Wednesday July 9, 2003

1) Cain’s Homelike Farm – Montgomery County – Interview at 1:00 p.m. Mini-tours on continuous no-till farming, Conservation Reserve Program participation (habitat restoration), and Conservation Security Program participation (conservation planning) at 1:40 p.m.

2) Sennett Cattle Company – Montgomery County – Interview at 3:00 p.m. Mini-tours on beef producer initiatives, marketing new beef products (including an opportunity for tour participants to taste samples of new beef products), and nutrition, health, and housing management in the beef finishing enterprise.

3) Evening program at 7:30 p.m. “Are You Ready for a New Ag Venture?” Jerry Nelson, New Ventures Extension Educator, Maria Marshall, Extension Rural Business Development Specialist, and a panel of entrepreneurs; Community Building, Putnam County Fairgrounds, State Road 231 North, Greencastle, IN.

Thursday July 10, 2003

4) Legan Livestock and Grain – Putnam County – Interview at 8:00 a.m. Mini-tours on cropping alliances with neighbors, manure nutrient management, hog production technology,
and pond development, wildlife habitat, and wetland establishment at 8:45 a.m.

5) McCammack Farms – Putnam County – Mini-tours on how to bring a son or daughter into the family farm business, tillage and residue management practices, and a Purdue corn yield test plot at 10:00 a.m. Interview at 11:30 a.m.

6) Lunch will be served at 12 Noon at the McCammack Farm. Chris Hurt, Purdue Extension Marketing Specialist, will provide an update on the market outlook for grains, soybeans, and livestock immediately after lunch is served.

7) White Oak Farms – Putnam County – Interview at 2:00 p.m. Mini-tours on cropland management and the economics of tile drainage, grain merchandising, and pork production and the feed mill operations at 2:45 p.m.

Five farm families with their own unique management practices welcome you to their farms. Read the profiles in this publication, look over the farmsteads, listen to the general interviews, and then see if you can answer the following questions. As you answer them, think about how you might use some of the host farms’ ideas on management to improve the management performance of your own farm.

Cain’s Homelike Farm

1. What are the benefits of long-term, complete no-till farming?
2. What does generational sustainability mean, and how can it be achieved?
3. Why is diversity an important concept not only for ecosystems, but also for family farm enterprises?
4. How has the focus on sustainability affected the Cains’ decisions involving the adoption of new technologies?
5. What advice would the Cains give to other farmers who want to follow in their footsteps, but need help getting started?

Sennett Cattle Company

1. How do the Sennetts handle decision responsibilities in the day-to-day management of the farm and cattle business?
2. How do the Sennetts market their fed cattle, and what role has their relationships with both the buyers and suppliers of their cattle played in the success of their operation? Will “country of origin” labeling affect their relationships with cattle buyers and suppliers?
3. Why do the Sennetts consider their cost of production as critical to the success of their cattle enterprises, and how do they collect and utilize cost of production information in the management of their beef finishing enterprise?
4. How does the need for beef quality assurance affect the Sennetts’ health management and production practices?
5. What are the Sennetts’ views on the regulations that apply to confined animal feeding operations, and how have they dealt with those regulations?

Legan Livestock and Grain

1. Since the Legans both came from non-farming families, how did they get interested in farming, and how were they able to make contacts in the farming community?
2. How did the Legans start farming despite having no farm base or capital? Can it still be done this way?
3. How critical is production, financial, personnel, and marketing management to their success? Which ones are more important?
4. Why do they farm in a cropping alliance with a neighbor? How does it work? What are the disadvantages?
5. Has their leadership involvement been a drain on the farm business or an asset? In what ways? Do they have suggestions for others who would like to get involved in local, state, or national leadership activities?
6. What value does their farm gain from an “Informal Board of Directors”? How does their board operate?

McCammack Farms

1. What are the advantages and disadvantages of using a general partnership to bring a second generation into a farm business?
2. What are advantages and disadvantages of using a Phillips Harrow, along with other recommended tillage and residue management practices?
3. What are the results from double-cropping “on the U.S. 40 line” and from the production practices and technology being used?
4. Which hybrids are being grown on the Purdue Department of Agronomy corn yield test plot located on the farm, and what are the preliminary findings?
5. How is information collected from the yield monitor on the combine used to make management decisions, and how do David and Clayton view its use in the future?

White Oak Farms

1. The Manns have made significant investments in drainage. What led them to do this, and what has been the return on this investment?
2. Over the years, several additions have been made to the management team of White Oak Farms. How has the business been organized to accommodate these additions?
3. What are the important characteristics of the purchasing and marketing strategies used by White Oak Farms?
4. What are the key communication tools used by the White Oak Farms’ managers?
5. The evaluation and adoption of new technology is important to the success of any farm business. How does the White Oak Farms’ management team go about this process?
6. What types of data analysis procedures do the White Oaks Farms’ management team use?

Many farmers talk about stewardship and sustainability as goals to be approached after meeting their primary objectives of income, wealth, or getting larger. But Kenny and Terry Cain have incorporated stewardship and sustainability as the underlying concepts in their vision and mission for their operation.

The Cains feel strongly that they must be stewards of their land. They view each decision in terms of its influence upon the landscape that they manage. Will this help improve the quality of the soil, prevent degradation of water, or improve the habitat for a variety of wildlife species? How their management decisions affect the ecosystem is a vital criterion. The beneficiaries are not only them and their families, but all the rest of us who rely upon the ecosystem for our sustenance.

Generational farming is an excellent way to introduce their concept of sustainability. A guiding principle of their operation is to increase the options for their heirs to continue to live upon and farm the land. This includes not only their children but their grandchildren, great-grandchildren, and succeeding generations. While the success of their vision and their decisions may not be known for decades, they continue to utilize this concept of creating a landscape and a small business for the future generations of Cains.

Family

Cain’s Homelike Farm includes three generations: Kenny, Marlene, and their children, Sam, John, and Josh; Terry, Amy, and their children, Jess and his wife, Melissa, Zachary, Seth, Katie, and grandson, Conner; and Terry’s father-in-law, Jim Harper, and his wife, Jeanette. Living on the home farm is Kenny and Terry’s mother, Valera.

