What's So Great About the Way We Farm?

Are there any industries, other than production agriculture, that buy inputs at retail price and sell goods at wholesale price?

A conventional farmer buys seed, fertilizer, chemicals, and equipment at full retail value from a manufacturer.  Farmers utilize those ingredients to grow large quantities of a commodity - corn, soybeans, or wheat among others – and sell their wares at wholesale prices to a manufacturer who will sell a product at retail price to a consumer.

Where I Belong

Am I really in the right job, am I using all my skills, am I challenging myself, am I working hard enough, am I working too hard?  Should I go back to school for a graduate degree, should I quit my job and become a missionary, should I go back to public accounting, should I start farming?  Should I learn how to write code for software programming, should I dedicate more time to write, do I spend too much time writing, does anyone ever read these things?  Would it be smart to sit tight until I find a wife before making a bold career move?  Or should I make the move and let relationships worry about themselves? Should I buy a new sexy pickup truck, should I buy a house, should I buy stock options that could pay off in multiples (or zero), or save it for a big shiny engagement ring in case I run into “Ms. Right?”  Or have I already run into her and I need to stop being ridiculous?

Tax Tips for Farmers: The Case for NOT Prepaying Expenses

Here's a piece I wrote for the Corn & Soybean Digest:

It’s standard practice for farmers, who are cash basis taxpayers, to accelerate expenses at year-end. Paying fertilizer, seed, and chemical bills prior to Dec. 31 can create a paper loss and reduce your current year taxable income to near zero or below. The sister practice is to defer income into the following year by holding a portion of your corn and soybean crop to be sold after Jan. 1.

Follow the link here to read the rest of Tax Tips for Farmers: The Case for NOT Prepaying Expenses

Effort Does Not Equal Value

I was watching Shark Tank yesterday and it struck me how often people over-value their effort.  Many people seem to think that the harder they work, the more their business is worth.

One woman in particular, had not received any offers from the Sharks – all five were out.  Then she welled up in tears and between sobs tried to explain how hard she’s worked over the past four years to bring her product to this point.

Watching this, I wanted to jump through my television screen and explain to this woman that how hard she worked was irrelevant.  Here’s why I believe this:

Obama's Poorly Hidden Secret About General Motors

My stomach churns every time I hear President Barack Obama tell me that he saved the auto industry.  And this week in the Vice Presidential Debate with Congressman Paul Ryan, Vice President Joe Biden made the following remarks when discussing how he and the President “helped” the economy:

We immediately went out and rescued General Motors. … when that occurred, what did Romney do? Romney said, “No, let Detroit go bankrupt.”  (The Washington Post Transcript)

Biden’s assertion is clearly that the Obama Administration saved GM from bankruptcy, when Mitt Romney wanted to supposedly usher it to the grave.

What the Obama/Biden ticket fails to accurately disclose is that General Motors did, in fact, utilize Chapter 11, Section 363 of the U.S. Bankruptcy Code to reduce its liabilities and get a fresh start.  But don’t take my word for it, read its own words from the General Motors' 2010 Annual Report (my emphasis):

Our company commenced operations on July 10, 2009 when we completed the acquisition of substantially all of the assets and assumption of certain liabilities of Old GM through a 363 Sale under the Bankruptcy Code. As a result of the 363 Sale and other recent restructuring and cost savings initiatives, we have improved our financial position and level of operational flexibility as compared to Old GM when it operated the business.

The annual report explains that as part of this 363 Sale a new entity named NGMCO, Inc. was formed and “acquired substantially all of the assets and assumed certain liabilities of General Motors Company.”  This entity then went so far as to change its name to – take a guess – General Motors Company.

The next step in the transaction was for the existing General Motors Company (“Old GM” according to the company’s own words) to change its name to “Motors Liquidation Company.”  Creative, huh?  The company formerly known as General Motors Corporation continued to exist until the remaining assets and liabilities could be liquidated, and from General Motors’ 2011 Annual Report we learn that, “On December 15, 2011 MLC was dissolved.”

Wait, wait, wait; walk that back again.  Biden puts Romney on blast for wanting to “let Detroit go bankrupt.”  Not the city of Detroit itself (although it could probably benefit from bankruptcy as well… I digress), but specifically General Motors.

So the genius alternative to bankruptcy that Obama/Biden are taking credit for is to let General Motors utilize provisions in Chapter 11 of the U.S. Bankruptcy Code to sell its assets to itself. 

Here it is again in Crayola:  Obama/Biden saved GM from bankruptcy, by letting it go through – say it with me now – BANKRUPTCY!

The only difference was that Obama’s version puts the American Taxpayers on the hook for 500 million shares of GM stock.  The break-even share price on our (the taxpayers’) investment is $53.00 per share.  What was the last closing price, you ask?  Get ready… you may want to sit down for this: $24.44.  A little public school math tells you that figures out to an unrealized loss of $14.28 Billion dollars.

