Is “Commercialism” good for economy?

Is Commercialism  good for economy?

Here is a blog I wrote in December of 2009 but did not enter. It still stands today.

The last couple of days have been revealing to me that world we live in is changing. One of the ways is the way we buy things. When you are in a brick and mortar store you look for the sale signs or how much it has dropped from what previously was fair. When shopping on the internet we compare prices at several places at lightning speed either through comparison sites or multiple tabs or windows open.

But are we receiving more for our money or being played? The recent Black Friday is an example my wife came to me and said this has never been cheaper and may not be there again for a long time.  Yesterday, December 3^rd, I found it on the front page of Yahoo cheaper.

2 days ago a friend called me for a great deal on phone unlimited and high speed internet from our current provider for local phone service. I logged on to the site and found out a $79.00* deal cost $129 per month without even changing any options.  $50 difference is this false advertising? I will leave that to you.

Are there any businesses that give you the straight talk or are we all becoming car dealerships? Loss leader, Bait and switch, Incomplete comparison and others are commonly used to lure consumers in then increase sales and margins. http://en.wikipedia.org/wiki/Category:Advertising_techniques

We recently were involved in a real estate transaction where the contract (that I would not sign) was revealed only after we had wasted 3 weeks of our time bargaining. The contract was so one- sided it basically said they keep your earnest money even if the seller cannot complete the deal.

Springing Acres welcomes dairy farmers to view our rates online Literature and Application . There are no points, application fees, recording fees, origination fees, variable rates ect in our leases.  A copy of an example lease is available immediately after we have approved you application and are doing the farm visit. We are a No Bull Business.

A Sound Feeding Program

Finally some relief on the feed front corn below $7 did I just say corn below $7. It is hard to believe it but for now this is what we have. Maybe putting up some High Moisture may be in order. I mentioned wheat midds to several people a couple of months ago. 

Do you have a sound feeding program?

Cows should always be fed on time. When they come out of the parlor fresh feed should be there or pushed back up. They need to eat then lay down (more blood to udder more milk).  

Water, water and more water .  Clean fresh, lots of space no stray voltage water. 

The ration should be checked for dry matter weekly including high moisture shelled corn, corn silage, haylage and all other feeds that have a moisture level above 16%. Make sure you or your nutritionist can make changes quickly or you will not do it. The batch sheets should be changeable in a spreadsheet, printed and posted for feeders immediately after checking. A gram scale and microwave is the way to do it, unless you are like us and have a feed lab 4 miles from you.  

Example 50 lbs haylage at 65% moisture=17.5 DM

Example 50 lbs haylage at 55% moisture=22.5 DM Do you think the cow noticed 5 pounds of DM? The feeders need to tell you when the bucket of feed weighs more or less than it did yesterday. 

Your feeders need to know how many cows are in that group. Did you dry, cull or sell cows? They need to know when more than a few are removed or added. 

Ration changes. Transition rations are important. The rumen takes time to adjust. 

Check ingredient processing. Did the delivered corn come ground or cracked?  If you feed processed corn silage are the kernels cracked today? Is the haylage long or short? 

There are probably 20 other things to consider. We see many of these things being overlooked in the field. Think about you feeding program not your ration. 

The price of cows, http://cdp.wisc.edu/milk%20production%20costs.htm.  Look at this page 3^rd paragraph May $1,200, June $1,400, July $1,200, August $1,435 and September $1,200 don’t let the seller of cattle talk about last month’s prices talk about this month’s.

On the lighter side http://www.agweb.com/blog/late-night_laughs/?Year=2011&Month=8

Positivity vs. Irrational Exuberance

We are almost there. Fall the season of harvest!!!  

Are you positive this year http://www.youtube.com/watch?v=Z45EB4TiYz4 or negative or there is a third choice Irrationally Exuberant. I believe the third choice was when dairy cattle went to $2500 for heifers a short while back. The other current might be corn going through the roof.

You may ask what is the definition of Irrational Exuberance and what does it have to do with the dairy business? The term irrational exuberance became Greenspan's most famous quote, out of all the millions of words he has uttered publicly. The term "irrational exuberance" is now often used to describe a heightened state of speculative fervor. It is less strong than other colorful terms such as "speculative mania" or "speculative orgy" which discredit themselves as overstating the case.

