Larry listened to our story, told a few of his own (like the one about the farmer who has had a suspicious number of insurance claims for lightning-struck cows, or the one about Larry's aging father who refuses to be told that he's too old to farm...Larry won't let him on the tractor anymore), and then pulled out his cell phone to start calling farmers for us.
One of the contacts that he gave us was Lyle Fischer, who manages the LeRoy Co-op Association, a nearby grain elevator and agronomy service. Two days later, after enjoying the Coffey County Fair and a parade, we drove a few miles out to LeRoy to call on Lyle.
A cooperative is member-owned. In 1960, fifty years ago, the farmers wanted something better for them. Competition-wise, they wasn't getting a fair shake in the market. So they decided to start a cooperative and own it themselves. From that it's grown to the membership we have now. But a co-op is member-ownership; you earn your membership by doing business there, or you can buy membership. Any money that's made at the end of the year is shared back to the people that have done business that year. So all the assets, the income, is returned back to the members, based on their annual purchases, unlike an independent elevator or grain business, where it goes in their own pocket.
1980 was a tough year. It was a dry year. Very, very dry. That hurt too, back with the interest and the dry year, people didn't raise a crop. And not too many people had crop insurance then.
In the 90's, the price for commodity crops were at rock bottom, which has changed today. While commodity crops command a better price these days, the catch for many farmers currently is the high price of inputs. Any natural or synthetic additions a farmer has to apply to the soil or crop is usually very expensive.
Lyle also has seen a lot of farmers working hard to reduce their pollution from chemicals and runoff. The government requirements are getting tighter and tighter and in this area nitrogen has been found in drinking water and phosphate in the lakes. Lyle believes that the government will continue to demand better and cleaner systems, and he has seen that most farmers are willing to comply with requests even before they are requirements. A lot of farmers in this area have lined their streams with filter strips which prevents runoff to some degree.
We asked him about the increasing size of these Midwest crop farms...are they getting bigger because they want to or because they have to to stay afloat?
I would say that most of them are getting bigger because they have to. Now, there's a few, I'm sure, that are getting bigger because of pride. You know, "I want to be bigger than the other guy." I could tell you a few of those. Most of them, I'd say, are getting bigger because they see the need to farm more acres to make their machinery pay. To me, I can't understand how they can put a quarter million dollars into a combine or $200,000 into a planter, and plant two or three thousand acres and make it work. I guess they have to. I spend $200,000 for a sprayer, but I can spray 30, 40,000 acres, generate a lot more income. Not necessarily profit, but a lot more income, cash flow, out of that machine. But when you run a quarter million dollar combine over 2,000 acres, I don't know, that's a lot of money per acre.
We also asked him about the negative press that chemicals often get in popular press, and how he feels about it:
I think the word "chemical" sounds like a hazardous material. Maybe the word "chemicals" is the wrong word to use. "Herbicide" is a better terminology to use. Herbicide is used by our customers to control weeds. Then there's pesticides. Pesticides are more for pest control, insects. Gosh...how do you tell the consumer that these chemicals are not hazardous to the food?
Herbicides are safe! They're out there to control weeds. The plant that grows, like the corn or soybean, is tolerant to those herbicides, so it doesn't bother that grain that's growing. I don't know.
I don't know if the consumer actually knows what it takes to raise a crop, to make the bread on his table and the eggs in his frying pan, I don't know if they do or not. Sometimes you wonder. I think...to me, the naturalist or whoever that thinks that we can feed the world on the way it was 50 years ago, is going to go hungry. We can't feed the world on 50-bushel {per acre} corn, 20-bushel beans. We have to have genetics, we have to have fertilizer, we have to have herbicides...we have to have those traits in these crops to make higher yields.
The GMO is the traits that they put in the plant so that the plant is resistant to the corn borer. Well, think about that. The corn borer, the corn root worm is being controlled genetically in the plant instead of using a pesticide. So the use of a true pesticide, the organophosphates that we used to use to control corn root worms, we don't use them anymore. We don't have to! Because the plant itself has got the gene in there to control that pest.
So the pesticide use has gone down bunches in our country, in corn and soybean country. Because we don't use them anymore!
To society I think that farmers offer a lot. They're independently owned. They're their own boss. I'm not sure how to answer that, except that farmers are just a huge part of this society, in these communities. Now Kansas City or Wichita, you know, they get overlooked. What do you think?
