Tag Archives: financial sustainability

It’s Just Money…

DSC03742A couple of really smart people told me at the beginning of my blogging journey to never write or talk about money when visiting with people outside of agriculture. The subject is difficult to navigate and often results in negative exchanges.  After following this advice for more than four years, last week I deviated and addressed the topic in the middle of a presentation at a local university.

The University of Nebraska @ Kearney offers classes for retired Nebraskans looking to expand their knowledge. For the past two years, I have presented in a class that teaches about agriculture. This group of “students” provides a truly unique audience as many of them are retired college professors who possess incredibly curious minds and no inhibitions relative to asking questions.

After a 45 minute exchange with the class, I prepared to close my talk when an older gentleman sitting in the third row caught my eye as he raised his hand with a question. He had read an article talking about the commodity markets, in particular the negative margins experienced recently in the cattle feeding business. He asked me how I protected my farm financially so that I could make a consistent profit.

My simple answer, “That is an impossible task”, led to an interesting array of facial expressions across the audience. Another hand immediately went up as the audience started to ask more questions about profit, loss, and farmers’ financial sustainability.   I thought briefly of the advice from my beef advocating mentors , but decided to go with my gut feeling and answer the flurry of questions.

We talked of the recent economic crisis plaguing beef farmers, the need for better risk management tools for farmers, and the importance of diversity in agriculture as a basic protection tool for long term sustainability. One of the hardest lessons that I have learned in my 19 years of caring for cattle is that regardless of the quality of both my animal care and the quality of the beef that my animals produce, I am ultimately at the mercy of the market relative to making a profit.

My favorite farmer’s grandfather learned many, many years ago to not put all of his eggs in one basket. For that reason, our farm grows a variety of products (corn, cattle, alfalfa, and soybeans) to sell into a variety of markets (traditionally grown as well as organic niche sales). This helps to protect us against experiencing paralyzing losses when market volatility strikes. We also follow the old fashioned adage: save when the years are good so that it is possible to sustain in the years that are bad.

The latest issue of Drover’s Magazine reports that feeding cattle in 2015 resulted in an economic crisis where United States farmers lost a total of $4.7 billion dollars over the 12 month period. The Feed Yard Foodie farm was not immune to this industry wide catastrophe, and the cattle portion of our farm has sustained significant losses since April of 2015. While this has been psychologically difficult for me, our farm business is solid enough that we are persevering in the long run.

When the class finally broke for the day, a woman from the audience came over and put her arm around me. I was truly humbled when she said, “I had no idea that farmers ever lost money. I will pray for you and your family because what you do is important and now I understand just how hard it is.”

I learned an important lesson that afternoon – sometimes compassion and vulnerability trump pride, and the truth is often the very best answer.  I do not even know that very special lady’s name, but I will remember her face and her kind words for the rest of my life.  Her compassion serves as a reminder that it is okay to be human, and that at the end of the day it’s just money

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Filed under Foodie Work!, General

Partnerships Create Sustainability…

I grew up a privileged child.  My parents always provided for me, and I never knew any form of financial insecurity.  I remember my dad sitting in his recliner chair at night watching CNN and worrying about the markets, but I never lacked for anything important.  He worked hard and, as a result, his law practice always persevered.

My parents with my daughters...

My parents enjoying being grandparents many years later…

When my brother and I approached upper elementary school, my mom went back to school and earned her Master’s degree.  She then continued her career teaching at Cardinal Newman High School.  She says that she teaches because it is her vocation, but I am savvy enough to realize that her paycheck also allowed me to graduate from college free of debt.

My parents are planners.  They are providers.  As an adult, I can look back and see that they made sacrifices so that I could pursue my dreams.  Twenty years later, I want that same thing for my own children.

My daughters and their cousin provide the next generation...

My daughters and their cousin provide the next generation…

Today, I worry about the markets looking at a computer screen instead of on a television but my face gets the same little crinkle in between my eyes that I used to see on my dad’s face.  I can now empathize with his worries of making a payroll, running a personal business, managing risk, and never losing sight of the responsibility to provide for my own family.

There are days when I am tremendously proud of my professional accomplishments.  There are days that I am scared to death that my hard work may not be enough.  Even though I believe that it is my vocation to care for cattle and raise beef, financial sustainability is never far from my mind.  It has to be—my farm is a business that must be able to endure.

It is not always easy...

It is not always easy…

Historically, raising cattle and growing beef is commodity based where supply and demand determine the price for the end product.  I believe that the single largest driver toward my financial sustainability is building demand.  The ability for me to endure requires that someone wants to purchase my beef at a price that will allow me to pay my bills and also provide for my family.

I have no financially sustainability if you do not have a desire to purchase this...