Background

Kenny and Terry’s parents, Paul and Valera Cain, moved to this farm in 1951 from the Roundgrove area of White County. Kenny and Terry began farming in the 1970s and initially began tearing out fence rows, bringing marginal land into crop production, and trying to maximize yields and output in order to feed the world. Only later did they realize that the world’s productive capacity was much greater than the effective demand for crops and that such fence-row-to-fence-row attitudes were incompatible with their real goals of stewardship and sustainability.

Decision-Making

While every small business and farming operation makes dozens of decisions every day, the Cains’ secret to success is the assimilation of information from numerous sources about the consequences of their choices, keeping their goals of stewardship and sustainability in the forefront, and then moving on after the decision is made. They know that new information may become available or that other factors will alter the consequences, but they do not dwell on their decisions by second guessing or patting themselves on the back. They comment that they “make decisions and live with them.” Their method is to move on to the new decisions, try not to make the same mistakes twice, and remember that the time frame for their success or failure is not the next quarter or the next crop but rather the coming decades and generations. They have created a unique cooperative decision-making style that focuses upon their ultimate goals, the criteria for each decision, and how important each criterion is to their fundamental objectives of stewardship, sustainability, and generational farming.

Anticipate the Future

Just as with any business venture, part of their success ultimately is to anticipate the future of their industry. What will consumers demand in the future? Who will be the consumer of their land-based products? Will they want regular dent corn or crops with specific properties (pharmaceuticals, industry crops, fuel crops)? What is the future of government programs? Will the government continue to pump money into the farm sector? If so, will those dollars be focused upon commodities, farm income, diverse landscapes, water quality protection, or habitat restoration?

Diversity

The Cains suggest that diversity is an important concept, not only for the ecosystem but for a family enterprise that stresses sustainability across the generations. This concept of diversity is a dynamic idea that will change depending upon markets, weather, and a host of other conditions.

While they exited the hog business in the 1970s, this was only after careful consideration of a wide variety of confined feeding systems and deciding that their time, energy, and capital would be utilized better in other enterprises. They have diversified into a variety of specialized crops as a method of adding value to their crops, rather than just producing commodities.

However, crop farming is a seasonal business that frees up labor during non-critical times. To more fully utilize their labor resources, they have also established a successful excavating and drainage business. This business provides for complete utilization of their labor and the diversity of income sources is a buffer for the poor farm income years that allows for greater consideration of long term consequences.

Kenny and Terry Cain started with little other than their work ethic, their intelligence, and a little luck. They comment that they started with nothing, so decisions are easier because they cannot end up worse off than they started.

Tillage

Kenny and Terry became intrigued with the concept of ridge till in the 1970s as a better method of crop production, but within a few years they began experimenting with no-till systems. Over the course of the next decade or so, they went totally no-till and have been complete no-till farmers for the past 13 years. In addition to better soil tilth, reducing equipment and labor needs, they have “never had crops so good.” This is another example of stewardship and sustainability leading to good societal decisions that are also very wise business decisions.

Technology

While some think of sustainability as a “small is beautiful” concept, the Cain brothers have expanded their operations, utilize the latest technologies, and are not averse to using bigger equipment if it helps them achieve their objectives. The best example of this is their new John Deere 32 row planter. They utilize the best of the new plant technologies that allow for better pest control and greater protection of their land and water resources.

Cooperation

The Cain brothers view themselves as assimilators of information that they receive from diverse sources. While they search for new ideas and methods on their own, they rely upon a bevy of other individuals and organizations. For many years they have been working with Dave Swaim, a crop consultant, to improve the quality of their soil and crops. Dave has been a tremendous resource in assisting them to better incorporate stewardship and sustainability into their farming operations. Don Bickle, a forester and owner of Edge of the Prairie Wildflowers, and Pheasants Forever have proved to be valuable sources of assistance in their efforts to create wildlife habitat and restore those acres that should never have been farmed to natural prairie or savannah. These efforts have also benefited from several government programs that provided technical and financial assistance in the form of the Agricultural Conservation Program years ago and the more recent Conservation Reserve Program.

Conservation Security Program

With their focus upon stewardship and sustainability, the Cains look forward to the implementation of the Conservation Security Program (CSP) that was authorized in the last Farm Bill. The philosophy behind this program fits well with the Cain brothers’ farming practices, and they seem to agree that it is time for a program that rewards those who are doing a good job of producing environmental benefits while producing agricultural products. The CSP provides incentives to farmers to do a better job of farming. If funding is restored to this program, the Cains plan to qualify for the Tier 3 program, which could provide them with $20-30 per acre. This reward for positive behavior will be a reward to the Cains for their stewardship and will serve as an additional incentive for all farmers who incorporate stewardship and sustainability into their fundamental objectives.

There is money to be made in the cattle business in Indiana, as shown by the Sennett Cattle Company near Waynetown, Indiana. Clark Sennett, former president of the Indiana Beef Cattle Association; son Lance; and partner Chad Cass operate a commercial-sized cattle feeding and breeding operation. They market 1,200 to 1,500 head of fed cattle each year. In addition, they operate both a purebred Limousin cowherd and a commercial crossbred herd. The Sennett family’s farm business philosophy is to keep it simple. Their success in the cattle business is based on a combination of astute marketing, relationship management, careful attention to costs, and dedicated management of animal health, physical attributes, and housing to ensure high-yielding, high-quality beef.

The Sennetts buy feeder cattle, primarily black or black Limousin crosses from trusted suppliers, and feed them at their state-of-the-art facility until they are ready to be shipped to a packer. They typically feed to a finished weight of 1,100 to 1,250 pounds. Their goal is for finished cattle to grade choice. Some of their production qualifies for Certified Angus Beef brand. The Sennetts produce “Limflex” bulls —black Limousin crosses, which according to Lance, are just now becoming popular in the beef industry. They also breed and raise their own cattle for their feeding operation or for sale to other feeders, breeders, and
4-H members. The Sennetts run a diversified business, coupling their livestock feeding and breeding operations with their grain operation.