I think there's a lot of people that wish they could be more involved in raising their own food, having their flower gardens...farming to me is just a livelihood. I don't know how anybody could beat it, to be a farmer. You're your own boss, you're out there working with your animals, you know nobody's telling you what to do everyday! The young people that don't ever experience those thoughts even, or the joy of it, being out in the country, they're missing a lot.
Read the full interview here, and learn about the complex grain marketing system, government regulations, and a year in the life of a grain elevator.
Lyle Fischer, Full Interview:
I lived here all my life. My dad worked in construction and farmed a little bit, but he never made a real livelihood out of farming. Had cattle and some hogs...raised seven kids. Took a lot of food to feed seven kids. I went on to school for four years and got my bachelors degree in business administration; had a buddy that was going to go to Cargill to work, and I said, "yeah, that wouldn't be so bad, working in a farm-type atmosphere." So I went down to Humboldt, and talked to the manager down there, which is about 40 miles that way, and decided to go to work for a co-op. I felt like that would be a good job.
Cargill's huge. Feed, seed, animal science, they're a big corporations. Worked there a couple of years, and had a chance to come back home, and went to work here in 1976 as the assistant manager, getting the feed, the seed, all the supplies, worked the counter. We started spraying row crops back in '75, so we bought a sprayer pickup a couple of years later and I drove that in the summertime for awhile. Got to where that was taking to much time and I wasn't getting my stuff done in the office, so I quit doing that. 2001 I took over as general manager...nine years went by, and it doesn't seem like nine years! I don't know, I really don't have a good story to tell. It's just work!
Well, he [Larry Gleue] said that it was a really unique and good model, this co-op, in how it operates. How is that, what makes it unique?
How is that...well, I think it started back in the mid-'70's, not just because I came there, but because we started doing things in agronomy. We started spraying in '75, and we grew from one rig to two or three rigs, and today we have 3 row row crop machines, 2 fertilizer machines, and a couple floaters, and 5 or 6 full-time people that custom apply. It's just grown from that. I think the service and the work ethics that we had with that, our people willing to do it, to get it done, has formed a bond to where they know they can come to us and it'll get done. I'm not saying that others won't. Probably being a workaholic was our problem, we all work too much. And it still goes that way!
Do you know how many farms are part of the co-op now?
Well, in 1995, the LeRoy co-op bought out an independent at Gridley over here. We also bought a Westphalia independent, which is that way about 15 miles. We opened up our territory, so the customers we already had in those areas had a place to go for closer service. As far as the farm numbers, gosh, I don't know the count, but we have about 1200-1300 members. They're not all active; part of them are landowners who are members who don't even live here. You got a lot of landowners who have got their land from family over the years, somebody farms it for them, but they're members.
A lot of the farmers are farming 1500 to 2000 acres, corn, beans, some wheat. Wheat's kind of a rotation crop. Little bit of milo. Not much milo anymore.
Are you cropping too?
No. No I don't. I just run a few cattle. It's all grass. I don't have time for farming.
So, I'm from a dairy area, and I'm not very familiar with the way that row crops and elevators and everything work. So how does a co-op elevator like this work, compared to someone who might just have the option of a larger company owning the elevators around them?
Well, a cooperative is member-owned. In 1960, fifty years ago, the farmers wanted something better for them. Competition-wise, they wasn't getting a fair shake in the market. So they decided to start a cooperative and own it themselves. From that it's grown to the membership we have now. But a co-op is member-ownership; you earn your membership by doing business there, or you can buy membership. Any money that's made at the end of the year is shared back to the people that have done business that year. So all the assets, the income, is returned back to the members, based on their annual purchases, unlike an independent elevator or grain business, where it goes in their own pocket.
Since you get to work with all these different farmers in the 30-some years you've been involved, what are the biggest issues you've seen farmers around here dealing with?
In the late '70's and early '80's, it was the debt load. The debt and the interest. The interest was so high that we lost a few farmers that couldn't make it. They was paying 18% interest on a lot of money. That was the biggest challenge I can see in those times, the interest rate. Since we're dryland country, we don't have irrigation, we rely on mother nature's grace to give us rain and the right weather when you need it.
1980 was a tough year. It was a dry year. Very, very dry. That hurt too, back with the interest and the dry year, people didn't raise a crop. And not too many people had crop insurance then. So, that was probably a challenge as far as the '80's.
