Scythe & Spade Blog

LEADERSHIP

by Chas Bonner

Leadership is one of those concepts that is ill-defined, and perhaps impossible to define. Nonetheless, it is of critical importance in any enterprise.

Recently, there was a lengthy study completed by the federal government (hardly a bastion of leadership) entitled “The Best Places to Work in the Federal Government.”

Of primary interest in the study was that the key factor in being a good place to work was not immediate supervisors, but rather perception of top management. Good leaders, (therefore good places to work), were those who provided meaning and importance to work, a sense of purpose, caring, and an ability to make the world a better place. Money was not meaningless, but was far down the totem pole. Purpose and affirmation of that purpose are key. Finally, deeds must follow words, and if not parallel, it is soon noticed and consequences follow.

The Center for Creative Leadership conducted a study of employee retention: In organizations where there was a prevailing perception that “top management cares,” 94% of all employees planned to stay; in those organizations where top management did not appear to care, only 43% planned to stay.

This is a compelling message to each of us, whether managing a business, farm, ranch or even household.

Blog #28 - 9/17/10

by Chas Bonner

THE HOUSING BUBBLE-BUST

One might wisely ask, “What is a blog about housing doing in an agricultural medium?”

First, every farmer lives in a house, and second, every person in the country knows what housing has done to our economy as well as to their own family economics.

But all is not doom. There have been some positive outlooks for months:

• The largest builders in the country are public companies, and because of heavy cost cutting, bond sales, government tax breaks, and asset sales, they are in sound financial shape. In fact, many have seen a doubling of stock price off the bottom.
• These builders have a reported $12 Billion cash, ready to invest.
• Building lots owned by these companies are actually on the increase. With a 60-80% decline in the number of homes built over the past 3 years, the demand for housing should increase dramatically when “Junior” finally finds a job, and moves out of his parent’s home.
• Many construction costs have dropped, though that will reverse if and when construction begins anew.
• Even the “Oracle of Omaha,” Warren Buffett believes the housing crisis should soon be behind us, and he is the owner of Clayton Homes. He should know.

Although we are still deep in the woods, at least we can see some light between the trees.

Expanding vs. Selling

Introduction by Chas Bonner

Jeri Engstrom is a man who knows first-hand about the subject of “expanding vs. selling.” He was a 4th generation farmer in Glasgow, Montana who decided to sell his stake in the 8000 acre family ranch to an investor who then rented back to Jeri’s brother. Jeri took some cash, and moved to a friendlier climate in Boise, Idaho at the suggestion of friends. He now brings his considerable farming talent and experience to Scythe & Spade. The farm’s loss is our gain.

by Jeri Engstrom

Expanding vs. Selling

This is the age old question for families in the farming and ranching community. There are a multitude of factors involved in making this kind of decision; let’s focus on a few of the main factors.

There are five primary reasons one may consider expanding:

First: Younger family members want to come back to the farm as a career. This is probably the most predominant reason for farmers to add acres to their existing operation.

Second: Shrinking profit margins. You can only produce so much off of that same sized acreage, yet after thirty years your expenses have doubled, tripled or quadrupled and the profits have not kept up, requiring expanded acreage to feed the family.

Third: Is there economic sense in the expansion move, i.e.: does it cash flow? Most farm ground bought by farmers is financed through a bank or sold under a contract for deed. Usually there is a 25 or 30 percent down payment made, then annual payments for usually between 10 to 20 years. Outfits like Farm Credit are more than happy to carry the paper for 25 years, but in the end, it all has to cash flow.

Fourth: Locality, what is its proximity to your current location. The farm ground right over the fence always garners a premium to the expansion minded farmer. Conversely, it will cost you money to drive 50 miles out of your way to farm a piece of ground you thought was a bargain (windshield time is expensive ).

Fifth: Long term investment is another important reason for expansion. When an investment like this is made in a family operation and combined with a life insurance policy for the surviving spouse, it can become a very sensible investment for generational transition and continuation of the family legacy of being on the land.

Now, what about the selling side? If you don’t have heirs or children that are interested in agriculture, your view of the future may be much shorter term. You and your spouse probably spent several decades on that farm, raising crops and kids, and making sure the farm does all it possibly can do for you. Now you want to see some of the world while you are still limber enough to enjoy it. You can’t do that if you take on more ground, more debt, more worry. You think this could be just the perfect time to sell. Land, over time, always appreciates and now you have a nice nest egg just waiting for you to use.

Some of the biggest positives to selling now would be:

• Lower capital gain taxes
• Becoming debt-free (possible for the first time in your life)
• Freedom
• Semi-retirement
• Move to a better climate

It takes a lot of soul searching, family discussions and mathematical calculations to make such an incredibly difficult and final decision, but it can be done. It will happen more in the future as well because the statistics currently show 45% of U.S. farmland is being farmed by people who don’t own it; that statistic is expected to climb to around 70% in the future.

Cultivating Mindset Needed for Growth & Success

by Monte Nevitt

At Texas A&M’s TEPAP (The Executive Program for Agricultural Producers) a couple of years ago one of the presenters shared the principle that hog producers need to quit thinking of themselves as pig farmers and to start recognizing their larger more strategic role as a manager of manufacturing plant of a live food based product.

I found the comment to be of interest at the time. In retrospect, however, the thought can withstand a semester’s worth of development and study. This thought came to mind this week while reading an article from the “Masters” by Jim Rohn. At a time when I generally push material, information, emails, and texts away as I work on information overload in attempting deal with the highest priorities in life – this article entitled “The Miracle of Personal Development” is worthy of a pause in our busy schedule to contemplate.

Rohn touches on the shift in mindset that is needed in order for us to become more successful in our business. The thought deals with the critical need to reinvent ourselves and our attitudes in making room for the changes that success brings.

Here are a few of the highlights of Rohn’s article:

• Income rarely exceeds personal development.
• Sometimes income takes a lucky jump, but unless you learn to handle the responsibilities that come with it, it will usually shrink back to the amount you can handle.
• If someone hands you a million dollars, you'd better hurry up and become a millionaire.
• A very rich man once said, "If you took all the money in the world and divided it equally among everybody, it would soon be back in the same pockets it was in before."
• It is hard to keep that which has not been obtained through personal development.
• So here's the great axiom of life: “To have more than you’ve got, become more than what you are.”
• This is where you should focus most of your attention. Otherwise, you just might have to contend with the axiom of not changing, which is: “Unless you change how you are, you’ll always have what you’ve got.”

In short – farmers are among that elite group that stares down the federal government in adapting to evolving regulation and technology – in continually finding ways to provide a return, not just for themselves, but to provide employment, educational opportunities, and quality of life for employees and their children. Farmers are the perpetual optimists who endure weather and tough times to find ways to continue to feed America. In that quest to remain profitable, however, we’re reminded of the need to allow our thinking to evolve to create emotional capacity to deal with future success. There is a very real possibility that our lack of vision costs us far more than periodic setbacks.