Growing is risky for a farm

Growing is risky for a farm... actually, it's risky for most businesses, but I'm going talk about a recent situation I've run across.

So imagine you're selling chicks, baby chickens, and business is good, and one of your regular customers comes up and asks you to supply a larger number of chickens than usual, and finished chickens - older, mature chickens.    So instead of selling chicks, you'll be supplying the market-ready birds.  This customer wants a quantity, and the increase in sales would be a nice addition to the overall farm sales.

On the face of it it seems like a no-brainer -- more sales?  Sure!  But think about what this really means.  Lets say that he wants you to produce 20 finished chickens a month, and that chickens take 3 months to get to the weight the customer wants, from hatch.

That means you'll have, at minimum, 60 chickens (3 batches of 20) at various ages.  And when you send one off to market, you'll replace 20, to keep the supply continuous.

So what this customer is really asking you to do is finance their operation, because you'll have money and resources (labor, facilities) tied up with these three batches of chickens.  With pigs and a grow out of 8 months (birth to slaughter) you'd have 160 pigs (8 batches of 20) around.

So to continue with the chicken example, the first thing I'd do is consider that you could sell the chicks at hatch like you normally do -- and so, for a cost basis, it's fair to figure the retail price of your chick as a starting point.  then the amount of feed you'll need to bring it to weight.  Usually it's about 4lbs of feed per pound of chicken, and chickens go to market at 4lbs or so.  So you'll need 16lbs of feed per chicken.  And then you need to figure in the labor and facilities.  Lets say each batch of chicken costs you 10 minutes of labor (70 minutes a week, 280 minutes a month-) and at $15/hour (because who wants to work at minimum wage?) that's about $70/month/batch * 3 months, or $210 in labor costs.

So to summarize it:
Chick cost at $3/each * 20 = $60
labor cost at 70/month = $210
feed cost at .20/lb * 16lbs = 3.20 *20 = $64
Water, bedding, barn repairs...$10 per batch?

So each batch "costs" you $334 = $16.7/chicken

you're going to need to charge $5 or $6/lb to make a profit on these birds, but I'm using this as an example.

Basically you'll need to front the costs for feed, chicks and labor before you get any sales income.  So this customer is really asking you to finance them for 90 days at $334 a batch.  If you did this on your visa card visa would charge you some rate.  lets say 12% (lots of people pay 29% or higher) and that means that the interest on this money could be from $10 to $24, and if you're lending money, well, that's money you should be getting, too.

There are three things you can do to reduce the risk to your farm or business:

1) have the customer pay some portion of your hard costs up front, in the form of a deposit.  if they flake out that helps cover the loss as you scramble to find another market.  In this case I'd consider having the customer pay for the chicks up front, and for the feed costs, so a $124 deposit, at least.

2) Have the customer finance the entire order.  This is harder to ask for, but the risk shifts from your business to theirs, or sometimes you have to do this if you just don't have the capital yourself to make this work.

3) Assume all the risk and finance this yourself.

So in my case, I'm going to go back to the customer with a propose that looks a lot like #1 here - I'm going to propose that they buy the animals and pre-pay the feed costs.  I still have a risk that they won't complete their order, but I have less risk (and less capital need - read: less money I need to borrow or supply myself) than #3.

Anytime you get a larger order, particularly something that will be produced in the future, always consider that there's a cost to growth, and make sure that you understand how much that growth will cost, and where the money will come from.

There are times when it is the prudent thing to decline new sales, or scale them back so that the growth is more gradual - less risky.

Three corn fields and combine notes

The corn was scheduled to be ripe on sept 1st, and based on these samples it's pretty close.  The sample to the left is the top field, and it's the least developed.  the middle field is in the middle, and the lower field is pretty ripe.

Looking at the ears of corn I can see that I've got my nutrition and population about where I want them.  the ears themselves are pretty uniform in size.  I'm going to guess that it'll be a month or so before I harvest them unless we get some hot weather between now and then, and I'll probably lose some to the geese that will be flying by, but with a half-million ears of corn, a couple of thousand lost won't be noticed.

I've chosen a four row corn head for my combine to match my four-row corn planter.  If I had more acres a 6 or 8 row would make the harvest faster, but I'm only combining forty acres, and I had to think about moving the combine around.  With a 4 row I can drive it down the road with the corn head attached; it's 12' wide, about the same as the combine.  with a wider rig I have to transport the head and the combine seperately, and I also have trouble getting around between fields -- I typically need a 16' gate to move through and a lot of fences around here think that a 12' gate is plenty big.

The other reason for a corn head that matches my planting equipment is that the spacing for the rows will be the same; each group of 4 rows will be perfect spacing; if I were to pick a 6 row, the area between groups of four where operator error can make for narrow rows could cause me to lose some corn.  this way everything is the same size, and hopefully it makes the harvest more efficient.

Power out day 4 and counting

Well, if I wondered what I'd do for an extended outage, I have my answer now.  Power went out friday night, this is tuesday afternoon, and no word on when it'll be back on.  4 days and counting with no power.

Biggest problem so far is water; while I do have a generator, it only does 120 volts, and the well pumps are 230v; so I've been having to pull water out of the river to water my 600 critters.  450 gallons of water twice a day.

lots of thirsty critters.  the weaner sale pen right now

 Really makes me think about some sort of gravity powered or wind powered solution -- I daydream about a windmill and a water tank with a gravity feed to the animal troughs.  I even went and looked one up; you can buy a pretty good quality one for about $4k.  Not writing that check now, but if this was a major catastrophe and my power was going to be out for a month or two, I'd sure like to have one.

Dreaming of windmills

Right now I'm using a 12v RV-style water pump with a garden hose to supply water to the drinking nipples that most of the hogs use, and feeding it from a 55 gallon drum.  The rv pump is an on-demand, and I'm running off my set of car batteries that I use for electric fences.  When those run down I'll probably pick a vehicle - a truck or skidsteer or something - and have the engine running to replenish the batteries.  1 of the drinking nipples can service 40 or 50 pigs, and one small rv pump can supply enough flow to keep 8 or 10 nipples going.

sprayer converted to livestock waterer

The second problem is feed; the motors that drive the feed augers are 3 phase 230v; and my generator does single phase.  So to get feed to the critters I'm having to pull it out of the inspection plate at the base of the augure.  With a trowel.  By hand.   I have to say that it's making me weigh the feed to each critter -- so while I'm spending a lot more time on (read: labor costs) I'm probably actually using less feed than normal.

One of my few vices is internet, and I actually do have both a DSL based internet, via phone line, and a sattelite internet via dish, and I've found that I need both.  When my power goes out the DSL line goes out, too.  So having the sattelite allows me internet access (and telephone via voip, and email) and I think it's worth the money to have both.  If I had to choose one I'd probably pick the DSL line -- the sattelite is fast once it gets going, but there's a half-second delay before anything happens just because the data has to travel 44,000 miles before there's any response.  

I actually purchased a whole-house backup generator, propane fired, but hadn't gotten around to hooking it up.  Needless to say that task got bumped on the priority scale.