The '90's, I'd say, was the price of the commodity. It was so low. Except for a peak year, you might have a good price, but when corn was $2 and beans were $4.50, you know, the income that they had probably came more from the government payments than it did from their farm. They had to survive on some government payments, their LDPs, etc.
Today, the cost of inputs have risen so much. It takes a lot of money to put in a crop, but the commodity prices are better. I'm not sure they're making anymore money.
Is it the chemicals or the seeds, or both?
Not so much chemicals. The seed and the fertilizer. Machinery. Labor. Those are all things that really got pretty high. Chemicals actually, probably got cheaper. But the seed costs have risen to offset the chemical prices.
I'm also curious; I imagine it's no different here than it is everywhere else that we've been, that farms have gotten a lot bigger, which means that a lot of people have gotten out of farming. Do you think that people are getting bigger because they want to or because they have to to stay ahead?
I would say that most of them are getting bigger because they have to. Now, there's a few, I'm sure, that are getting bigger because of pride. You know, "I want to be bigger than the other guy." I could tell you a few of those. Most of them, I'd say, are getting bigger because they see the need to farm more acres to make their machinery pay. To me, I can't understand how they can put a quarter million dollars into a combine or $200,000 into a planter, and plant two or three thousand acres and make it work. I guess they have to. I spend $200,000 for a sprayer, but I can spray 30, 40,000 acres, generate a lot more income. Not necessarily profit, but a lot more income, cash flow, out of that machine. But when you run a quarter million dollar combine over 2,000 acres, I don't know, that's a lot of money per acre.
Do farmers involved with the co-op ever share machinery?
Family-wise they do. There is a couple parties that have a sprayer together. There's a few that don't own a combine. There's a couple older guys that don't own a combine. But as far as sharing tillage, planters, no. If they do, it's custom-hired, they pay the other guy to do it for them.
Has the co-op's life been pretty smooth? Has it had any issues; competition, pressure, from other parties?
Oh, yeah. Oh, yeah, there's always competition. In the grain business especially, there's competition because the farmers will travel with their semis 40, 50, 100 miles. They don't have to go to their local elevator to market their grain. Unlike back in the '70's and '80's, when they had small trucks. They didn't have semis. Now all the farmers got semis, except for a handful, so they can truck it farther. So competition in grain is definitely there. Competition in seed is also there because you've got a lot of farmers selling seed. We probably have half a dozen seed dealers in our area. Fertilizer and chemicals isn't too bad because we're kind of sitting here in a zone, taking care of our own people; the other co-op down here about 20 miles, they take care of their people. So the crossover of agronomy doesn't affect us too much. 'Course in fuel there's always competition.
What would be some ideal changes, from your perspective, that you'd like to see in the larger ag system?
Well, the farmer gets a lot of aid from the government now, as far as government payments, conservation. There's really probably not much more they can get there. I'm looking for a challenge to the farmers...the government possible making them have to be accountable for all the phosphate and nitrogen that they put on the soil. That could be a huge regulatory issue if they try to control what the farmer does with fertility. If that happens, then we as an agronomy service will have to beef up our services for site-specific fertility. Which we're doing somewhat now, in 5-acre grids, soil sampling, putting together a soil fertility map and fertilizing based on those grids. We're doing a lot of it already, but we only got one person doing that. And right now it's all voluntary. I see that as probably the biggest challenge for the farmers. if the government tries to mandate how we fertilize.
You think that's likely to go through?
I think it will someday. Because the nitrogen in the drinking water and the phosphate in the lakes. We get those plumes...a lot of that's phosphate runoff, fertilizer runoff. But...filter strips that the farmers have put in around creeks and edges of fields will stop a lot of that movement of water from the fields to the streams.
That would be a challenge for us, is how are we going to pay for those people? To me that's going to be a real challenge. I'll probably be out of it by then! But we're still working towards it, doing a lot of grid sampling. We've done that now for 3, 4 years, and it's good! 'Cause now you're putting fertilizer on where you really need it, not just a broad coverage. So I like that idea to do it that way; I just hope the government doesn't mandate it.
