Ranches Only Newsletter
June 2010
The subject of the last newsletter was Kohl’s Laws – He is a dairy farmer, university professor, and has a value added business selling milk and ice cream products. He is a contributor and advisor to the Royal Bank. He has ten rules for living a stress free life in agriculture. The first five were covered in the last newsletter. You can read it by clicking on ranchesonly.com – then go to the newsletter. We begin with rule # 6. I wish I’d read these 30 years ago.
#6 – WATCH THE NUMBERS
Learn the 5-5-3 and the 10-10-6 rules. This is a “shock test” for a considered opportunity – reduce projected income by 5%, inflate expenses by 5% and assume interest rates rise 3% - if it still works – go for it!
#7 – BOB GAINEY RULE
If you make a $2000 purchase on your credit card and make the minimum payment – it will take 23 years to clear the debt (Bob Gainey rule # 23) Use credit wisely!
#8 – 80 – 60 - 40
80 % of North Americans have no goals. 16 % have goals in their head. 4 % write them down – these 4 % will earn 9 times as much as the others. Goals should be discussed with your spouse so you have a common target.
#9 – MANAGE RISK
How many people get hurt on the farm and the injury has lasting effects? Besides financial, there is physical risk. Get rid of cows and bulls that will come at you, get rid of shaky ladders etc. As we often work alone on farms it can be awhile before we get found if we get hurt.
#10 – BALANCE ALL OF THESE RULES AND ENJOY LIFE!
REAL ESTATE MARKET OBSERVATIONS:
1. Residential real estate below $400,000.00 is strong in the Kamloops area and lower end housing is strong in BC in all markets.
2. Investment and capital is still tentative but some enquiries are just starting.
January 2010
Here are some rules developed by Dave Kohl to help farmers survive. Mr. Kohl contributes to the Royal Bank newsletter. He is a university professor and operates a dairy farm, a value added business selling milk and ice cream. Here are some of his concepts for stress free living.
Time Management - 1000 hours maximum
If you have a full time off-farm job, it is difficult to put in more than 1000 hours into the ranch business. It will likely be to the detriment of your job, your family life, or your personal life.
Debt Load
When we take the real estate course, we are taught that mortgage payments should not exceed 35% of income and total debt load should not exceed 40%. Over the years, I’ve grown to see the wisdom of this. The stress of debt load, if it doesn’t break us, or cause a divorce, certainly leads to a stressed, low quality of life.
Full or Part-Time
At what point can I give up my off farm job? One thing is certain- a family needs $40,000 to $70,000 just to exist. What often happens is that the operating capital of the ranch vanishes. This is the most common way agricultural businesses slowly lead to death. The truth is a lot of people do not keep operating capital as a separate business asset in their mind.
J. Barrie Cline, Ranch Sales
April 2009
We are very happy to announce that a young commerce graduate– Carleigh Woods, has joined our team. There were many career choices open to Carleigh, including a very successful family business. She chose this occupation because of her interest in the rural lifestyle, the animals and to spend a life with honest country people. We feel fortunate to have her !
Expenses have been exceptionally volatile, and each price change has been an increase in expense to the farmer. It has been almost unreal. Fertilizer costs have been most cruel. Because most farms use both gas and diesel, we have chosen to use sweet crude to reflect both. We all know that when crude rises the pump's prices go up the same day. When it lowers, prices go down slowly over a month. The graph turned up perhaps a little less dramatic because of this.
Also it shows that the price swings in fuel are dwarfed by fertilizer and feed barley.
Real Estate Market:
To date there has been a slow down in sales until about March 1 and then a bit of a market began to evolve. Sales are coming on no where near as fast as the listings. Big money is tentative.
When list to sell ratios average 40% prices are stable (that means 40% of properties offered – sell) When the ratio rises prices tend to rise. When the ratio falls-prices tend to fall. The current list to sell ratio is 7% (Jan & Feb) where as last year 28%. We lag below the average in the earlier part of the year cold weather. A more accurate reading can be made at the end of June. Last year by the end of February, in the Kamloops Real Estate Board $145,935,006. worth of real estate sold. This year to the end of February $51,122.438. A serious drop. Active listings changed from 1683 last year to 2453 this year. Sales are down, supply is up. Come August or September, there will likely be some deep price cuts.
October 2008
Cattle Shrink
Shrink results from stress cattle experience during processing, transporting and marketing costing both the buyer and seller. Reducing stress and time involved will reduce the loss.
There are 2 kinds of shrink – fill shrink and tissue shrink. Fill shrink is manure and urine. Cattle loss 2% of their body weight overnight, but withholding feed and water will result in a 6% loss of body weight. This is quickly recovered once the cattle are back on feed and water. Tissue shrink occurs after cattle have lost 6%. This can take 10-36 days to recover.
Calves can lose 3% sorting and loading. Every hour spent moving cattle around in handling facilities cost 1% of body weight. Quiet handling, well designed handling facilities will reduce loss. Avoid yelling, whistling, electric prods, canes, whips and dogs if you can.
Transporting
Compared to cattle standing in a pen without feed and water, transported cattle will shrink 2% more over the same time period. During the first 3-4 hours of travel cattle will lose 1% of their weight per hour. Over the next 8-10 hours they lose 0.25% per hour. Cattle lose an additional 0.61% of their weight for every 160km (100 miles) they are shipped. One long hauls feeder cattle shrink 25% more than finished cattle.
Overload and under loading increase shrink. Heat, long delays, and storms increase shrink.
Cattle that shrink over 9% are susceptible to bovine respiratory disease and can have a higher mortality rate.
This information comes from a sheet published by the Ontario Governmentís Ministry of Agriculture.
