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| Usually disconnected from the market. If times are really good sometimes we get a free roast or something. However, my integrator went through bankruptcy and all of us growers took a pretty good cut for a year. Had this happened when most of us had paid for buildings it would have been much easier. The result is we are still very very tight on money - good crop prices have floated us through it. Even at full payment the way the business model works, we have enough money left over after the loan payment to just cover utilities, repairs and pay me about $8/hr for my time - it's not get rich quick, but it gives a little cash when we wouldn't normally have it, keeps me based on the farm and there is the manure (not cheap, but pretty good fertilizer). At the end of the loan some integrators drop the contract price, mine doesn't - so in about 8 years (or shorter if we can swing it) it pays pretty well.
One important lesson to learn is that bankruptcy can be more accurately termed "notagoodenoughbankeruptcy". When times are good, anybody can be a banker, but I wonder if it's worth 1/2 point of interest to have someone that can help navigate through troubled times. This past year there were hedging opportunities that a bank could help with and other tools that could have been used to save the business from bankruptcy and get the bank paid back faster. I agree that when there is nothing on the horizon and the business has been barely making it for years bk might be the only option, but I think bk probably needs to be avoided as much as possible - it only makes lawyers richer.
It looks like even farm credit is getting wiser and hiring folks with risk management skills. I used to think bankruptcy meant all the stoppage of payment stuff along with the lender coming in and setting up hedges, directing you to sell off excess inventory - basically managing your business to reduce risk while the business heals. I was wrong - maybe I was ahead of my time.
Thanks,
Pat | |
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Where do you feel Fat cattle prices are headed?