Oh, issues for the elevator and the co-op go far beyond that. DOT regulatory issues, OSHA regulatory issues, EPA regulatory issues. Yeah, we all have to be safe, we all have to make sure we don have spills with chemicals, make sure we contain our fertilizer load pads, you know, it's all in place. But it seems to me like the regulatory people are trying to do more than whats necessary. Because of dollars. I think they have to find some dollars to keep their programs funded, and if they can find some penalty out here in the country, then they can charge a fine.
You know, one of the things last year is...it's gonna happen...have you ever been around a grain bin, trying to clean it out? Well, OSHA says we can not get into the bin with any moving parts. Well, when you get the grain run out of the bin through the holes, you got all this grain around the bottom; well, you have a sweep that brings it to the center and then it augers it out. Well, those sweeps don't run by themselves. You have to get in there and kind of manage it, keep it going, sweep up behind it, stuff like that. Well, OSHA says we cannot have anybody in the bin with any power on. So we can't go in the bin to clean it. It's like, "uhh...so, how we gonna do it?"
Is that regulation coming because there have been issues, or is it just overly cautionary?
Oh, they think that there's been some injuries because of it. And there has been. But most of them don't come from walking behind a sweep. Just things we gotta deal with, figuring out new ways to do things. So we buy a power sweep that has a tractor drive that pushes it. Those work, but it just costs money. We're gonna spend $30,000 to put in six sweeps that have tractor drives on them. So it's just...we'll deal with it somehow, but we're gonna spend money to do it, and it's not necessary.
And that money could go to the farmers?
That could go to bottomline profits, which goes to the farmers.
Can you walk me through how an elevator operates through the season? How does the elevator or co-op decide how much money the farmer gets and when the co-op sells off its store?
So, we have a fall harvest. Corn comes in, soybeans come in. We try to make 20-25 cents a bushel for a margin. So if we can sell them for $10, they're gonna get $9.75, for beans. That's the margin structure that we use. Grain comes in, we try to keep as much in our facility as we can until we have to ship it. Then, once we need to start shipping it, we find the market to take our soybeans. Most of the soybeans go to a processer in Emporia that processes the soybeans into meal and oil. Some of the beans go south to the port area near Tulsa, and it hits the barge and heads on down river to the Gulf; it's put on a ship and is taken to China or somewhere.
So the grain movement is from the farm to the elevator to the end user. That's the only market we have for soybeans, is a processor or an exporter.
And is that shipped by truck or do you have rail?
Mostly truck. We do some rail, but mostly truck.
Now, corn is a little different. The corn market is...you got the ethanol users, you got the livestock users, you got the food processing, and you got export. Well, most of our corn goes to the ethanol market, because there's an ethanol plant in Garnett, which is 30 miles to the east and north. Probably 10% of our fall harvest is put on rail, and most of the time that goes south and is probably going into the Arkansas poultry, or feedlot or dairy. Most of that's going to livestock feed.
About 10% of our corn goes to our own feed mill to process and feed livestock in our communities. Then, I don't know how much of our corn is actually exported, because, like I say, we only rail about 10% of it, and I don't think there's too much going to the Gulf for export.
We don't have a food processer in this community, within 100 miles that I know of. So the corn is brought in and we ship a lot during harvest, then we ship during the winter and spring and summer. The corn marketing is a little different than soybeans. We can usually hedge the corn. So we own it. We paid the farmer for it. And then we carry that until a future month. We can make up 10, 15, 20 cents a bushel by hedging and shipping later, using the board of trade market. We're not risking the price, we're just risking the basis. So we might buy some corn in the fall and not actually market or ship it until March, April, or May.
With soybeans, the price they are, $10, we really can't afford to hold them too long. 'Cause the interest on that will really kind of eat you up.
So, is it risky at all that you...you paid all the farmers, you now own the corn...then a couple months later you're thinking you're going to sell it, and then something strange happens, and the price just drops dramatically...is the elevator then going to lose quite a lot of money?
On a hedge, we're not risking the price. Okay, if we buy the corn at $3 and the Chicago board is, say, $3.50, that's a 50 cent basis. So, we buy the corn and we sell corn on the board, not the cash market. So a true hedge is: you buy the corn, and you sell to the board. So now the price change doesn't matter. If the price goes down to $1, well the board's going to go down, and so's your cash. Now, the risk you take is...remember I said 50 cents was the basis, the spread? The risk you take is, if the cash goes higher than the board. But during all of our years of marketing, we watch the basis, and if we see a basis that's really good, we sell it. If we see a basis that's going against us, we'll get out. We won't carry it to where we have a loss on the basis. But the price of the grain is immaterial to us. It means a lot to the farmer, because that's the price he's gonna get. But to us the price of the grain is not important.