It can certainly open oneís eyes to the risk of shipping to far away markets.
J. Barrie Cline
RE/MAX Barrie Cline
JANUARY 2008
Food No Longer Cheap
Food prices, of late, have risen so sharply in Russia and Venzuala that the countries have imposed price controls. These were political moves to get people elected, and, they got elected. Mexico had riots because of the high price of Tortillas.
The world price of wheat rose from $200. Per tonne in May to $400 per tonne in September. Corn reached a high of $175. per tonne, a new record high. A magazine called "The Economist" tracks the food price index and report it is the highest ever since they starting tracking it in 1845.
High food prices are usually caused by crop failures in major feed grain producing countries, but, that is not the case this time. Record prices are being achieved at a time of abundance. The "International Grains Council" reports that this years total cereals crops will be 1.66 billion tonne – 89 million tonne higher than last years. This is the biggest grain harvest the world has ever seen, and yet prices have risen at an alarming rate.
What Then is Causing this Rise?
Two things
The increasing wealth of China and India. There is a population increase where it had previously stable for years and the increasing wealth in these countries has made hundreds of millions of people capable of affording meat. The Chinese consumer in 1985 ate 20 KG of meat and that has now risen to 50 KG.
The Rapid Demand for Feed Grains for Ethanol. American farmers have increased their corn production this year by 25% - taking land out of production of wheat and soybeans. Even during this time stockpiles of all cereals was drecreased by 53 million tons. In 2000, 15 million tonnes of corn went to Ethanol production – this year 85 million tonnes. Political support for the American Ethanol subsidies (1.90 per gallon) seems stable amid America's fuel appetite.
It is likely that the program in the U.S. where farmers are being paid to leave ground idle will be suspended and the land put back into production. Europe has already suspended it's "Set Aside Policy".
For the Future:
Global warming could cut world farm output by one-sixth by the year 2020.
High oil prices can depress the use of oil based fertilizers.
How Does This Affect Us:
Obviously the rising grain price has driven down the price of cattle because of the cost of gain is higher than the feedlot can afford and still sell their beef at world market levels. Eventually doesn't the increase meat demand have to reflect in higher beef prices to the producer? How far away can it be?
Once the industry adjusts there should be more value given in weight gains created by grazing wild grasses instead of grain fed weight gains. Should we find the price of 900 lb steers rise in value to the feedlot instead of 550 lb steers? How long will the market take to adjust? I think we will find the rancher will get more value from his range, may run fewer head for longer, and profit by selling the feedlot more "short stay" cattle.
Ranchesonly Team News – Growing Again!
Looking forwarded into this New Year, we can expect another busy "ranching real estate" year. Once again, we added to our sales force on the Ranchesonly team. We welcome Charlie McClary with RE/MAX Bulkley Valley to our team. Charlie lives and works in the Smithers area and focuses on ranches and some commerical real estate.
Looking forward to seeing everyone at the 2008 Cowboy Festival in March. Please drop by and say "hello". We are located in the same place as last year – look for the Ranchesonly banner.
J. Barrie Cline, Ranch Sales
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MARCH 2007
We all seem quite aware that the reason that cattle prices are low is because barley and other feed grain prices are high - Had lunch with John McCurrach of Purity Feeds to find out why. Barley, one year ago at $1.60 to $1.80 a bushel, now brings $3.20 to $3.60. We know that grains are being used to produce to ethanol plants, but, barley is not their favorite. It is affecting the prices but, an even bigger reason for the barley shortage is the fact that Australia, after a 10 year drought, has been using its barley locally. While they were the major supplier of barley to the Pacific Rim, those users have shown up in Canada buying barley.
Let's take a look at ethanol. Knowledgeable people, on more than one occasion, have expressed concern that producing ethanol, the way we do it, creates so much greenhouse gas that they wonder if it helps the environment at all. While environmentalists are quick to jump on the ethanol band wagon, when they have full knowledge they may revise their position. Sugar cane ethanol can be produced at 10% of the cost, and, significantly more environmentally friendly than corn and the other products we use. Brazil has been using it for 30 years, but because of trade sanctions placed by the U.S., has not been allowed to export it.
While ethanol production still needs technical advances in North America, there is no doubt that any protein food stuff is going up in value.
Have you ever noticed how some people always seem to make money even in a diminishing market with numbers that theoretically don't work? I have concluded they are gifted business people that think ahead, and, do whatever is necessary to find their way to profit. One of these guys made a move the other day. He concluded that a premium will be paid for 800-900 lb calves (yearlings). His rationale is that the feedlots won't want to use feed grains to put weight on calves from 500- 800 lbs., wild forage is the most economical weight gain, and our ranges are about to be even a larger contributor to the viability of our ranches. This rancher has a ranch long on hay and short on grass. He bought a ranch long on grass, short on hay. He will endeavor to sell larger calves or yearlings.
In a world of uncertainty of one thing we can be sure: protein of any source is about to take a huge jump in value.
Farm Rollovers. On this topic, I am not an expert but have been consulted recently and was shocked by the enormity of the problem. Recently a rancher in his seventies called, he had pnuemonia and wanted the son to takeover the ranch. It was about 2 weeks to calving season, and, he wanted it done by calving.
Through this it become apparent to me the enormity of the task. I contacted FCC and was directed to their website www.fcc.ca. You can then find your way to their section on estate planning. The Kelown office, 1-800-387-3232 looks after the interior. They can help with estate planning and many other farm management strategies. If I was ranching today, I would certainly be in touch. They have so much to offer, and so inexpensive.
J. Barrie Cline
Re/Max Barrie Cline
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