OUCH!  No wonder Joe Biden was so angry the other night:

Photo Credit: Alex Wong/Getty Images via www.rollingstone.com

Motivation

I went for a bike ride this afternoon and on my way out, I passed this family of a mom, dad, and two boys maybe 8 and 4.  The youngest had training wheels, the dad seemed to spend most of his time at the front of the group stopped, looking behind at his crew, and the mom was in the back barking orders basically the entire time.  I saw this family early on my route and was surprised to see them still on the path on my way back home also.

When I came up to them the second time, I passed the Mom first (still yelling at everyone ahead of her), the youngest boy, then the oldest boy (looking bored, wanting to go faster), and the dad (stopped, turned around, listening for orders).  It wasn't until after I rode on past that their conversation sunk in and I realized what I had just heard.

The youngest boy slows and starts to get off his bike.  The mom screams, in one of the shrillest I'm-glad-my-mom-doesn't-scream-like-that voices, "keep going, Riley.  KEEP GOING!"

A Lesson on Enthusiasm

This kid is probably four or five, not yet in kindergarten and still in the "this many fingers" age range. He's rocking that deep summer tan and bleach blonde hair that only a kid can achieve, but don't let his cute appearance fool you.  No, you have to keep your guard up around this little guy.  He has a mouth like a sailor (in that oh my goodness, you have an unbelievably strong command of the four letter vocabulary kind of way) and he loves to deliver hay-makers to the baby-makers when you lose focus, if you know what I mean.  Which works out perfectly, because an average adult male's future children are about fist high for him.

You know how with most little kids you tease them little, poke them in the ribs and they laugh and think you're a little funny and one of the cool adults... that's not this kid.  If you even think about joshing with him a little he wants to literally knock you unconscious, laugh at you, and make out with your girlfriend... and then laugh at you again.  Maybe I'm embellishing a little bit, but only in the sense that it will be a couple more years before he starts making out with girls.  Mark my words that before he graduates high school he will have knocked a kid out with one punch and stolen someone's girlfriend.  I'll bet you five bucks and if both happen to the same dude you owe me double.

What Ever Happened to the Local Butcher?

This whole pink slime / lean fine textured beef story has me thinking... what ever happened to the local butcher?

I grew up on a farm and am still lightly involved in the operations, I have an ownership interest in some beef cattle with my brother, I have cousins who work in the meat industry, and years ago my uncle ran the local butcher shop.  So admittedly I probably think about beef/meat a bit differently than the average grocery shopper.

Back in the day, when I was really young, I remember there being a butcher shop in town.  I vaguely remember going inside once and, as I recall, I think I remember Mom telling me that we didn't shop there very often because it was more expensive than the local grocery store.  But before I was very old the butcher shop burned down and was never rebuilt.

Today most of our meat comes from a grocery store, from a very large meat processing company, from a feedlot.  Over the entire product life-cycle, from mama cow's udder to feedlot to packer to grocer to kitchen freezer, that meat probably travels hundreds, if not thousands, of miles.

Back in the day, the life cycle of meat may have stayed within a single the county.  A farmer had beef cows, fattened the steer calves, took them into town to the local butcher, and the meat was either brought home to the farm freezer or sold in the shop to the town's folk.

So what caused us to transition away from home grown food to meat from parts unkown?  Here are some of the reasons  I think contributed to the downfall of the local butcher shop:

• Dwindling populations in rural communities, decreased local demand for meat.
• Farm crisis in the 1980's set back rural economies, probably hurt nearly every business in rural communities.  Again pressure on demand.
• Downward price pressure from big, growing meat packing companies who could use economies of scale to produce low cost food.
• FDA regulations that might increase the costs of "food safety" compliance for small butcher shops.
• Commodity cost fluctuations.  A large packer/processor and feedlot would more easily be able to hedge against volatility in both inputs and revenues.  The local shop would be less likely to benefit from these contracts and hedge against risk.

Decreased demand, price competition, increased compliance costs, price volatility... that's a recipe for small business failure.

If you can think of other reasons or if you agree/disagree with mine, please comment below.  Or if you have any stories about back in the day when the local butcher reigned supreme (the pre-chicken nugget era maybe?), you DEFINITELY need to comment below.  I'd love to hear your stories.

You Don't Train For Easy

In marathon running, you don't train for the first mile.

In culinary school, you don't train to be a cereal chef.

In cycling, you don't train to ride downhill.

I took a short ride on the bicycle tonight after work. As I ascended and descended a couple of medium sized hills the thought occurred to me that everyone feels really fast going downhill, but only the strongest riders (myself not included) feel fast going uphill.