Clark Sennett believes beef cattle make sense on Indiana farms for many reasons. Beef cows provide a means to utilize resources that otherwise might go unutilized, including pasture land and suitable facilities. The Sennetts also value the potential benefits of diversification and the opportunity to add value to the crops and forage produced on the farm. The beef operations provide Clark and Lance opportunities to leverage their skills as business managers and livestock producers. They are active, progressive, and well-informed participants in an industry they care about deeply.

A Brief History

Clark Sennett was an Animal Sciences major at Purdue University in the late 1960s. He harvested his first crop in 1970 with his father after returning from Purdue. He farmed with his father until 1979, when Dad retired. Clark acquired a farm in the mid 1980s that included a couple of Harvestore silos and accompanying buildings. That property is now the centerpiece of the farm’s current cattle feeding operation. Clark’s son Lance joined the operation in 1995 after attending Western Kentucky University. A new, 500-head, beef cattle finishing barn was added in 2001 to expand the cattle finishing enterprise.

Marketing

The Sennetts purchase animals from trusted suppliers who have proven their ability to supply high-quality feeders. They do not use or need video or electronic auctions because they are very pleased with their current suppliers. The Sennetts purchase almost one-half of their feeder calves from just one supplier. They have high expectations for the quality and condition of animals supplied to their farm. The relationships they have developed with their key suppliers are an important element of their success in achieving low death losses and getting animals off to a fast start in the feedlot.

The Sennetts often sell their cattle to a packer in Philadelphia, Pennsylvania, over 700 miles from home. There are other packers in Illinois and Iowa closer to home that the Sennetts sell to from time to time, but the Sennetts typically receive a premium of a couple dollars per hundredweight from the Philadelphia packer. The Philadelphia packer cuts beef for premium markets on the East Coast, such as white tablecloth restaurants, and trusts the Sennetts to provide the higher quality beef demanded by this market. Some of the Sennetts beef grades as prime — most as choice. The Sennetts value their relationship with their Philadelphia packer and consider developing and maintaining such relationships with both suppliers and buyers of their cattle as one of their key success factors.

Cost Management

According to Clark, cattle feeders must know their costs of production to know how much can be paid for feeder cattle. The Sennetts use a computer spreadsheet template that Lance acquired on the Internet from the University of Nebraska to estimate the cost of production for each lot of cattle they are planning to put in the feedlot. The Sennetts then accumulate actual information on costs incurred, feed used, days on feed, and any death loss for each lot finished in the feedlot, and their feed dealer uses that information to prepare a summary report of costs and returns for each lot. Table 1 shows an example of the summary information reported for one 92-head lot started in May 2002.

The maximum amount that the Sennetts could have paid for this lot of feeders, and still breakeven, was $84.07.

Table 1. Feedlot Costs, Returns, and Related Performance Measures

Thus, relatively small differences in the cost of obtaining quality feeder cattle can significantly influence profitability. Based on benchmark data that is relatively readily available for this industry, the other costs of finishing cattle on this farm are quite competitive with the finishing industry. Net returns vary from one lot to the next, but Clark believes it very important for the successful cattle feeder to buy and sell year-round to make money.

The Sennetts use four different rations tailored to the needs of the finishing animals. They use those same four rations year-round. Feed is the second largest cost of finishing purchased feeder cattle, and the Sennetts use silage-based rations to keep feed costs low.

The Sennett farm just last year joined the Illinois Farm Business Farm Management program. They work with an FBFM fieldman based in Danville, Illinois. Illinois FBFM provides recordkeeping, records analysis, and income tax management services for several thousand farmers in Illinois and in western Indiana counties. Clark also believes the Illinois SPA records program (Standardized Performance Analysis) provides pretty accurate cost and return data for cow/calf producers. He benchmarks both his own cow cost and breakeven cost for producing calves against that information. The Sennetts figure that their annual cost of maintaining a cow currently averages $230 and that reducing cow cost to this level is critical for achieving profitability in their cow-calf enterprise.

Quality and Health Management

One of the most important ways to keep costs under control is to keep the cattle healthy and to purchase feeders most likely to yield high-quality meat in large quantities. Lance Sennett pays careful attention to the animals’ health care. Purchased animals must meet criteria similar to those required for certification under the guidelines of the IQ+BEEF preconditioning program. (See below.) For example, feeder calves must be “bunk broke” (that is, the cattle become accustomed to eating from a feed bunk) and properly vaccinated. The Sennetts also pay attention to health care details that affect meat quality. For instance, Clark explained the importance of placing all required vaccinations in the neck area to avoid affecting the quality of meat products. They rely heavily on their local veterinarian for high-quality health care, on an emergency basis if needed, as well as competitively priced health-care supplies.

The Sennetts have considerable interest in the progress of the Five State Beef Initiative, which led to the IQ+BEEF program. The initiative is a cooperative effort of several organizations interested in the beef industry in Indiana, Michigan, Ohio, Illinois, and Kentucky to develop and implement beef quality assurance programs that will benefit both producers and consumers.

The Sennetts practice early weaning of their own farm-raised calves. They usually wean calves when they are 150 days old. The 205 day adjusted weaning weights for these calves average 575 pounds. The Sennetts feed their early weaned calves in a cement lot until they are heavy enough to go into the feedlot. The early weaned calves grow more rapidly than calves that are still nursing at the same age, and the cost of feed per pound of gain is low during this “backgrounding” phase of the production process.

The Sennetts recently built a new 500 head feeding shed. Equipped with concrete slatted floors, a 3-foot center opening, and a manure pit under the feeding floor, the structure promotes animal health and feeding efficiency as well as meets regulatory requirements. The Sennetts believe that keeping animals comfortable reduces the time required to feed animals to market weight. They estimate that the new finishing barn has reduced days on feed by as much as one month.

