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Advisor

Re: USDA says big farm bring efficiency

I would have to agree. I can also see the logistical benefit for the integrator. Along this line, I see a quiet increase in custom farming among my area's grain farmers. The guaranteed income is important to the lenders and the farmers. Particularly true , with the recent large swings in commodity prices and rents.

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Senior Contributor

Re: USDA says big farm bring efficiency

I also agree... but then the buyer has to be able to off set the risk on the board.   This is something that has become not quite so certain in the last few weeks with m f global.

 

It seems that it was only implied that CME was backing up, steadfast and honest.  We now have many folks not hedged on corn or cattle forced out by MF Global and Corzine who still holds folks margin money....

 

Is any contract a sure thing?

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Advisor

Re: USDA says big farm bring efficiency

  The sureness of contracts worried me after the MF fallout so I called the grain office at the elevator to ease my mind.  He guaranteed me they were safe BUT a contract is only as good as the 2 parties involved but told me not to be worried.  That don't tell me a whole lot.  Having 30% of my beans at $14+ in January does concern me.  We'll see what happens in about 5 weeks.

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Honored Advisor

Re: USDA says big farm bring efficiency

I will split hairs a little bit here..there is a difference between being an independent producer with a contract ( maybe a window or ledger agreement, for example) and being a contract grower for an integrator. I can speak to the second situation. If you had a grower production contract in hand with almost any integrator 15-20years ago, it was a golden ticket; or, maybe it was just goodness for people like us, who already had a proven, positive track record in swine production independently, and had excellent credit. Lenders were hungry for the loan volume in this poor region with not much going on but agriculture... even commercial banks. We originally financed with a commercial bank, but moved our business to Farm Credit two years after startup. I had caught our loan officer in some gross misconduct on a life insurance issue, and in following through on my investigation with her superiors, she ended up fired. He "didn't talk to customers" according to his secretary, but did manage to come onto the line when I told her it was his choice, but if he didn't take my call, i was hanging up, and the next one was to the Attorney General's office. Whole thing gave me pause, since we had never had such a problem in all our lives. We put together a package of information, and approached our local PCA. They fell all over themselves to have our business. Although most such loans had assignment clauses in them, where the payments from the contract went directly to the lender, ours did not need to do so, since we had been making payments for a couple of years by then. Now, we watched as another guy struggle ths past year to get an FmHA guaranteed loan to build basically the same sort of operation as ours, on the same scale, and he has a good job working with the integrator. I don't know what his credit history is, but I think his lender is Farm Credit, which has not much else but ag eligible for its loan portfolio. Whether this has anything to do with the perceived stability of animal ag in general, swine production more narrowly, or that borrower specifically, I could not say. We live in a changing world, and these are changing times. Sort of makes you wonder
Senior Contributor

Re: USDA says big farm bring efficiency


@Kay/NC wrote:
I will split hairs a little bit here..there is a difference between being an independent producer with a contract ( maybe a window or ledger agreement, for example) and being a contract grower for an integrator. I can speak to the second situation. If you had a grower production contract in hand with almost any integrator 15-20years ago, it was a golden ticket; or, maybe it was just goodness for people like us, who already had a proven, positive track record in swine production independently, and had excellent credit. Lenders were hungry for the loan volume in this poor region with not much going on but agriculture... even commercial banks. We originally financed with a commercial bank, but moved our business to Farm Credit two years after startup. I had caught our loan officer in some gross misconduct on a life insurance issue, and in following through on my investigation with her superiors, she ended up fired. He "didn't talk to customers" according to his secretary, but did manage to come onto the line when I told her it was his choice, but if he didn't take my call, i was hanging up, and the next one was to the Attorney General's office. Whole thing gave me pause, since we had never had such a problem in all our lives. We put together a package of information, and approached our local PCA. They fell all over themselves to have our business. Although most such loans had assignment clauses in them, where the payments from the contract went directly to the lender, ours did not need to do so, since we had been making payments for a couple of years by then. Now, we watched as another guy struggle ths past year to get an FmHA guaranteed loan to build basically the same sort of operation as ours, on the same scale, and he has a good job working with the integrator. I don't know what his credit history is, but I think his lender is Farm Credit, which has not much else but ag eligible for its loan portfolio. Whether this has anything to do with the perceived stability of animal ag in general, swine production more narrowly, or that borrower specifically, I could not say. We live in a changing world, and these are changing times. Sort of makes you wonder

I'm sorry to say this but, in today's world with the rule of law the way it is the attorney general (at least in my state) would have rolled over for the bank and this would have been stone walled and ignored squashing you like a bug.

