The issue, as many farmers are beginning to realize, is that they have not been trained to look at their farms and ranches as businesses. They can produce cattle with half again as much meat as those their grandfathers raised and grow 125 to 160 bushels of corn per acre instead of 60 to 80. But they can't afford to bring their children into the business, and their neighbors are losing their land. Their revenues are two to five times what they were five years ago, and their land is valued at least five times higher than what they paid for it, but still they are not making any money. And the reason is not that they are lousy farmers.
The tools that U.S. farmers must use to make money, say Ferguson and Van Dusen are comparable to the tools used by the rest of U.S. business. Budgeting with 95% to 98% accuracy, strategic planning, hedging, profit-and-loss financing instead of asset financing, and sophisticated weather forecasts are the implements of the new farmer.
At lunch, the Haugebergs say that they think what Van Dusen and Ferguson are saying is interesting but not really applicable to their situation. They don't believe that even the most sophisticated university meteorologist has the ability to predict North Dakota heat waves, cold snaps, and hail. And they are not sure it is possible for producers of durum wheat, sunflower seeds, flax, like themselves, to draw up a budget that is 95% to 98% accurate, because, after all, those commodities can't be hedged. But they do agree that it is time to think of their farm as a business.
"Two years ago you didn't need to," says Carl Haugeberg as he sits down to the PCA lunch of pickled salads, Jell-O, and a sandwich. "The profits were there. We did think of farming as a way of life. But things have changed.
"I've wasted 20 years not being hungry," he says looking at his plate. He talks about a North Dakota energy company that was very successful in its early days but lost steam after the founders made their first millions. "They got what we call a farmer mentality," says Haugeberg. "They weren't hungry." Now, he says he realizes that farmers have to be hungry to survive.
Still, he has reservations about what these two consultants are saying. They are bright, and their ideas will work for some farms but maybe not for North Dakota's. Besides, the Haugebergs are not yet facing the debt crisis of some of their midwestern neighbors. They didn't have the assets to borrow themselves into a hopeless state of hock, and Carl Haugeberg is cautious by nature. They may not be making much money, and the smaller size of their operation may prevent them from taking advantage of some economies of scale, but their lender is not yet pressuring them to sell off their assets. Like many farmers, Carl and Marlys Haugeberg have a sense that something in their operation isn't clicking, and interest costs are much higher than they would like. But they don't owe the Minot PCA anywhere near the amount of money that Keith and Dorothy Kuhn owed their lender in the fall of 1981.
Dorothy Kuhn never intended to marry a farmer. She had grown up on a dairy farm near Sioux City, Iowa, and had seen that the financial rewards were not always commensurate with effort and that the job was never done. Seven days a week, 52 weeks a year, her father got up at 2 a.m. to start the milking. He would milk until 7 or 8 in the morning, go back to bed for a while, then begin getting ready for milking again around 3 in the afternoon. Her father made a decent living, but they weren't rich. Dorothy wanted something different. Her brother helped her father with the dairy, and Dorothy went on to school, at Wayne State College in Wayne, Nebr. After graduating she taught business in two or three cities in Iowa. Until she met Keith, the brother of a friend, she thought she would be happiest in the city.
Keith Kuhn is a third-generation farmer. His father had bought the 629-acre Iowa homestead where he raised corn, alfalfa, oats, cattle, and purebred hogs. After studying animal science at Iowa State University in Ames and a tour of duty in Vietnam, Keith came home to take over the family farm. He liked getting up in the morning not knowing what kind of challenge he would face that day, whether it was planting, or strategy sessions with his hired men, or rounding up straying cattle in his pickup truck. And he figured he would probably make a "bunch of money" farming.
After Keith's father died of leukemia a few years later, Keith shared the ownership of the land with his mother, who had a half share, and his two sisters. His mother continued to do the books, as she had for Keith's father, but the responsibility of seeing that the place would be there to hand down to the next generation of Kuhns was clearly Keith's.
Kuhn read the 1970s the same way most strong and aggressive producers did, and he started adding acres as land became available. He bought 240 acres for $307.50 an acre shortly before he got serious about Dorothy. They decided to get married in 1973, and Dorothy kissed the city life good-bye. She knew she was marrying a business as well as a young man, and her business background would prove useful for doing the farm's books. For the first year she worked on them with Keith's mother, learning the system Keith's parents had used, a system they would soon find inadequate for the less-forgiving environment of the '70s.
For the rest of the decade the Kuhns expanded right along with all the other future-oriented producers. Keith Kuhn added land, at steadily increasing prices, until Kuhn Farms Inc. covered 1,489 acres. He bought more efficient tractors and, just before his father died, an eight-row planter. About 98% of Keith's education at Iowa State had been geared toward production, he says, and he learned his lessons well. He produced 110 bushels of corn per acre, and in good years 145, instead of the 90 bushels per acre his father had raised. He nearly tripled the number of hogs marketed annually, from 1,500 to the 4,000 he sold in 1982. He more than doubled the number of feeder cattle. Kuhn Farms was featured in several national agricultural magazines. Keith and Dorothy built a large ranch house down the road from Keith's mother's place, up on a hill, away from the animals and the farm traffic.