A complex system.
It is. I've heard marketing people say, "buy high and sell cheap to make money." How can you do that? Well, you give the farmer $5 for his corn, and at that time the board is $5.50, you bought it high...the price goes down $3, you sell cheap. You still make your margin. 'Cause you covered yourself with the hedge. You've got two sides of the marketing...the farmer that wants to sell for a high price and the end user, the feeder or the ethanol plant that wants to buy cheap. Well, not everybody can have what they want.
I'm curious about the demographics of the farmers around here. Do you see many younger folks getting into farms? Kids taking over operations, or anybody new coming in?
We have several...and they're not young, but there's several in the 35 to 50 range. I mean, that's not young, but it's pretty young for...we have quite a few that's in their 50s and 60s. As far as under 30...there's a few. But they're all sons. They're sons that are coming back or staying. Yeah there's a few. I think we've got a good bunch of under-50 farmers. Under 50 means they still have 15, 20 years, 25 years of farming in 'em. Very very few of them retire at 65, you know. They think they do, but they're still farming when they're 70, 75.
The co-op has a retirement plan. When guys reach 69 they get their equities. Well, their equities was money they earned over the years from the profits of the co-op every year. We've got some farmers that have $15, $20, $30, $40, $50, $60 thousand dollars worth of equities. And what's interesting is, we pay those down to $1,000 when they reach that age, 68 or whatever it is. But those guys are still farming at 68, so now they start earning money again. There's some of these older farmers that have $20 or $30 thousand bucks back in their equities, just because they didn't quit farming at 68. They're still farming and earning dividends.
There's farmers that won't quit till they're buried. And there's a few of them that quit and they're done. Then all they do is hang out. There's a few farmers that don't have livestock, just rowcrop. To me, they have a lot of time to kill. To me, they don't farm full time, they work 4,5,6 months out of the year, and the rest of the time they're just hanging out. But the livestock guy, he's working livestock.
We saw a lot of pasture as we were coming in here...do most of the folks have a small or midsized herd?
Yeah. But there's a lot of the farmers that don't have livestock at all.
I'm curious about...it seems like there's been negative press about chemicals. What would you like those folks to know?
I think the word "chemical" sounds like a hazardous material. Maybe the word "chemicals" is the wrong word to use. "Herbicide" is a better terminology to use. Herbicide is used by our customers to control weeds. Then there's pesticides. Pesticides are more for pest control, insects. Gosh...how do you tell the consumer that these chemicals are not hazerdous to the food?
Herbicides are safe! They're out there to control weeds. The plant that grows, like the corn or soybean, is tolerant to those herbicides, so it doesn't bother that grain that's growing. I don't know.
Do you think what the farmers do out here is appreciated by the consumer?
The consumer in which community? I don't know if the consumer actually knows what it takes to raise a crop, to make the bread on his table and the eggs in his frying pan, I don't know if they do or not. Sometimes you wonder. I think...to me, the naturalist or whoever that thinks that we can feed the world on the way it was 50 years ago, is going to go hungry. We can't feed the world on 50-bushel {per acre} corn, 20-bushel beans. We have to have genetics, we have to have fertilizer, we have to have herbicides...we have to have those traits in these crops to make higher yields.
The GMO is the traits that they put in the plant so that the plant is resistant to the corn borer. Well, think about that. The corn borer, the corn root worm is being controlled genetically in the plant instead of using a pesticide. So the use of a true pesticide, the organophosphates that we used to use to control corn rootworms, we don't use them anymore. We don't have to! Because the plant itself has got the gene in there to control that pest.
So the pesticide use has gone down bunches in our country, in corn and soybean country. Because we don't use them anymore!
What was your question? I forget!
If consumers appreciate this type of agriculture.
I doubt it. I doubt it. Do you?
Like I said, I'm from the Oregon coast, and it's all dairy around me, mostly small-scale dairy. And so, I didn't until...of course you can't really understand until you're totally around it. I'm always curious how to better communicate how agriculture works to people in the cities and even to people in other types of agriculture. That's really why we're doing this.