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Honored Advisor

Re: USDA says big farm bring efficiency

Two factors drove integration via contract growers in the nineties in NC. One was simply that it was easier to let individual farmers leverage themselves and their land to build a significant portion of the production facilities for such an unprecedented construction boom. Not even Smithfiled was big enough to pull that explosion off on its own tab. Second, not everywhere was thrilled to have big corporate hog farms built alongside 100-sow farrow- to-finish independents. There was a half- assed petition drive mounted against our farm before we got here, but one of its main proponents was an officer on the board of our bank, which was a serious legal faux pas. A similar situation in VA had ended up around the same time in the farmer not getting to build his farm, but the bank had to pay him a $3 million settlement. Since we were shopping land over the NC line while suing our VA county over the right to farm raising hogs, it was clear that we didn't take no for an answer easily. That twofold report of the news shut up the opposition here pretty darned fast.... We were moving in from 75 miles away, but most times, contract growers were locals with existing social ties. Most of them in this county didn't build new facilities, but instead stocked defunct finishers from failed 100-sow ops with company pigs. They were making something where they and formerly been down a deep hole. Their lenders loved the contracts, and there were no more hogs in one spot than there had ever been before, so had a vested right to raise pigs on the property. So, the integrators killed two birds with one stone: Individual producers financed their expansion into production, and battled NIMBY for the right to raise pigs. When a pig farming kindergarten teacher ( me) could inform a high- paid industry lawyer that a local ordinance that sought to hamstring hog farming would be " void ab initio", you know that at least some of us had camped put in the trenches of the right-to-farm war. There were many casualties. To those of us who survived went the spoils.
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Senior Contributor

Re: USDA says big farm bring efficiency

Did you know a lot of chicken contract feeders went under this year?  Seems chicken didn't keep up with pork at the retail level.

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Senior Contributor

Re: USDA says big farm bring efficiency

This report is just a bunch of BS.   I have yet to see efficiency of size really play out except on paper.  And the more concentrated an operation is in operation your way more open to market price drops then someone who is diversified.  Yes would a guy farming 1500-2000 better of then a guy who is 500-800 acres, Yes I believe so, but when you move to over 2000 to upwards of 3000 and above your spending more on machinery, even with the increase in acres.   Unless you have a family big enough to do most of the labor, I really don' t think there is a size of efficiency.  Except when your selling livestock, profit per head does make a difference on size, BUT i've seen 50,000 head feedlots make less in the whole operation then a 5000 head size. 

And of course the bigger commercial farms are going to produce  most of the grain,  most ot the smaller size farms are in local food production, be it vegetables or goats, or grass feed cattle, or something of that sort.  

 

Something that people have to understand economics is nothing more then numbers, there is nothing in nature that backs anything that has been written in books over the past 1000 years of civilization.   I pay no attention to it.  Its like an escalator, once you figure out how to jump on, get on and go to the top.  

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Veteran Advisor

Re: USDA says big farm bring efficiency

I have read the article this morning on "Bloomberg" news about the $$$$ shoveled into the big 6 banks since 2000 ---interesting process on to big to fail--- big challenge to keep the "" Titanic's "" afloat doesn't sound like a glamorous highlighting operation --- all this aside guess if this is one's ambition get after it ---  

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Highlighted
Veteran Advisor

Re: Politically incorrect reesponse

According to this:  http://governmentgrant.com/housing-grants

 

There are programs out there to help the poor pay for a new house.  A couple quotes from above:

 

Maybe you are a low-income, first-time buyer, or because of credit history cannot get a mortgage. There are billions of dollars in housing grants being offered to renters and buyers. You can receive government grant money to pay rent, make a down payment or for home renovations. Just because the bank thought you were a poor credit risk, does not mean that all the doors have closed. In fact, so far in 2009 $11.5 Billion has been given away in federal grant money for low income housing programs alone.

Read more at: http://governmentgrant.com/housing-grants

 

Also, I'm not so sure that the people I mentioned are truly 'married' as they are swindlers of the highest order, and could very well be co-habitating, in order to qualify for something like this (they have 3 kids)  Note that in the title, is says 'buy a house'.

.

 

http://www.livestrong.com/article/256810-grants-for-single-mothers-to-buy-a-house/

 

 

I have no ideas on the details on how they do it, as I only talk to the guy, when we meet on the street, and he more or less corners me, usually to brag up how he has the money rolling in, because of his 'smarts', while poor slobs like me actually have to work for a living.  She (the wife, or live-in, or whatever) seems nice enough, but sure seems to put up with a lot of verbal abuse from the clod.  If I knew for sure what they were doing was illegal, I'd report them, but don't want to unless I am sure, as I wouldn't doubt that I'd wake up one morning with my tires cut, if he found out who turned them in, and caused trouble.  If he wouldn't go to jail, I have no doubt he'd retaliate in some way or another.

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