I have no financially sustainability if you do not have a desire to purchase this…

Building demand for beef from a farm in rural Nebraska is no easy task.  Cattle outnumber people 4 to 1 in my beloved Cornhusker State, so most of my customers live far away.  Growing beef is also a very capital intensive and heavily regulated business.  There are many obstacles to direct marketing and also to attaining the vertical collaboration that I believe is so critical to long term financial sustainability.

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He is raised with care…

Last week I took a major step toward achieving my dreams of building beef demand through quality.  I have known for a long time that accomplishing this would require partners and collaboration—my small feed yard in rural Nebraska does not produce enough volume of beef to surpass the challenges of building a brand or a demand for my specific product.BMG.jpg

I am incredibly proud of my new alliance with the Beef Marketing Group and am excited to enter into a new phase of learning and development.  My focus on quality will prevail and strengthen as I pool my ideas with a great group of cattlemen.   I have always led with my heart, and today still believe that the things that feel right lead to success.

ProgressiveBeefLogoGreen

I have faith that this new venture with BMG and Progressive Beef will help me to accomplish my goals of continuous improvement in animal welfare and food safety.  It will also help me to further develop a relationship with all of you wonderful people that choose to celebrate your lives over a delicious beef meal.

He still provides through mentoring to both me and my daughters...

He still provides through mentoring…

As I worked these past few weeks to complete the alliance with BMG, I frequently thought of my dad and how he always taught me to persevere while also staying true to my values.  Today I am smiling knowing that I have made him proud while also offering the same example to my daughters.

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Filed under General, Sustainable Spring

Profit, or Not?

My favorite 12 year old likes to buy blue jeans at The Buckle. I always have to take a deep breath before we go shopping because the price tag blows me away.  When I look at her size 24 blue jeans and the amount of cotton material used to make them, I wonder where the $100.00’s goes that I pay for them?

The special jeans…

Does it go to the cotton farmer?  Does it go to the designer or the person that sews the jeans?  Does it go to the retailer that I purchase them from?  While I am unsure of the breakdown of where the proceeds go, I am pretty confident that each one of the people that I named gets a part of my $100.00 bill.  Did all of them make a profit from the sale—most likely that depends on the cost that they accrued at each level of the jean making process…

Last week a Business Week reader asked me, “Is it true that cattle make only $20 per animal? That just doesn’t sound right to me. When I buy a New York steak from the market I typically paid around $6 – $7. That is one piece of steak. Where did the money go?”

Where does the money that you pay for this steak go?

Raising cattle and growing beef is a complex business.  Like my daughter’s blue jeans, there are many different people involved in the creation of the steak before it ends up at your market or grocery store.  The following is a blue print of the beef that comes from my farm…

Stage 1: The cow-calf rancher (like Al and Sallie Atkins in my Calf #718 blog series) is the first phase of the beef production cycle.  This rancher has a cattle breeding herd and cares for the calf from birth to approximately 8-12 months of age.

A young calf, standing near his mama on the AL Ranch. Al and Sallie Atkins work hard in stage 1 to offer good care to this animal who will grow up to make safe and healthy beef…

Stage 2: The feed yard farmer (like me) is the second phase.   I feed the animal until he is ready for harvest (another 4-6 months).

Just like Al and Sallie, I am dedicated to offering good care to my animals and enabling them to make safe and healthy beef…

Stage 3: The packing plant (like US Premium Beef / National Beef) is the third phase.  It is at this phase that the animal is harvested and becomes beef.

All of Al’s and my hard work comes to fruition when the animals that we raise become high quality beef for you to purchase…

Stage 4: The retailer / food service company is the final phase.  This company brings the product to your dinner table either via the grocery store or the restaurant.

From our ranches and farms to your dinner plate…

At each one of these stages, there are revenues and costs that determine the profit or loss.  Each one of us (the rancher, the feed yard, the packing plant, and the retailer) hope to be profitable with every animal at every stage.  The quote of $20.00 per head that appeared in the article was an average profit number for my stage (the feed yard) of the beef production cycle.  If each partner at each of the 4 stages were to make $20.00 per animal, that would be a total profit of $80.00.

Considering that it takes approximately 18-21 months and thousands of dollars for one of my animals to move through the 4 stages and become beef, that is a relatively small profit margin.  Additionally, during that time frame, enormous volatility exists in the cost of my feed ingredients and the market values for my animals. From a business perspective, this volatility is one of my top three challenges as I grow beef.  Sometimes I make $120.00 per animal, sometimes I lose $100.00— I hope to see an average profit of $20.00 per head over the long run…

When we made the life decision to leave the city and move back to the farm, we did it knowing the inherent financial challenges that we would face. It takes both hard work and creative thinking to remain financially viable amidst the growing volatility in agricultural markets…

Long term financial sustainability in farming is intrinsically tied to saving during the good years in order to survive the bad ones…Hopefully, in the long run, there are more good years than bad.  My daughter’s cool blue jeans and her future college education are depending on it!

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Filed under Feed Yard Foodie "In The News", General