I don't know. Commentators...TV commentators, that's the one's you need to make sure understand agriculture. People watch TV and they hear a lot of stuff. I don't think radio as much as TV. I was on the road, traveling this week and happened to find a farm report in, I think, Oklahoma. They had a really good program on the appreciation of the farmer, and what he does to raise crop. That's what people need to hear, but how many people listen to that stuff? They're gonna put their earphones in, and iTunes...kids aren't listening to the radio.
Food's safe. I feel that food is safe. But you hear about the kids that are getting obese and the health issues we're going to have in the years to come...it's not because of the food they're eating, it's because of the foods they're buying. It's the processed foods, all the pops they drink, the snacks they eat, no exercise. But our food is safe. Personally I don't like buying a lot of processed foods, but we do. But I don't know how to tell the consumer our food is safe. Maybe the internet. But it only takes one TV commentator that has millions of followers to really ruin one good day! Mad Cow disease, you know, that started a lot of concerns years ago.
One of the big questions that we ask all the farmers is, what do you think that the role of the farmer in society should be?
Hm. Well, he's a contributer to our economy. In society we all hope to contribute to our economy. I think the role of the farmer is probably involved more in community activities than some of the people just working a job. What I see is a lot more giving, of their time, of their moneys, to the communities. At least, in our church, our farmers are big givers, big supporters. I think the farmers probably support the churches more than other groups of communities; maybe that's just what I see.
To society I think that farmers offer a lot. They're independently owned. They're their own boss. I'm not sure how to answer that, except that farmers are just a hige part of this society, in these communities. Now Kansas City or Wichita, you know, they get overlooked. What do you think?
I think there's a lot of people that wish they could be more involved in raising their own food, having their flower gardens...farming to me is just a livelihood. I don't know how anybody could beat it, to be a farmer. You're your own boss, you're out there working with your animals, you know nobody's telling you what to do everyday! The young people that don't ever experience those thoughts even, or the joy of it, being out in the country, they're missing a lot.
I would say that most of them are getting bigger because they have to. Now, there's a few, I'm sure, that are getting bigger because of pride. You know, "I want to be bigger than the other guy." I could tell you a few of those. Most of them, I'd say, are getting bigger because they see the need to farm more acres to make their machinery pay. To me, I can't understand how they can put a quarter million dollars into a combine or $200,000 into a planter, and plant two or three thousand acres and make it work. I guess they have to. I spend $200,000 for a sprayer, but I can spray 30, 40,000 acres, generate a lot more income. Not necessarily profit, but a lot more income, cash flow, out of that machine. But when you run a quarter million dollar combine over 2,000 acres, I don't know, that's a lot of money per acre.
We also asked him about the negative press that chemicals often get in popular press, and how he feels about it:
I think the word "chemical" sounds like a hazardous material. Maybe the word "chemicals" is the wrong word to use. "Herbicide" is a better terminology to use. Herbicide is used by our customers to control weeds. Then there's pesticides. Pesticides are more for pest control, insects. Gosh...how do you tell the consumer that these chemicals are not hazardous to the food?
Herbicides are safe! They're out there to control weeds. The plant that grows, like the corn or soybean, is tolerant to those herbicides, so it doesn't bother that grain that's growing. I don't know.
I don't know if the consumer actually knows what it takes to raise a crop, to make the bread on his table and the eggs in his frying pan, I don't know if they do or not. Sometimes you wonder. I think...to me, the naturalist or whoever that thinks that we can feed the world on the way it was 50 years ago, is going to go hungry. We can't feed the world on 50-bushel {per acre} corn, 20-bushel beans. We have to have genetics, we have to have fertilizer, we have to have herbicides...we have to have those traits in these crops to make higher yields.
The GMO is the traits that they put in the plant so that the plant is resistant to the corn borer. Well, think about that. The corn borer, the corn root worm is being controlled genetically in the plant instead of using a pesticide. So the use of a true pesticide, the organophosphates that we used to use to control corn root worms, we don't use them anymore. We don't have to! Because the plant itself has got the gene in there to control that pest.
So the pesticide use has gone down bunches in our country, in corn and soybean country. Because we don't use them anymore!
To society I think that farmers offer a lot. They're independently owned. They're their own boss. I'm not sure how to answer that, except that farmers are just a huge part of this society, in these communities. Now Kansas City or Wichita, you know, they get overlooked. What do you think?
