Lately, on this board, there have been quite a bit of talk of crunching numbers, what does and doesn't pay. It has all made for very good discussion. I do hate to see it get a little personal at times (people who don't do A are stupid, etc.). But all in all it touches on some of the themes my father and I have been going through. I am in the process of taking a late lunch, so I am going to waste a little space and write about it.
My father and I live in Iowa, and have 400 acres of row crop. My grandfather farmed and had comercial angus cattle, and his father farmed and had comercial angus cattle. About 12 years ago we joined the Central Iowa Farm Business Association. They mainly focus on row crop, not many cow guys in the association, and have been an excellent bunch of people to work with.
What makes them so valuable, is you give them your costs, etc. and they can accurately track what it is costing you and acre or bushel for a wide range of expenses. Then they use that info to benchmark you against other producers in the same area and statewide. They show you the high profit 1/3, the low profit 1/3 and the average for farms your size.
While this has helped us make good, economic changes in our farming operation, it has also shown a clear trend for us. Our profit is shrinking. While we can be on par in most areas of expenses, equipment repair costs were really eating into our business. Of course new equipment expenses wouldn't be helping us out either. We were at a point where we were going to have to take on more ground (cash rent + larger equipment) or rent our ground out. We had little interest in financing a large amount of money to expand, and this last month we decided to rent the farm out. For the last few years the analysis has shown a better return figuring an average cash rent anyway.
Yes it was a bit hard, but it was the right decision to make. I have a good feeling that whoever it was in the family that first decided to farm, did so because it was a good way to make a living for him and his family. And while continuing farming is a way to honor those that went before you, making the best decision possible for your family is very much in keeping with their original intent.
Farming has changed an incredible amount in the last 10-15 years. And in many ways, row crop farming had passed us by. The technology today that is present in the row crop industry is amazing. Everyone thinks about "auto-steer" and GPS and yield monitors. But the real technology is the ability to combine a 30 ft. swath of beans at 6 miles an hour. Or plant 24 rows of corn with a picket fence stand. The efficency of some of these larger operations, their management of their costs, are pretty astounding. Those that never stayed caught up with that efficency started leaving a long time ago. The name of the game, since everyone is raising the same crop, is who can raise the most, the most efficently. While our yields have been very good, our efficency relative to that of others has not.
In the cattle business, the guy with 20 cows could possibly get a better return per cow, than the guy with 200. But it is not the same in farming. A guy with 60 acres, or 400 like us, would'nt even get close to a guy with 1500, for the most part.
So starting about 5 years ago, we really started turning our attention to our little 100 head cow herd. There is some ideal pasture ground and there are some good cattlemen in our area, but if you were to ask them, "What do you do a better job of managing, your cows or your row crop?" If they were honest, virtually all of them would say row crop. Why? Because as low as prices have been at various times through the last decade they have had to be to survive. While cattle, in the meanwhile, have been some valuable property to have and a high price can "hide" a lot of inefficency.
Where the guys out West have us beat, is that for a lot of them, cattle has been the only game in town for sometime. All we need to do is apply the efficency of the guys with row crop, and the efficency of the "Western Cattleman," to the cattle here in row crop country. And sooner or later, a lot of guys are going to have to, or get out all together.
Dad and I strongly feel that things will come full circle. What has happend in row crop agriculture will catch up with beef production. All we need is the low prices to set things in motion. Once we get them, there are a ton of things waiting on the sidelines in the beef industry that will attemp to establish themselves. Technology is ready to lead another change of things. And yes, we can talk about that technology being in the form of DNA testing, and DNA based EPDs, or sexing semen or even cloning, but think of the technology to be found in a single, plastic ear tag, or RFID button, that will allow that animal to be traced back to your farm.
I am not going to guess what will or won't establish itself as the greatest thing since EPDs, but I do think it will make for an interesting time. I do think the next decade may hold more change for us than the last two or three (since herd records and EPDs).