In the future, genetic technology may offer the Sennetts another tool for ensuring quality. Commercial DNA tests have recently become available that allow producers to determine which genetic characteristics are most associated with quality characteristics such as tenderness and marbling. As the precision of these tests improves, and the costs of using them decline, producers such as the Sennetts will be able to identify high-quality feeders with greater precision and efficiency. The Sennetts are very interested in the potential of this technology and have been following developments in this technology closely.

Environmental Stewardship

As a large cattle feeder, the Sennetts are required to have a plan for handling livestock waste and a permit for their operation. The Sennetts used a service provided by Indiana Farm Bureau Services Division to help them write their plan so that they could obtain their CAFO (confined animal feeding operation) permit. They follow their plan and feel that it has improved the management of their enterprise. They consider adhering to government regulations as simply part of the price of doing business.

They have participated in EQIP (Environmental Quality Incentive Program) through a cost-share arrangement for the manure pit in their new feeding shed. The Sennetts believe environmental stewardship is important for the viability of their industry in Indiana as well as for their own quality of life.

Future Concerns

A big concern for the Sennetts at this time is the country of origin labeling requirements that are expected to go into effect in the future. The rules will essentially require traceability of animals from birth to the end-products sold to consumers. Clark is concerned about the massive amount of time and cost that may be involved in understanding and implementing country of origin labeling in the beef industry and the implication of these costs for the structure of the industry. Vertical relationships may become even more important for producers, and options for procurement may be limited.

Today they farm 775 acres of crop land and have 700 sows producing 15,000 pigs per year. They farm with a neighbor in a cropping alliance in which each handles their land independently, yet each contributes machinery and labor to the 2,600 acre joint operation. Their vital people network includes formal consultants and also an “Informal Board of Directors” that includes other area farmers and bankers. While building their business they have been extremely active in leadership at the local, state, and national levels. This has broadened their exposure to top managers both in the state and across the country.

Background

Mark and Phyllis began farming full time in 1989 after Mark spent several years working with farmers as an Extension Educator with the Purdue Cooperative Extension Service. Their first farm venture was a180 sow hog unit on a 50/50 livestock share lease in which the Legans supplied the breeding stock and labor that was matched by the landlord’s buildings and hog equipment. Direct costs were split 50/50. In 1993, they entered into a second 50/50 lease with another farm family, which added 250 more sows. Then in 1994, they had the opportunity to buy this farm on a contract-for-deed arrangement. Further expansion of the hogs occurred in 1997, when a new 400 sow breeding/gestation/farrowing building was constructed at this main site.

They started farming about 200 acres in 1989 and today are farming 775 acres with about 30% owned and the rest cash rented. The first 40-acre tract was purchased in 1992. The hog operation was purchased in 1994 (on 154 acres), as were an additional 63 acres. The last land purchased was another 20 acres, which included a 2,000 head capacity finishing facility they had been renting. The barrows are fed out, and the gilts are sold as SEW pigs on a coordinated arrangement with a neighbor.

The farm is going through a period of reorganization with regard to business structure. They have recently organized as a sub chapter S corporation for tax, liability, and estate planning reasons. They are further considering moving assets into two or three Limited Liability Companies (LLCs) to better provide liability protection. They are working with a legal firm on these reorganization plans.

Crop Operating Arrangements

The Legan’s crop farm, together with Double “R” Farms, is an organized alliance. Double “R” Farms is an LLC owned by Ron, Sheryl, and Brooke Cash. Double “R” Farms is about 1,800 acres, and the Legans add nearly 800 acres, for a total operation of 2,600 acres. Each party provides machinery and labor to the cropping alliance, yet each remains independent with regard to direct costs, revenues, and management decisions on their own land.

The Legans supply a primary tractor, corn planter, nitrogen applicator, and one semi, and Double “R” supplies the soybean drill, spray equipment, combine, and additional trucks. Each party pays for the direct costs of fertilizer, seed, chemicals, fuel, and crop insurance on their own farms. Then each provides their portion of the equipment and labor to complete production.

Ron and Sheryl also buy the SEW (young pigs) gilts for finishing from the Legans. Thus, they work closely together, but each has independent cropping and hog operations.

Hog Operation

The modern hog facilities feature artificial insemination, segregated early weaning, all-in-all-out production, split sex feeding, phase feeding, plus Pig Champ and United Feeds records. The nutrient handling system at the sow facilities involves a two stage lagoon with a center pivot irrigation system on nearby fields for the recycling of hog nutrients to crop nutrients.

After a repopulation in 1997, the Legans became gilt multipliers for Premier Pork Systems. All of the SEW gilts are sold to neighbor Ron Cash on a futures-based formula. While Ron takes ownership of the gilts, the premiums for the gilts that are selected for Premier’s breeding program are split between the Legans and Cashs.

Legans finish the barrows themselves. Prior to 2002, they primarily finished these hogs in rented facilities. Renting provided the opportunity to keep their limited equity capital invested in a much larger sow operation than would have been possible if they owned all of the facilities. In 2002, however, they did have the opportunity to buy a 2,000 head capacity finishing unit they had been renting. In addition, they continue to rent an additional 1,000 head of finishing.
In hog marketing, they sell hogs on a weekly basis, but no long-term contractual agreement has been entered into with a packer. Instead, they have sold to as many as five different packers in recent years. They do utilize forward cash pricing with the packers or sell futures for their own account when forward prices offer reasonable returns. In addition, they have purchased call options on corn to protect against the financial losses from potential corn price increases. Mark admits they feel vulnerable in their marketing program and that they do not develop a well-thought-out marketing plan. In the future, they will consider a long-term contractual agreement with a packer as those opportunities arise.

Crop Operation

The farming operation is primarily no-till and uses Roundup Ready soybeans. The cropping operation is complementary to the hog operation. It provides corn at the costs of production and uses some of the machinery and labor that are needed for the hog units. In addition, the animal nutrients are recycled for crop nutrients, reducing the need for commercial fertilizers. Sharing equipment with Double “R” Farms reduces the costs of machinery per acre and provides a larger labor pool for those critical, and sometimes short, planting/harvesting windows, such as in the springs of 2002 and 2003. This farming alliance allows them to have the cost advantages of a 2,600-acre farm, although they farm about 800 acres.