What!!! My definition is investing in things that don’t make an adequate return on investment and/or overvaluing your investments. Do you put the pencil to the paper or do what everyone else does? Do you look at history or only to the future? Which investments have higher return crops, dairy or equipment? You always have to put in opportunity cost even if you are paying cash.

We don’t know when, where or why, but one event can often be the catalyst for a lifetime of achievement. For the founder of Cactus Feeders, Paul Engler, that “event” might have occurred when he was 13 years old.

While Paul’s dad was away on a business trip, Paul slipped away to the local cattle auction and purchased his first herd of cattle. As he tells the story, I think we can all learn from his experience.

“On Wednesday afternoons when the sale was going on, I’d take my horse and go up there to work. So, when my father was gone, I sat up in the ring and bought myself a hundred head of cattle, and I didn’t have a dime! After the sale, the sale barn operator, the owner, said, ‘Paul, you bought some cattle today.' “And I said, ‘Yes, I did.’

“And he said, ‘You don’t have any money, either, do you?’

“I said, ‘I don’t have a cent.’

“And he said, ‘Well, how you gonna pay for these cattle?’

“I said, ‘I guess you’re gonna have to loan me the money.’

“And I guess I had a good enough reputation around there, that he said, ‘Okay, we’ll do it.’

“So I went home and told my mother. She had a fit. She said, ‘You’re gonna get the worst licking you ever had in your life when your dad gets home.’

“First of all, she thought I got cheated and didn’t know what I was doing. We had a neighbor who was a rancher. So she ran over to tell him and he said, ‘No, Paul did a good job buying his cattle.’

“I got the cattle home, branded 'em, put my brand on 'em, and just turned 'em out with his [his father’s]. When my father got home, he said, ‘Let’s go look at the cattle.’

“We drove over there. He said, ‘The herd got a little bit bigger while I was gone.’ But I was ready for it. I told him what I did and he said, ‘How’d you pay for them?’

“I told him and he said, ‘Let’s go down to the bank. I think we can do a little bit better.’

“And we got it all done, and instead of getting a licking—and this was a very touching thing to me—he stuck out his hand and shook my hand and said, ‘I’m proud of you, son.’

“So it was a nice deal and that’s how I got started in the cattle business.”

Cactus Feeders is now the largest cattle feeding operation in the world.

Agripreneur Anecdote

August 26, 2011

 By Kevin Spafford

 Legacy by Design Farm Journal

Do we have you thinking?

What has been my mind this year? Stability!

What a ride this year has been economy good/economy bad. Would you like a stable milk price, a stable feed price? Join the rest of us in the dairy industry and all other businesses and employees and retirees. August futures Friday for class 3 milk $21.50 August 2011down to$16.97 in February of 2012. Source http://www.cmegroup.com/trading/agricultural/dairy/class-iii-milk.html 8-5-11. You say so what. On February 7^th the August 2011 was trading for $16.86 and January 2011 $15.73 http://www.dailydairyreport.com/data/ddr020711.pdf. Six months before August they were off 27.52% up. Even though the dairy business is better now you the dairyman need to look for opportunities to lock a profit between feed and milk.

I’ll bet you want to know if we should vote for or push Foundation for The Future. We at Springing Acres have not decided yet it is still changing as they move it to committees to see what our new farm bill will be. We believe in the free market system, so it is hard to put our hands on something that limits expansions. But in the name of Stability we are looking at it.

What will be happening next with Europe’s euro crises? The S&Pdowngrade? The answer comes only with time.

So keep analyzing feed costs, labor costs and develop a marketing and input purchase plan. Check all the biggies and visit sites like http://cdp.wisc.edu/Welcome.htm ; they have spreadsheets and literature to help you understand financial statements. It will help you be informed so you can keep you creditors happy and maybe even lease a few cows. Cows have the largest return on investment on the farm at least throughout history.

By the way I like the choose my plate I believe dairy is more prominent. http://www.choosemyplate.gov/

Positivity

Dig out those magazines they are turning positive.

Financial update: some profit coming in the dairy industry. Have you started locking some margins?