One thing is for certain, while row crop is a game of who can grow the most the cheapest, the cattle side has one difference. We are not all selling the same thing. I hope that means there is room for everyone, and there is no reason, if there are major changes that take place, that anyone needs to be left behind. Here's to everyone finding their niche and my apologies for all the typing this afternoon. Good Luck.
My father and I live in Iowa, and have 400 acres of row crop. My grandfather farmed and had comercial angus cattle, and his father farmed and had comercial angus cattle. About 12 years ago we joined the Central Iowa Farm Business Association. They mainly focus on row crop, not many cow guys in the association, and have been an excellent bunch of people to work with.
What makes them so valuable, is you give them your costs, etc. and they can accurately track what it is costing you and acre or bushel for a wide range of expenses. Then they use that info to benchmark you against other producers in the same area and statewide. They show you the high profit 1/3, the low profit 1/3 and the average for farms your size.
While this has helped us make good, economic changes in our farming operation, it has also shown a clear trend for us. Our profit is shrinking. While we can be on par in most areas of expenses, equipment repair costs were really eating into our business. Of course new equipment expenses wouldn't be helping us out either. We were at a point where we were going to have to take on more ground (cash rent + larger equipment) or rent our ground out. We had little interest in financing a large amount of money to expand, and this last month we decided to rent the farm out. For the last few years the analysis has shown a better return figuring an average cash rent anyway.
Yes it was a bit hard, but it was the right decision to make. I have a good feeling that whoever it was in the family that first decided to farm, did so because it was a good way to make a living for him and his family. And while continuing farming is a way to honor those that went before you, making the best decision possible for your family is very much in keeping with their original intent.
Farming has changed an incredible amount in the last 10-15 years. And in many ways, row crop farming had passed us by. The technology today that is present in the row crop industry is amazing. Everyone thinks about "auto-steer" and GPS and yield monitors. But the real technology is the ability to combine a 30 ft. swath of beans at 6 miles an hour. Or plant 24 rows of corn with a picket fence stand. The efficency of some of these larger operations, their management of their costs, are pretty astounding. Those that never stayed caught up with that efficency started leaving a long time ago. The name of the game, since everyone is raising the same crop, is who can raise the most, the most efficently. While our yields have been very good, our efficency relative to that of others has not.
In the cattle business, the guy with 20 cows could possibly get a better return per cow, than the guy with 200. But it is not the same in farming. A guy with 60 acres, or 400 like us, would'nt even get close to a guy with 1500, for the most part.
So starting about 5 years ago, we really started turning our attention to our little 100 head cow herd. There is some ideal pasture ground and there are some good cattlemen in our area, but if you were to ask them, "What do you do a better job of managing, your cows or your row crop?" If they were honest, virtually all of them would say row crop. Why? Because as low as prices have been at various times through the last decade they have had to be to survive. While cattle, in the meanwhile, have been some valuable property to have and a high price can "hide" a lot of inefficency.
Where the guys out West have us beat, is that for a lot of them, cattle has been the only game in town for sometime. All we need to do is apply the efficency of the guys with row crop, and the efficency of the "Western Cattleman," to the cattle here in row crop country. And sooner or later, a lot of guys are going to have to, or get out all together.
Dad and I strongly feel that things will come full circle. What has happend in row crop agriculture will catch up with beef production. All we need is the low prices to set things in motion. Once we get them, there are a ton of things waiting on the sidelines in the beef industry that will attemp to establish themselves. Technology is ready to lead another change of things. And yes, we can talk about that technology being in the form of DNA testing, and DNA based EPDs, or sexing semen or even cloning, but think of the technology to be found in a single, plastic ear tag, or RFID button, that will allow that animal to be traced back to your farm.
I am not going to guess what will or won't establish itself as the greatest thing since EPDs, but I do think it will make for an interesting time. I do think the next decade may hold more change for us than the last two or three (since herd records and EPDs).
One thing is for certain, while row crop is a game of who can grow the most the cheapest, the cattle side has one difference. We are not all selling the same thing. I hope that means there is room for everyone, and there is no reason, if there are major changes that take place, that anyone needs to be left behind. Here's to everyone finding their niche and my apologies for all the typing this afternoon. Good Luck.