There is a total of 117,000 bushels of storage capacity at three locations, with 80,000 bushels at the primary hog farm location. All of the corn produced is fed, and additional bushels are generally purchased from neighbors at harvest to meet the feeding needs for the entire year. Soybeans are trucked to three different soybean crushers, with soybean meal purchases used as a backhaul.

Labor Resources and Management

People are a vital key to the successful production of hogs and crops. Both Mark and Phyllis are actively involved in the day-to-day management of the farm. Key employees are a swine herdsman and two additional full-time employees. In addition, some part-time help is hired as needed.

New employees have a training period in which they are shown the tasks they are expected to master. Employees have set working hours during the week and share the weekend chores on a rotating basis. The Legans have a farm policy manual that outlines the benefits provided, such as holidays, vacation time, the pension plan, and the expectations for employment. They have annual performance reviews, meet more often with new employees, and meet with their other employees when needed.

Keys to Success

Here is the list Mark and Phyllis provide as their keys to success.

1. You have to like what you do and truly have a passion for it.
2. You must be willing to make substantial sacrifices for the business at times.
3. You must have a family that is committed to the farm’s mission.
4. You must have low costs. No choice! You must get the most from the least!
5. You have to be financially sound and maintain liquidity at all times.
6. You must communicate effectively. We are in the people business more than we are in the farming business.
7. You must be “fair” with everyone you deal with.
8. We must maintain environmental and social integrity with our neighbors, landlords, and the broader community.
9. You must think ahead. Plan, plan, plan, and then plan again.
10. We have been able to farm because others gave us a chance to prove we could farm.

Leadership and Support Network

Both Mark and Phyllis have been active in leadership roles. Mark is the immediate past president of the Indiana Pork Producers Association. He currently serves on National Pork Board committees, is the agricultural representative on the IDEM Water Pollution Control Board, the Indiana Farm Bureau Livestock Committee, and the Purdue Animal Sciences Advisory Committee. He has also recently served on the agricultural advisory boards of the Chicago Federal Reserve Bank and the 7th Congressional District. Phyllis is the Putnam County Soil and Water Conservation District Chair and heads the Ag Week activities for local 4th grade classes. They are also active in leadership of their church and the Putnam County 4-H program.

The Legans use an “Informal Board of Directors.” This means that they have a group of about 8 to 10 people that they consult or more informally bounce their ideas and budgets off of before they make key decisions. This group is composed of hired consultants, including their vet, crop consultant, environmental engineer, personnel consultant, and CPA, as well as bankers, key farmers, and leaders in state and national organizations.

The Future

Their direction for the future includes continued improvement in the debt/equity position of the business as the hog cycle provides positive returns in 2003 and 2004. Their focus on low-cost production will continue. The business may be growth oriented if opportunities develop to expand the hog operation. With some additional growth, the business could become large enough to have a primary manager and thus release some family-contributed management. On the other hand, the hog industry has changed so dramatically in recent years that a continuing evaluation of the future of the industry must be on-going. One item they will be evaluating is the need to work more closely with an individual packer through a long-term packer contract.
The opportunity to diversify will also be considered, including movement closer to the consumer with pork products or even other value-added crops such as vegetables. Land investment relative to hog expansion may also be a possibility, again as opportunities arise.

First, a general partnership is used to bring a younger generation into the decision-making process. The advantages and disadvantages of that form of business organization will be discussed at a mini-tour stop.
Second, David McCammack has used various tillage and residue management practices to improve the land he plans to pass on to the next generation. One of those decisions was to purchase a Phillips Harrow, which will be displayed and discussed at one of the mini-tour stops.
Third, double-cropping technology and practices will be discussed at another mini-tour stop, which will examine the benefits of using a combine stripper head for wheat.
Finally, a Purdue Department of Agronomy corn yield test plot is located on the farm. The overall yield test plot program, as well as the plot on this farm, will be discussed at a mini-tour stop.

Farm History and Family

McCammack Farms is a fifth-generation grain farm that began back in 1886, when V.B. McCammack purchased a farm in Putnam County. Currently, this corn, soybean, and wheat farm is owned and operated by David and Janice McCammack, and their son, Clayton. However, the road through time for McCammack Farms has had various turns, which have influenced the management philosophy and practices used today.

In 1972, David graduated from DePauw with a major in zoology and a minor in chemistry. Although an impressive plan of study, it is not the curriculum studied by the majority of Indiana farmers. However, at the time, David did not plan, or even expect, to farm. David expected his older brother to farm with his father, Myron. So David accepted that expectation and prepared for another occupation.

However, the road took an unexpected turn when David’s older brother decided to pursue another occupation, which created an opportunity for David. Consequently, in 1974, David started farming by working for his dad as a hired employee. At that time, the farm consisted of 640 acres, of which David was renting 125 acres. This arrangement continued until 1977, when it became clear it was not working as originally envisioned. Primarily, there was not enough farm income to satisfy the needs of two families, and the transfer of management decision-making was not occurring.

As a result, the road took another turn in 1977, when David decided to quit farming completely and started driving a truck on a full time basis. He continued to drive a truck full time until 1983, when he started farming again, this time by himself. He continued to drive a truck part time until 1985, while renting the family farm. During this period, his dad worked full time off the farm.

From 1979 until the present, the farming operation has continued to grow as acres have been both rented and purchased. A chronology of those events is provided in Table 1.

Table 1. Chronology of the Growth of McCammack Farms

Janice, who graduated from DePauw in 1971 and grew up on a family farm, teaches first grade at the Cloverdale Elementary School. Clayton’s wife, Niki, works full time off the farm at Sensient Flavors. David and Janice also have a daughter, Laura, who graduated from DePauw in 2002.