For the cattle buyers please don’t overshoot prices for dairy cattle. There are still lots of replacements. Please read this article. It’s about land but follows through. We call it the 20/20 rule. 20% income down and 20% higher inputs.

If you don’t stay up late, please add a bookmark to this one.

It’s about Michigan. Please read pages 1-12 of Michigan Farmer February 2011. Let’s hope the feathers last page 12. I talked to Governor Snyder before he was elected. He seems like a straight shooter.

True GREEN Energy page 8 Dairy Today Power and Profit January 2011.

Dairying in the year 2011 (The tween years)

Welcome to our Blog, if this is your first time here. We now have a Facebook called Springing Acres.
Guess what’s back on our mind? Yes, just boring old economics.

In October of 2009, we wrote in article on Milk Pricing Strategies or Profit. We’re still in that mode.
The difference today is most of the press is on the same page. Here are a few links from other sources to get you going:
Use Dairy’s Rally to Get Started Marketing in 2011
Dairy Margin Insurance Making More Sense
Since the writing of our Milk pricing blog post we have had changes to the Livestock Gross Margin.
LIVESTOCK GROSS MARGIN FOR DAIRY CATTLE INSURANCE POLICY QUESTIONS AND ANSWERS.

The market this year is going to be interesting to say the least. Here is January 3rd’s daily dairy report and here is January 28th’s daily dairy report.

Are you motivated to develop a marketing plan or wait and see?

Eternal Optimist or Pessimist

Every problem was at one point a wee disturbance. What a ride life is, the lowest price for cows since 1999 http://usda.mannlib.cornell.edu/usda/current/AgriPric/AgriPric-10-30-2009.pdf page 11. Did you notice I did not say the lowest milk price? While we all get the negative view from the media or from others talking, our best option I to accentuate the positive http://www.youtube.com/watch?v=Z45EB4TiYz4 . We are in a renewed era of people thinking before they pull out the credit card or checkbook. That is just for personal spending. Business still has to think (always should have) does this investment pencil. We at Springing Acres did not think $2000 cows penciled based on our experience of 30+ years in the dairy business. That is why almost all customers had to put money down during this last high cattle price period.
Enough looking back. Today the economics are in the dairyman’s favor. It is all in the presentation what happens from here on your farm. Below is the first year of a lease Plan 1 from Springing Acres for 40 cows. Look to the bottom for imputed milk price, cull rate feed expense ect. This example raises the heifers sells the bulls as calves and replaces the cows culled.

20.25 % gross to lease target <18%


41.97 % gross to feed Target <50%

39.45 % ROI Cows Target > 36%

	A	B
1	Income	Year 1
2	Milk	116853
3	Cull cow\ bull calves	5940
4	Springing Heifer Sales	0
5	Total Income	122793
6
7	Expenses
8	Feed	51539
9	Heifer raising costs	4738
10	Interest Bank	0
11	Lease payment	24869
12	Other variable expenses	11090
13	Total Exp	92236
14
15	Income-Expenses	30557
16	Fam Living	0
17	Cattle purchase	13200
18	Total Dispur	105436
19
20	Debt Financ
21	And Repaymt
22	Bank Pmt	0
23	Total Pmts	0
24
25	Net Cash Income	17357
26	Borrow Bank	44000
27	Bank Debt	0
28	Heifers owned yr 1	18.05
29	Heifers owned yr 2	36.10
30	Heifers owned yr 3	44.65
31
32	fill lines 26b-46b not red
33	# cows	40.00
34	#cows in milk	35.20
35	# cows dry	4.80
36	Milk price net	14.00
37	# milk/cow	65.00
38	$/cow purch	1100.00
39	cull rate%	30.00
40	cows culled/pur/mo	1.00
41	cull price/cow	400.00
42	heifer calves born /mo	1.58
43	bull calves sold/mo	1.58
44	$ bull calves sold	60.00
45	feed cost/cow milking	3.70
46	Feed cost/cow dry	2.30
47	lease rate/$1000	47.10
48	loan payment/$1000	0.00
49	loan %	9.00
50	other expenses/day/cow	0.76

This Worksheet has been a thorn in our side for the last 8 months or so. Not now when 2 of the 3 ratios are in line we are ready to go. Are your barns full? I will let you ruminate on this article for today. Feel free to comment.