I think there's a lot of people that wish they could be more involved in raising their own food, having their flower gardens...farming to me is just a livelihood. I don't know how anybody could beat it, to be a farmer. You're your own boss, you're out there working with your animals, you know nobody's telling you what to do everyday! The young people that don't ever experience those thoughts even, or the joy of it, being out in the country, they're missing a lot.
Read the full interview here, and learn about the complex grain marketing system, government regulations, and a year in the life of a grain elevator.
Lyle Fischer, Full Interview:
I lived here all my life. My dad worked in construction and farmed a little bit, but he never made a real livelihood out of farming. Had cattle and some hogs...raised seven kids. Took a lot of food to feed seven kids. I went on to school for four years and got my bachelors degree in business administration; had a buddy that was going to go to Cargill to work, and I said, "yeah, that wouldn't be so bad, working in a farm-type atmosphere." So I went down to Humboldt, and talked to the manager down there, which is about 40 miles that way, and decided to go to work for a co-op. I felt like that would be a good job.
Cargill's huge. Feed, seed, animal science, they're a big corporations. Worked there a couple of years, and had a chance to come back home, and went to work here in 1976 as the assistant manager, getting the feed, the seed, all the supplies, worked the counter. We started spraying row crops back in '75, so we bought a sprayer pickup a couple of years later and I drove that in the summertime for awhile. Got to where that was taking to much time and I wasn't getting my stuff done in the office, so I quit doing that. 2001 I took over as general manager...nine years went by, and it doesn't seem like nine years! I don't know, I really don't have a good story to tell. It's just work!
Well, he [Larry Gleue] said that it was a really unique and good model, this co-op, in how it operates. How is that, what makes it unique?
How is that...well, I think it started back in the mid-'70's, not just because I came there, but because we started doing things in agronomy. We started spraying in '75, and we grew from one rig to two or three rigs, and today we have 3 row row crop machines, 2 fertilizer machines, and a couple floaters, and 5 or 6 full-time people that custom apply. It's just grown from that. I think the service and the work ethics that we had with that, our people willing to do it, to get it done, has formed a bond to where they know they can come to us and it'll get done. I'm not saying that others won't. Probably being a workaholic was our problem, we all work too much. And it still goes that way!
Do you know how many farms are part of the co-op now?
Well, in 1995, the LeRoy co-op bought out an independent at Gridley over here. We also bought a Westphalia independent, which is that way about 15 miles. We opened up our territory, so the customers we already had in those areas had a place to go for closer service. As far as the farm numbers, gosh, I don't know the count, but we have about 1200-1300 members. They're not all active; part of them are landowners who are members who don't even live here. You got a lot of landowners who have got their land from family over the years, somebody farms it for them, but they're members.
A lot of the farmers are farming 1500 to 2000 acres, corn, beans, some wheat. Wheat's kind of a rotation crop. Little bit of milo. Not much milo anymore.
Are you cropping too?
No. No I don't. I just run a few cattle. It's all grass. I don't have time for farming.
So, I'm from a dairy area, and I'm not very familiar with the way that row crops and elevators and everything work. So how does a co-op elevator like this work, compared to someone who might just have the option of a larger company owning the elevators around them?
Well, a cooperative is member-owned. In 1960, fifty years ago, the farmers wanted something better for them. Competition-wise, they wasn't getting a fair shake in the market. So they decided to start a cooperative and own it themselves. From that it's grown to the membership we have now. But a co-op is member-ownership; you earn your membership by doing business there, or you can buy membership. Any money that's made at the end of the year is shared back to the people that have done business that year. So all the assets, the income, is returned back to the members, based on their annual purchases, unlike an independent elevator or grain business, where it goes in their own pocket.
Since you get to work with all these different farmers in the 30-some years you've been involved, what are the biggest issues you've seen farmers around here dealing with?
In the late '70's and early '80's, it was the debt load. The debt and the interest. The interest was so high that we lost a few farmers that couldn't make it. They was paying 18% interest on a lot of money. That was the biggest challenge I can see in those times, the interest rate. Since we're dryland country, we don't have irrigation, we rely on mother nature's grace to give us rain and the right weather when you need it.