Current Operating Arrangement

David and Janice own all the family-owned land in the operation. They then rent that land to an operating partnership, which is organized as a general partnership. The number of owned tillable acres totals 650. Those acres are combined with 375 acres rented on a crop-share rental arrangement from David’s parents. The remaining acres are rented on a cash basis.
David and Janice provide management, labor, capital, and machinery to the operating partnership and withdraw an amount from the partnership as compensation. They also rent, on a cash rent basis, their 650 owned tillable acres to the partnership. Clayton provides management, labor, operating capital, and machinery to the partnership and also withdraws an amount from the partnership as compensation.

Cropping Program

The cropping program for 2003 consists of waxy corn and non-GMO soybeans, of which about 500 acres of wheat are double-cropped. Basically, there is a four-year rotation; corn, corn, soybeans, wheat, and double-crop soybeans. All the soybeans are planted using no-till, but they plant very few acres of no-till corn. The five-year average yields are 175 for corn, 57 for soybeans, 32 bushels for the double-crop beans, and 75 bushels for wheat.

McCammack Farms is located just south of U.S. 40, which is literally “on the line” for double cropping wheat and soybeans. They started double cropping in the mid-1990s, when Clayton was old enough to provide some of the labor. It enables them to use their labor over a greater part of the year. Also, some of the land they farm is prone to soil erosion. The practice of no-tilling wheat into the soybean stubble reduces soil erosion.

Machinery and Equipment

The current line of machinery consists of the usual line of machinery and equipment, with the exception of six items that deserve special mention.

First, they own a 75 E Cat tracked tractor, which they use to reduce soil compaction. They are so pleased with the results that they plan to purchase another tracked tractor when the time comes to purchase their next tractor.

Second, they also own a Phillips Harrow, which is used in the bean stubble. The Phillips Harrow is a tillage tool that is used to mix residue and speed the surface drying, without increasing soil compaction.

Third, they use a stripper head on their combine for harvesting wheat. It enables them to harvest a greater number of acres each day and to harvest grain with a higher level of moisture than was the case with their conventional head. They credit this 1999 purchase with improving their timeliness when harvesting wheat and enabling them to plant the double-cropped soybeans more quickly, because it is easier to drill soybeans without the chopped straw.

Fourth, the Soil Max Gold Digger Pro is a tile plow, which is used every year. On average, about 50,000 feet of tile are laid on the owned acres. Also, each year, depending on the time available, they lay about 10,000 feet of tile for their landlords. Records from their yield monitor are used to compare the yields on tiled versus non-tiled land.

Fifth, in 1999 they purchased an Ag Leader System with a light bar for applying chemicals. It uses a GPS guidance system and saves money on chemicals. They now want to do fall spraying in the soybean stubble and are considering the purchase of a second system, because the first is currently on the combine.

Finally, David and Janice own 130,000 bushels of grain storage and the partnership rents another 70,000 bushels of storage from landlords. They have a dryer with a capacity of 500 bushels per hour. The capacity is currently considered to be adequate, but a future possibility is additional storage capacity.

Information Technology

The McCammacks actively gather and use information in decision-making. First, they use QuickBooks to record and report financial information. They also use the data collected to conduct a cost analysis for their acres farmed. However, they are currently not involved in a farm records program that would provide data for comparative analysis.

Second, they have a yield monitor on their combine. They have made soil density maps and plan to overlay them on their yield maps to see if there is any correlation. Both David and Clayton are concerned about soil compaction and are interested in collecting and analyzing data on soil compaction. Also, they have used the information gathered from the yield monitor during negotiations with their landlords. David and Clayton expect the information will be used more in the future when negotiating with their landlords than for making fertilizer and herbicide decisions.

Third, they use the Internet for a variety of purposes. They use it to obtain marketing information and advice, for communication, and to purchase inputs and parts. Also, in the past, they have produced corn for National Starch, and they have used the Internet for receiving and providing bids on contracts.

The Road Ahead

As the McCammacks look down the road to the next 5-10 years, their overall goal is to remain a productive and financially viable farming operation, with David and Janice gradually transferring their management responsibilities to Clayton. In order for the farm to remain productive, they feel an obligation to continually improve the land they farm by using the most effective conservation tillage and drainage practices. Furthermore, they want the successes they have experienced to be long term and to be enjoyed by not only themselves and future family members, but also by their business associates. Consequently, they value the relationships they have with their landlords and want to continue to operate in a manner that is satisfying to both parties.
To achieve these goals, they have identified the following performance objectives for their operation.

1. Sample by soil type, and continue to improve soil fertility.
2. Continue to double-crop, while increasing the number of acres of no-till corn.
3. Improve drainage by continuing to tile additional acres each year.
4. Continue efforts to improve relationships with landlords.
Thus, the road through time for McCammack Farms has had a few unexpected turns since David graduated from DePauw with a degree in zoology. However, each turn resulted in a lesson learned, a resolve to improve, and an obligation to pass on the resources received to the next generation in a better condition than it was received.

The roots of White Oak Farms can be traced to 1963, when Fred and Linda Mann returned to Cloverdale from Purdue University and began farming. That operation consisted of 300 acres of cropland, 50 farrow to finish sows, and 50 steers fed per year. Fred and Linda operated using a share arrangement with Fred’s father Leonard. Fred provided the labor and Leonard provided the land, capital, and machinery.

Today, White Oak Farms is comprised of three different entities: Fred Mann Farm, Inc., a land holding S-corporation owned by Fred and Linda Mann; White Oak Farms, a general partnership that includes Fred, Rob, Chris, and Joe Mann; and Mann Land LLC, a land holding limited liability company owned by Fred, Rob, Chris, Joe, and Linda Mann. The business operates 7,000 acres and produces 18,000 market hogs.

Building a Family Business

In 1964, Fred and Linda bought the machinery and livestock from Leonard and rented his cropland using a 50/50 crop share lease. That same year, Fred rented his first 80 acres, beginning a trend of steady growth. In 1967, Fred and Linda bought their first farm, a 67-acre farm that became their livestock production center. The sows were moved to this farm and were quickly expanded from 50 to 150 sows. In 1969, Fred and Linda bought the home farm from Fred's parents. This farm was their grain center. In 1976, the farm was incorporated as Fred Mann Farm, Inc. At that time, the farm consisted of 500 owned acres, 150 sow farrow to finish unit, and 1,500 rented acres.

