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survival guide
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hedgefund farmer
Posted 12/15/2013 19:12 (#3521251)
Subject: survival guide

Many on here seem relatively confused on how they will weather the coming yrs if prices stay low or go lower. Many think half arsing it on inputs will be the way to go etc. Listing below is a few of the things I have learned while navigating through a very tough hog business stretch (07-13). Consolidation was huge in an already very consolidated business.

1) Cash flow is king
2) Look at all your fixed assets. Do you have debt on too much machinery that in many cases was purchased to avoid taxes or out of shear convenience and rarely used. Might want to dump it early before it loses value if downturn persists.
3) Get rid of land that doesn't pay early. Yes I know someone else will farm it but let them as you don't want to take on too much water in the early stretch of this thing. also have to be mindful of what this will do to your fixed costs though.
4) If you are well positioned and opportunites come your way take a few , but save a lot of powder for the end of the cycle when it really gets ugly. You'll be glad you did. In this situation I would get ready to start moving somewhere in 2015 and really put it together in 2016 and 2017.
5) Get ready to change how you do things.
6) Snake oil products out the door. Demand to see very good unbiased research that has statistical validity.
7) Team up with others to buy inputs cheaper. Buy 10k bags of seed at a time. you'll be amazed at the discounts.
8) Bushels and lbs is still what makes the world go around for cash flow. Might change how you apply fertilizer etc, but you' re gonna still want to have very good yields and be efficient.
Buying the high priced seed might still make sense. cut the dollars somewhere else etc.
9) With the past 6yrs we have had in grain farming don't be surprised if this downturn goes on for years while many wonder where the money is coming from.
10) People will be calling you to rent land when this is over if they know you are already on the move and expanding in hard times. Not like what is currently happening where land lords are getting 20-to 25 people interested in renting their land at very high rates.
11) Use your equipment intensively and keep overhead low.
12) Get your working capital in good shape early. You'll need it.
13)start a sideline that allows you to make some extra income in case there is none in crops or you need to offset losses.
14) In the early part of the downturn look way ahead and if you can lock in profits get it done. they just sort of disappear otherwise.
15) always be aware of where you are in the cycle.
16) Use grower sentiment and opportunites to gauge where the cycle is .
17) timing is everything
18) If your an older producer get out now you'll be money ahead.
19) if your a younger producer and it doesn't kill you it will present you with opportunities down the road.
20) be ready for that last bad year at the end of the cycle that finishes a bunch off right before upturn. It will be exhausting at that point Don't want to be sidelined right there.
21) don't expect to see lots of profits in the future at any time before cycle turns. If your towards the end take on more dirt even if losses are likely or small. you wont get a post card in the mail telling you its over.
22) Get muscled up in your records and management. Might mean hiring others to do some of the manual work.
23) Always honor your deals. It will help you as you go and people will want to grow with you. Honor them even if it means taking a large loss. Ex) When I had contracts with farrowers would be easy to tell them to get loss when I was paying 40 dollars per head and source on open market for free pigs or 5 bucks. Could save 100k in one week. that kind of short sided thinking will not help when the cycle turns and openmarket isos are 90 dollars per head.

Edited by hedgefund farmer 12/15/2013 19:39
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