by Glen Klippenstein, ACA CEO

Let's Count our Blessings!

My mother told me as a child that it took “much less energy to smile than frown.” If we have the ability to be ever grateful, the whole world becomes a friendlier and rewarding place. I often tell young people that the best times in life are the times that good and positive thoughts pass through our minds and affect our affections and energy levels. They don’t cost money – anyone can be a recipient – they are very fulfilling and rewarding.

Today all of us face changes, many of them without prior comparisons. It seems the whole world is sometimes turned on its ear – change is coming at us so fast that we feel intimidated and fearful (it’s amazing to me that some people are asking for more change – it’s become a political mantra).

If we step back and look objectively at our landscape, assuming we have the needed experience to see things for what they really are, we’ll better see the roadblocks and opportunities. Basic values and principles don’t change much – it’s only when we veer a ways off that confusion and frustration take over. That’s why we value consistency in the people we can count on.

For most of us, we have chosen to raise beef from cattle and feedstuffs. Most of us have land and many of us value the lifestyle land and cattle provide for our families.

We love our country and understand how important a strong Nation is for its citizens and beyond. We are a powerful, creative, energetic nation and its people should have a confidence that allows us to help make a better world. The vast majority of Americans believe in a higher Being and an authority that keeps everything, including us, in balance. In addition, we have family and friends that help make our world whole, exciting and worthwhile. It does seem that when we consider it, we have the “motherload” of what it takes to smile – then why do so many frown?

Yes, agriculture especially is undergoing a paradigm shift of major proportions. While certain catalytic forces have created shifts in the economic climate recently, we can’t help but wonder where we’re going and where we’ll be and how to go to where we’ll want to be.

There is little doubt that the stuff we grow on our farms and ranches has been vastly underpriced for a long time. $2 corn, $5 beans, $3.50 wheat, $0.65 finished cattle, $0.11/lb milk etc. are only a few years back. Now look at it! Net farm income has nearly doubled in the last three years.

Ag land values have risen 26% in the last two years. Farm business debt at $230 billion is just over half as much as the nearly $500 billion appreciation in just those two years! The present balance sheet for production agriculture has never been so secure. The net profit forecast for 2008 is at least 50% over the prior 10 year average, and this does not include the increased land values. Asset value of our farms and ranches is now at over $2.2 trillion of which 86% is attributed to land value. On the other side of the coin, our input costs are increasing dramatically.

We as farmers and ranchers are highly dependent on energy for fuel, fertilizer and chemicals that drive up the cost.  This has an especially direct input cost affect on livestock. Machinery and seed are far more expensive today than just a year or two ago. We are on an escalator and don’t know where it will stop or how to slow the cost side of the ledger. We are concerned that land prices are in the danger zone and input costs have no end in sight. These cycles, even though far less dramatic, have taken place in the past. The late 70’s and early 80’s were traumatic. According to some renowned and track-proven experts, this cycle for most, will not be as difficult and probably even afford far greater financial opportunities than those prior cycles. The “tsunami wave” will surely crush some, but in the end agriculture could well stand in the healthiest position we have known.

The world is changing – huge populations are becoming wealthier and want what we have grown accustomed to – higher protein food, an easier and diverse life and more freedom. If we have the confidence and courage to “ride the wave” to the future, we could easily be at a better place with our land, our genetically superior documented cattle, our faith, our family and friends. Keep doing business so you can “ride the wave” to where you want to go.

I want to say in a strong way that those of us that truly believe in the “hybrid advantage” and are accustomed to using it to advantage will be way ahead of the curve when new input cost levels hit home. The extras of fertility, longevity, decrease in management problems and increase of a tender high quality edible product compared to the caloric inputs will be a mandatory financial life savor. We have used hybrid advantages in almost all other plants, animals and even cars. In over 100 field tests in Ohio, alternating varieties of seed in stripes of 2-4 rows that reach pollination at the same time has increased average production by 15 or so bushels per acre. That’s a lot of money at $5/bushel! With cattle, we can increase lifetime production in a cow herd with the hybrid advantage by over 20%!

Because fertilizer prices are so high many pastures and hay fields will be completely bypassed by the fertilizer truck or there will be less put on in the future. In addition, lots of grass will be turned into corn, beans, wheat and milo, so the national cowherd will lose numbers. Calves will have more price competition from under-used feedlots and consumers will pay up for the beef product they love, when compared to higher priced pork and poultry. In addition, U.S. beef is gaining renewed access onto the menus of other countries. Altogether the future for beef prices should be on a big upswing.

Cull the cattle that are stealing from  you, and go out and buy the best you can afford to increase the value, profitability and pride of your herd over time. Use every advantage and efficiency you can. Promote to your neighbors, do your own work and support your ACA and cattle associations.

Good Luck!

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