Fred is a self-described risk taker who was not afraid to borrow money in order to grow the business. Fred indicates that acquiring land during this period was relatively easy. The area was going through a transition in which farmers who had farmed 100 acres were retiring. They would call to see if Fred was interested in renting their farm. Fred was interested in farming just about anything, often taking the poor quality land that others had no interest in. Fred also worked hard to develop a reputation as someone who did a good job of crop production and was honest in business dealings.

At that time, Fred and Linda focused on putting their limited money into land purchases. Fred characterized the farm as a low-cost, low-investment, and high-labor farm. This mix of land and labor worked well because Fred discovered that he was fairly good at managing labor. One of the keys to this success was delegating jobs to make sure everyone was working on something productive.

In 1983, Fred and Linda’s oldest son Mike joined the farm business. Mike helped with the crops, but his main duty was the day-to-day management of the hog enterprise, which by that time had grown to a 300-sow farrow to finish unit. Mike received a salary for the labor and management he provided.

1983 was notable for other reasons. Interest rates were high, prices were poor, lenders were nervous, and there was a bad drought. Fred describes the period from 1983 to 1988 as his most difficult in farming. It was hard to obtain financing, and the debt was not well structured because much of it was short term with a variable interest rate. The strategy of aggressive growth used in the 70s had to change. In reflecting on this period, Fred indicates that he and Linda
stopped all capital expenditures. They made do with the machinery and equipment that they had. The hogs were a great help because they retained good market prices and provided good cash flow. He also began raising, cleaning, and selling Indiana Certified Seed. This value-added enterprise helped the cash flow and utilized labor during the winter months. The seed business continued until patent laws were changed and Roundup Ready soybeans were introduced.

In 1988, Fred and Linda’s son Rob returned home from Purdue after receiving a bachelors degree in Agricultural Economics. At this time, the White Oak Farms partnership was created. Partners included Fred, Mike, and Rob. White Oak Farms began with 3,000 acres rented from Fred Mann Farm, Inc. and other landowners and 300 sows purchased from Fred Mann Farm, Inc. Buildings, equipment, and machinery were rented from Fred Mann Farm, Inc.

Rob brought skills in record keeping systems, tax management, marketing, and finance to the business. He implemented a computer record keeping system, developed cost of production studies and annual financial reports, improved the grain and livestock marketing systems, and enhanced income tax management. Rob’s addition to the business helped to reduce some of Fred's duties. Fred devoted more of his time to employee management and crop operations, Mike managed the hog production, and Rob became the business manager.

In the late 1980s and early 1990s, White Oak Farms experienced good growth in crop production though additional land rental. By 1995, the operation consisted of 6,000 acres of row crops. Rob identifies four keys to this growth.

1) Being willing to rent ground using a cash rent agreement (a rental arrangement that was just becoming popular at that time), something many farmers in the region were not willing to do;
2) Not having lots of competition because of the 1980s farm crisis;
3) Knowing how to manage no-till, a production system Manns adopted in the early 1980s; and
4) Fred’s solid reputation as a tenant.

In 1995, Fred and Linda’s son Chris joined the partnership. With degrees in agricultural engineering and agronomy, Chris was given crop production manager duties. He contributes to the operation through an improved fertility program, better herbicide management, seed selection, alternative crop production, soil and water conservation projects, improved drainage programs, manure management programs, and an engineer’s mind for grain handling and livestock facilities management.

After Chris joined the farm, row crop acres were expanded to approximately 7,000 acres, but the big growth came in 1997, with the expansion of the swine enterprise. In 1997, White Oak Farms still had a 300-sow farrow to finish unit that utilized partial confinement. While still profitable, it utilized low-capital and high- labor technologies. Because new technologies were rapidly changing pork production and there was a fourth son wanting to join the business, a decision was made to change the swine enterprise. The existing swine farm was converted into a sow unit, and a wean-to-finish complex was built offsite. This change allowed the farm to capture health benefits and better rates of gain through utilization of split sex feeding, all-in-all-out group management, and artificial insemination. It has also resulted in less labor per pound of pork, better manure management capabilities, and better genetics. This move increased hog production from 6,000 head to 15,000 head marketed per year.

In 1998, Fred and Linda's son Joe returned to the business after receiving his bachelors degree in agricultural economics. Joe has implemented a record keeping system and an input purchasing program for the swine enterprise. He is also responsible for management of the new feed mill and manages the day-to-day activities associated with the swine finishing enterprise. He assists Rob with marketing and financial management and assists Chris with manure management.

In 2002, Mike Mann elected to leave the partnership and purchase the sow production unit from White Oak Farms. While Mike’s unit is a separate entity, it is still an important part of the family business. Mike is the sole supplier of weaning pigs for White Oak Farms, and White Oak Farms provides all of Mike’s feed and manure management services.

Business Organization

The Manns believe that each partner should own an equal share of the general partnership. While this sounds like a reasonable strategy, it is difficult to implement. Each son entered the partnership at a different time. Because the capital base of the partnership was steadily growing, it made it harder and harder for each succeeding partner to buy an equal share of the partnership.
To solve this problem, two capital accounts are used in the partnership, a base account and a preferred account. The base account is the account in which there is an equal sharing. The size of this account is determined by the size of investment that the new entrant can cash flow. The rest of the capital held by the previous partners is placed in a preferred account. The capital in the preferred account is paid a market rate of return. These payments are an expense to the partnership and are paid prior to determining partnership profits and distributions. While the size of the preferred capital account is fixed, the size of the general capital account will grow as the business generates profits.

Partners can also loan money to the partnership. Again, the interest rate on these loans is at the market rate for operating loans. Transactions between the partnership and the land holding entities are also at market rates.

The partnership agreement is an important document. While a great deal of attention is often devoted to provisions for creating a partnership, the provisions for dissolving a partnership are seldom given the same careful attention. As the Manns developed their partnership agreement, they gave careful attention to the provisions that would allow a partner to exit. Joe indicates that Mike’s desire to separate from the partnership tested the exit provisions that were established and proved they worked.

