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Are you facing hard times?Are you facing hard times?

Prices are still good, but debt may have become a problem for producers who chose to expand when prices were even better.

Alan Newport

August 3, 2016

4 Min Read

Are we in hard times?

The answer is yes and no, as far as I can tell. We're back to what were record cattle prices in 2011 and 2012, with feed costs much lower, but land much higher. Human nature is such, however, that expenses on the ranch expanded to meet or exceed income, and some people took on debt for cows or land and are now in difficulty.

As more cattle, hogs and chickens go to market in the next couple years and prices decline, it could get worse.

Remembering the hard times of the 1970s, Oklahoma rancher Wally Olson recently penned a piece on the mental work of overcoming hard times. I think it's worth sharing.

Facing hard times in the cattle business
By Wally Olson

In the last 12 months the value of cattle has dropped by about 54%. Looking back, it took from 2010 to 2015 to rise that much. And if you compare the nearby to the far-out months in the feeder cattle contract it says we're going down 10% more.

This drop in the market really only matters if you were quitting or if you had a bunch of money borrowed from the bank. What is important is positive cash flow. To achieve this positive cash flow you need to be selling premiums and buying or keeping the undervalued animals. With positive cash flow you can continue to operate the ranch and also start building back the equity lost.

In my case, since I was quitting, it was very important that I got out when I did. If you have money borrowed with 20% equity you’re probably in trouble. When you take away your 20% equity from the 54% drop in the market, in theory the bank is into their money by 34%. And let me tell you bankers don’t like getting into their money.

If you are that person in trouble with the bank, maybe I can describe who you are. You’re married in your mid-30s and have some children. You had six or seven really good years in ranching. And you felt it was time to expand the cow herd, buy some land or build the new house.

So, what do you do?

Working through my problems in a similar situation back in the 1970s, I came up with the 10-year rule. If it really matters in 10 years I will put a lot of effort into it. There are only two main things that are this important: Your health and your family.

Not everyone made it through the ag crisis of the 80s, not all families stayed together. This round I pray we do better. The biggest thing you need to deal with is your guilt. This is something that I carry with me to this day. My wife worked hard for 10 years and when we moved on we didn’t have much to show for.

Here’s a true statement: “It’s just business.” There comes a time that it’s over and you need to understand this. The sooner you face up to this, the sooner you can move on.

Here's the attitude I had to develop. You are in the cattle business and it's not working out very well. The bank is in the loaning-money business and it’s not working out very well for them. You need to do all you can make the bank whole, but you also need take care your family. This has happened before; there are laws on how this all needs to be worked out. You need to know your rights.

Moving forward, it’s your attitude that will carry you. This is a story about why I don’t have bad days anymore. I was in a meeting in Salina, Kansas, dealing with the ag crisis. I was feeling pretty sorry for myself. And a gentleman got up and told this story: He had lost the family farm, he had lost his family, and he was going down by a pond where they had picnicked to kill himself. He said, "The only reason that I’m here today is I’d failed at everything else in life and I was scared that I would even fail at this and I couldn’t live with that."

From that very point, I have not felt sorry for myself and I have not had a bad day since.

When I was growing up, I worked for a gentleman by name Orval Burtis, Sr. He told me before you learn how to make money in the cattle business you need to go broke, or nearly broke.

Moving forward, the most important thing you can have in the cattle business is your name and your word. So don’t do something stupid so you lose these things.

I don’t know for sure how you’ll work this out. If you have the right attitude you will work it out. You need to be understood that you can be helped out, but we can’t bail you out. The structure of the business that you’re in is not quite right and it needs to be changed. There are many people out there that have been right in the same spot you are today that would gladly help you out. I know it’s tough to ask for help but humble yourself and do it.

About the Author(s)

Alan Newport

Editor, Beef Producer

Alan Newport is editor of Beef Producer, a national magazine with editorial content specifically targeted at beef production for Farm Progress’s 17 state and regional farm publications. Beef Producer appears as an insert in these magazines for readers with 50 head or more of beef cattle. Newport lives in north-central Oklahoma and travels the U.S. to meet producers and to chase down the latest and best information about the beef industry.

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