MBAg by Adam Erwin 12/02 14:45
Owner-Operated vs. Fleet Farming
Independent U.S. farm operations hold advantages compared to overseas
competitors with 100,000 acres and up, farmer columnist Adam Erwin learned at a
global farm investment fair.
By Adam Erwin
DTN Special Correspondent
If you have ever shopped for semi trucks, you quickly learn there are two
kinds: owner-operator rigs and fleet trucks.
Fleet trucks are Spartan beasts with dull gray cab interiors and painted
wheels lacking the bodacious shine of polished aluminum. Fleet trucks are the
18-wheeler version of the old avocado-colored station wagon you drove in high
Owner-operator trucks are the "King of the Road." Sporting hundreds of
little orange lights, oncoming cars could mistake such a rig in the nighttime
sky for the Aurora Borealis. Their customized cab interiors have that
saddle-shop smell of fine Corinthian leather. With hoods the size of Texas,
owner-operator trucks look naked without a set of steer horns complimented by
chrome "Barbie doll" mud flaps.
So does truck shopping hold lessons useful for farm management? It sure
does good buddy, c'mon!
In September I "convoyed" to the Global AgInvesting Conference in Singapore.
While there I received a big "Breaker 1-9" that the international investment
community views U.S. farmers as owner-operators. Yes, we carry the load, but
they see us as long on glitz and sporting lots of extra chrome.
Elsewhere in the world, where the route for agriculture is still being
paved, farmers are more likely to plan their journey in no-frills, plain-Jane
truck fleets where size is the key strategy.
KICKING THE TIRES
This international conference was really a rally to drive people with lots
of money, such as hedge funds, rich folk like Rothchilds and money managers to
agricultural investing destinations. Most of these investors don't bother with
projects under $10 million and prefer minimum deals 10 times that size.
I took my turn at the podium with two other road warriors. Each of us spoke
about what agriculture investing looked like in our respective countries. The
first driver was a 125,000-acre Ukrainian farm CEO who was in the process of
merging with a French/Argentine farm. The second was the CFO of a New York
Stock Exchange-listed Brazilian firm, who was transforming Bahian and Maranhao
cerrado into farmland from his office in southern Sao Paulo.
Even if I had told the story of the largest farms in America with tens of
thousands of acres, it would have gotten lost in the traffic. But I went the
other direction. I showed a few slides of my family farm as it transformed from
grandfather's dairy, to my father's feedlot operation and now as my cash grain
Traffic came to a stop as the crowd marveled at the fact that I was the only
person in the room who had ever castrated a pig, planted a crop that I actually
owned, or knew how to program the auto-steer in a tractor. I didn't see that
For the next two days, I sat in bumper-to-bumper traffic telling the tale of
the U.S. owner-operator farmer.
Neither I, nor the conference attendees, had fully appreciated how much U.S.
farmers prize their productivity. The forgone conclusion was that American
producers were much like I view my European counterparts -- productive in a
smallish way, really in it for the lifestyle, and probably not viable without
They just assumed that the U.S. owner-operator farmer faced some sort of
behavioral risk that we just couldn't organize any longer in a profitable way.
They suspected that we really farmed to justify owning $60,000 crew-cab pickups
and satellite radio-equipped tractors. That we farmed in sort of a "Beverly
Hills" of agriculture and were only productive because we had paved roads,
three-phase electrical power and processors seemingly everywhere. They believed
that if infrastructure improvements ever came online in South America, the
former Soviet Union and Africa, our fate was no better than the opossum in
front of the wheels of the speeding Kenworth -- road pizza!
But my surprise message was that U.S. farmers were not coasting on multiple
generations of accumulated equity, but rather, were pedal-to-the-metal in
relentlessly refining their business model for efficiency and increased
productivity. By being organized as nimble owner-operators versus giant fleets,
we could quickly adjust for changes in the road. Need renewable energy? No
problem. Integrate livestock production? We can handle that. Implement
precision farming? Done.
Meanwhile, the fleets in the developing regions deal with less intricate
risks. In some countries, if combines sit in a field during a rainy spell,
either the operators sleep in the machines, or the tires and fuel will be
stolen from it!
KEEP ON TRUCKIN'
I don't think the American model of owner-operator agriculture is in any
jeopardy. Obviously if our ancestors could have seen the road ahead, they might
have planned things differently. U.S. farmland might have been platted out in
bigger tracts. Enterprise zones might have been set up for neighbor-free
livestock farming -- things that the fleets are banking on for competitive
advantage. But our efficiency and ability to adopt new technology are a tough
match for their scale.
Another way to summarize it is that they, and I, realized that in the real
trucking world, owner-operators don't take the routine freight jobs hauling
paper towels from warehouses to Wal-Marts. Fleets do routine stuff like that.
Owner-operators bring home the bacon by hauling the specialty loads and
oversize cargo. We are the "Ice Road Truckers." And American owner-operators
are in the hammer lane implementing the best new technologies and constantly
"tricking our trucks" to efficiently produce what the market is ready to buy,
and doing it in style!
Editor's note: Real Midwest farmer Adam Erwin is a former banker who writes
under a pseudonym. He farms more than 10,000 acres of corn, soybeans and wheat
in several states.
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