Record Keeping and Analysis

Data collection and analysis are important activities at White Oak Farms. There are four profit centers used in the analysis of the business. These include crop production, grain merchandising, the feed mill, and hog finishing. The Manns study their break-even costs for each of these enterprises very closely. Both physical and economic performance measures are used. In the swine enterprise, pig performance is closely watched. In crop production, yields by field are carefully monitored. In looking for improvements, they are always trying to assess how various changes will affect the return on investment.

Marketing

Cash contracts play an important part in the marketing of grain crops and the purchase of inputs. Options are also used in the marketing program. Rob indicates that he likes to separate decisions about the basis from decisions about price.

The Manns try to market grain when it is needed most. For corn, they begin harvesting early to take advantage of prices before the seasonal price declines that occur during harvest. When harvesting, their strategy is to take grain to town first and then fill the bins rather than fill the bins and then take the excess to town. The strategy of selling when corn is most needed also means that corn will be sold during planting. Corn is sold to several different buyers, including large feeders and processors. There is a preference to ship corn south because of the stronger basis and better price, but grain is also shipped north to processors such as A.E. Staley in Lafayette. Rod notes that once our grain is on the truck, it is pretty mobile.

Hogs are sold to Indiana Packers in Delphi and become pork products in Marsh’s Signature Pork program. In order to participate in this program, the hogs must be raised on an Indiana family farm, they must be fed corn raised in Indiana, and the producer must use genetic lines selected by the packer. The hogs must be delivered on a specified schedule so they can rest before they are slaughtered. This resting period has an important effect on meat characteristics.

Inputs for the swine enterprise are contracted on a selective basis. Both soybean meal and other feed ingredients are contracted when there are good opportunities. Crop inputs are purchased in advance of the time needed. Fertilizer is often purchased in late summer for the next year’s crop. Seed and chemicals are usually purchased by late December. Buying at these times generally provides a lower price, something that has been especially important for fertilizer the last few years. The Manns built storage facilities for fertilizer, seed, and chemicals. Joe indicates that they do not like being vulnerable to big price moves with inputs. “We like to lock in prices and concentrate on doing a good job of production.”

Technology

The Manns are always looking at new technology, picking and choosing those things that will help them improve the return on investment through lower costs and improved efficiency. No-till has been used in corn and soybeans since the early 80s. The adoption of this technology has lowered their per acre machinery investment and helped to spread labor over a greater number of acres. It has also been an important soil conservation tool.

During the past several years, improving drainage has been the central focus of the Manns’ crop production strategy. Over the last five years, they have laid approximately 500,000 feet of tile (almost 95 miles). Chris has taken the lead in designing the tile drainage system.

The improved drainage has helped yields a great deal. The Manns’ records document a 25% yield increase in corn. The improved drainage also provides greatly improved field conditions for planting and harvesting. This allows them to begin no-till planting earlier. The Manns are also investigating the use of tile as a subsurface irrigation system.

To help in the selection of seed varieties, Manns have participated in variety plot research conducted by Purdue’s Agronomy Department. They also conduct side by side comparisons of various varieties. Yield monitors are not currently being used, but Chris indicates that as combines are traded, this technology will be used. However, this does not mean that little data is used in assessing the crop operation. Extensive field records are maintained. All crops that are harvested are weighed to track yields. Soil tests are conducted on fields every three or four years. Fertility and pesticide records are maintained. The manure applied to fields is sampled so that Chris knows what is being applied. Fields that receive hog manure do not receive any other fertilizer.

The Manns use a stripper head on the combine to harvest wheat. This allows them to harvest at higher moisture content. With the stripper head, dew is less of a concern. It also allows them to operate longer hours compared to using a conventional small grain head. These features have helped them plant their double-crop soybeans and milo about a week earlier.

In the hog enterprise, the Manns were early adopters of the wean-to-finish technology. Today they are using phase feeding to adjust the protein content of the diets fed to hogs to maximize lean growth. The adjustments not only reduce protein costs, but also influence the composition of the manure because smaller quantities of excess protein are excreted in the manure.
Current Perspective

Since 1998, White Oak Farms has remained relatively stable. There has been no increase in acres farmed. The number of hogs marketed has increased to 18,000 head per year through better pig flow management. Grain production has been increased through investments in drainage. The focus of the partners has been on reducing debt and improving productivity and efficiencies.

About 4,000 acres are rented using a combination of crop-share and cash rent agreements. There are a total of 30 different landowners spread from coast to coast that rent to White Oak Farms. Maintaining communications with this many people can be a challenge. Rob indicates that the key is learning how much each landowner wants to be involved. Some want very little contact, but others want to be more involved. They try to provide whatever communication is desired.

The other 3000 acres of land are owned. Land purchases are viewed as an investment. Rob indicates that if buying land provides the best return to the investment dollar and it comes close to cash flowing after making the down payment, it is time to buy. The late 80s and early 90s were a good time to be making land purchases. Joe adds that, while they tend to look at land purchases as their 401(k), today they are more interested in reducing land debt than making additional purchases.

This farm family’s goals and management philosophy are the same now as they were when Fred and Linda began in 1963 - be profitable, work hard, be efficient, and love what you are doing.

Acknowledgements

Purdue University’s Department of Agricultural Economics organizes the annual Indiana Farm Management Tour in cooperation with the Indiana Farm Management Association and the Purdue University Cooperative Extension Service. The tour visits farms that demonstrate highly successful farm business management practices or unique perspectives on farm business management to encourage and develop a high level of management knowledge and skill among Hoosier farmers. This publication profiles the management of the farms visited during the Indiana Farm Management Tour. The tour organizers sincerely appreciate the willingness of the host farmers to welcome tour participants onto their farms and to share what they have learned about managing their farm businesses.

The organizers of the Indiana Farm Management Tour appreciate the sponsoring agencies and companies whose donations help finance the tour. The organizers also thank the volunteer individuals and groups who give of their time to help make the tour as enjoyable, safe, and informative as possible for the tour participants.