? I don’t know. Maybe we just had to get diapers or something. But it was clear that money was tight – extremely tight – because Julie went to Arby’s to get warm after the car died and couldn’t afford to buy anything. Maybe those were the days before fast food restaurants took debit cards. Anyway, she attempted to nurse the baby in some privacy in a booth and couldn’t even pony up to buy a glass of water and her milk never let down without a drink of water.

I had a job that payed the salaried equivalent of $1o/hour. I made more with that company when I traveled for them and I guess we got used to spending the travel pay because when we had our first son and I came off the road everything got tough for us. I had to find a new job.

The car was seriously broken. Dad came to get us, a friend helped me haul the car home the next day and I began tearing down the engine in the garage…I think the head was warped.

That was a cold winter. Cold days and nights taking my car apart, hoping I could put it back together. Knuckles sore from holding cold metal in my hands. Soon I had the parts back, the engine together. Something else broke and got fixed. It happened a couple more times before I began a new job in St. Louis on Feb. 26 of 2001. I got myself a 50% pay increase!

For the next 7 months I drove that jalopy back and forth to St. Louis to a very challenging job with very challenging hours. I had to be in the office at 6AM, the beginning of the contracted support window for clients in London. That meant I had to leave home at 4:30. Shortly after starting my new job they put me in the on-call rotation complete with two different 25 pound laptops and a big, heavy book of contact information. There were many nights of being on call. Lengthy calls with phone techs in Southern California hospitals. “Was the machine a Nightshade or a Portland? Windows NT or OS2? Is CP running? Telnet into the attached device. Type in ‘A01RC2’ and press Enter.” Over and over. Night after night. Up again, home again, phone is ringing again. The primitive cell phone they gave me only worked in one room of our house…in one position, furthest South on the couch. I can’t say the work was entirely unpleasant but it was certainly demanding. I went without sleep but I learned a tremendous amount in a short time.

Toward the end of month 6 my 4-cylinder car decided it wanted to be a 3-cylinder car. I’m really not much of a mechanic. I just did what had to be done to make it last as long as I could. We reached a point where I just couldn’t fix it anymore. Shortly after 9-11 we bought a new car with a warranty! A Warranty! That was a financial mistake but we sold the car at 235,000 miles and I only rotated the tires and changed the oil. The Ford mechanics did the rest.

I excelled at my job. I was a total hack when they hired me but I learned quickly. My dad sometimes asks how I learned to do what I know how to do with computers. I guess there are two answers. First, I was hungry. Second, I was thrown into the fire.

So now we are at the point in the post where you ask the question, “What does this have to do with farming?

Everything. Stay with me.

11 years ago I had the beginnings of a family, a $35,000 mortgage, $14,000 in school loans and a $15,000 car loan at 0% . I know because it’s all in my diary. Yes, I tell my diary about my money problems. 29% of my after-tax income went to the car payment and associated car expenses ($300 gas, $308 payment, $86 insurance, $24 maintenance). We regularly bought hamburger helper and Eggo waffles and cereal…foods we can’t imagine eating today both for health and budget reasons. Magazine subscriptions, clothes, toys for the kids…I don’t even know what all we bought. Little things that by themselves were not harmful but together? Remember that big raise I got when I changed jobs? We spent it. All of it. The next raise too. No matter how much money I made we managed to spend it all. We went from below the poverty line to relative comfort but totally strapped for cash.

All of those debts and more are behind us because of that diary. We snowballed our way through them one at a time, paying one off to accelerate payment on the next. The house was the worst at 8.5% but because of the loan amount it had to wait till last. The car was at 0%, four school loans averaged $80/month and 4%. We picked one of those to target first, lowered our car insurance to $75 and went on the attack with our food budget. Really, we found and plugged so many financial leaks life suddenly got easier. Why hadn’t we been paying attention to where our money was going?

Skipping the details, we quickly got far enough ahead we bought a second house (mistake), moved there (bigger mistake) and sold the starter home (relief). After a few years of remodeling the new home it was time to move again. Then we moved again. Now we are at the farm.

Every few years we have to re-learn the lesson we first learned 12 years ago. It is easy to spend all of our money. For instance, our first winter here, we were used to having the house at 74 degrees. Natural gas was super cheap in the suburbs but propane here is expensive and the house is drafty. So we licked our wounds and turned the thermostat down to 57. Everybody put on a sweater, we put a space heater in a small room and we did all right. Once we got the wood stove we were back to normal. But that first winter was an expensive lesson. Based on recent writings it should be obvious that I’m in the middle of a financial lesson again now. But the other thing I take from this is that it’s really not that hard to fill in the holes I dig myself into…as long as I can work. But how much longer will I work? One of these days I’m going to be 80. How will I have time to cherish my grandchildren if I’m still a database janitor at age 80?

If you intend to hold on to your farm for any length of time at all you can’t keep falling into the spending trap. Like any other crop, you have to make your money grow and protect it until harvest. But even then you aren’t done. Once that newly harvested money is in your hand there are any number of ways the world seeks to take it from you. Just a little here…a little there…like mice stealing grain. Enough mice and you’ve got a real problem. Imagine inflation acting like mold, decaying your crop over time. How do you protect against that? We have to be diligent. Banks aren’t paying to hold money today. CDs aren’t worth buying. Land and cattle are near nominal all-time highs. How do we grow money in this environment?

These are the problems we have to solve. This is where we have to apply our time. Plug the holes in your budget and you might be surprised how quickly you can buy that dream farm. Forget to plug holes and you might be surprised how quickly you will lose it.

I have to add, too, that, like the job change listed above, when you finally get your land you will face a steep learning curve. You can do it. It will be tough but you can do it. Being both hungry and in the fire will do wonders for your work ethic. Just keep focused on minimizing expenses. Financial stress ruins relationships. Keep your expenses few and you’ll have an easier time focusing on your goals…especially your relationship goals.