Macros versus Micros

Top down management. Greece will ruin all of us.
http://en.wikipedia.org/wiki/Greece


http://en.wikipedia.org/wiki/United_States

 http://en.wikipedia.org/wiki/Michigan

Yes there are 3 links. Open them in new tabs easier to flip back and forth. Michigan is about as populous as Greece is. Michigan has a median income of $44627. Even though it is not a fair comparison to Greece’s $27624 GDP the US has a $48147 GDP per capita. Who is the superpower here Greece or the US? Now that you have answered that question and asked, when was the last time Greece bought my product or when did I buy a product or service from Greece. You have to ask yourself, why does our market move because of Greece.



The answer is it should not. Greece is a micro not a macro. If the rest of Europe is sound Greece is irrelevant. Your neighbor can’t pay for his cell phone you can. Does that mean you can’t pay for yours next month?



We have silly, fickle nonsensical markets right now. Milk futures for April milk have changed over 18.1% between January 3 and March 8, 2012 they will be up today (my prediction). That’s the entire profit of most farms WOW!

http://www.dailydairyreport.com/data/ddr010312.pdf



http://www.dailydairyreport.com/data/ddr030512.pdf



http://www.dailydairyreport.com/data/ddr030812%20.pdf



So did you lock in prices in January or are you waiting?



This article is not even about pricing our locking in pricing it is about what you spend your time managing. You are the CEO or the CFO do you oversee (delegate) the micros and manage (do) the macros? While you enjoy milking the cows (helps employee morale once in a while) you make more money working the ration to save $.50 per cow with no loss of milk or components. Locking in contracts for milk price and picking proper insurance products to protect the business that’s where the money is. The big things first, delegate the small stuff and ask to get reports how many cows are bred and how soon. You don’t have to do the work just help (enable) others to do it well.



Flaming enthusiasm, backed up by horse sense and persistence, is the quality that most frequently makes for success.

Dale Carnegie

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?