1980 was a tough year. It was a dry year. Very, very dry. That hurt too, back with the interest and the dry year, people didn't raise a crop. And not too many people had crop insurance then. So, that was probably a challenge as far as the '80's.
The '90's, I'd say, was the price of the commodity. It was so low. Except for a peak year, you might have a good price, but when corn was $2 and beans were $4.50, you know, the income that they had probably came more from the government payments than it did from their farm. They had to survive on some government payments, their LDPs, etc.
Today, the cost of inputs have risen so much. It takes a lot of money to put in a crop, but the commodity prices are better. I'm not sure they're making anymore money.
Is it the chemicals or the seeds, or both?
Not so much chemicals. The seed and the fertilizer. Machinery. Labor. Those are all things that really got pretty high. Chemicals actually, probably got cheaper. But the seed costs have risen to offset the chemical prices.
I'm also curious; I imagine it's no different here than it is everywhere else that we've been, that farms have gotten a lot bigger, which means that a lot of people have gotten out of farming. Do you think that people are getting bigger because they want to or because they have to to stay ahead?
I would say that most of them are getting bigger because they have to. Now, there's a few, I'm sure, that are getting bigger because of pride. You know, "I want to be bigger than the other guy." I could tell you a few of those. Most of them, I'd say, are getting bigger because they see the need to farm more acres to make their machinery pay. To me, I can't understand how they can put a quarter million dollars into a combine or $200,000 into a planter, and plant two or three thousand acres and make it work. I guess they have to. I spend $200,000 for a sprayer, but I can spray 30, 40,000 acres, generate a lot more income. Not necessarily profit, but a lot more income, cash flow, out of that machine. But when you run a quarter million dollar combine over 2,000 acres, I don't know, that's a lot of money per acre.
Do farmers involved with the co-op ever share machinery?
Family-wise they do. There is a couple parties that have a sprayer together. There's a few that don't own a combine. There's a couple older guys that don't own a combine. But as far as sharing tillage, planters, no. If they do, it's custom-hired, they pay the other guy to do it for them.
Has the co-op's life been pretty smooth? Has it had any issues; competition, pressure, from other parties?
Oh, yeah. Oh, yeah, there's always competition. In the grain business especially, there's competition because the farmers will travel with their semis 40, 50, 100 miles. They don't have to go to their local elevator to market their grain. Unlike back in the '70's and '80's, when they had small trucks. They didn't have semis. Now all the farmers got semis, except for a handful, so they can truck it farther. So competition in grain is definitely there. Competition in seed is also there because you've got a lot of farmers selling seed. We probably have half a dozen seed dealers in our area. Fertilizer and chemicals isn't too bad because we're kind of sitting here in a zone, taking care of our own people; the other co-op down here about 20 miles, they take care of their people. So the crossover of agronomy doesn't affect us too much. 'Course in fuel there's always competition.
What would be some ideal changes, from your perspective, that you'd like to see in the larger ag system?
Well, the farmer gets a lot of aid from the government now, as far as government payments, conservation. There's really probably not much more they can get there. I'm looking for a challenge to the farmers...the government possible making them have to be accountable for all the phosphate and nitrogen that they put on the soil. That could be a huge regulatory issue if they try to control what the farmer does with fertility. If that happens, then we as an agronomy service will have to beef up our services for site-specific fertility. Which we're doing somewhat now, in 5-acre grids, soil sampling, putting together a soil fertility map and fertilizing based on those grids. We're doing a lot of it already, but we only got one person doing that. And right now it's all voluntary. I see that as probably the biggest challenge for the farmers. if the government tries to mandate how we fertilize.
You think that's likely to go through?
I think it will someday. Because the nitrogen in the drinking water and the phosphate in the lakes. We get those plumes...a lot of that's phosphate runoff, fertilizer runoff. But...filter strips that the farmers have put in around creeks and edges of fields will stop a lot of that movement of water from the fields to the streams.
That would be a challenge for us, is how are we going to pay for those people? To me that's going to be a real challenge. I'll probably be out of it by then! But we're still working towards it, doing a lot of grid sampling. We've done that now for 3, 4 years, and it's good! 'Cause now you're putting fertilizer on where you really need it, not just a broad coverage. So I like that idea to do it that way; I just hope the government doesn't mandate it.
Oh, issues for the elevator and the co-op go far beyond that. DOT regulatory issues, OSHA regulatory issues, EPA regulatory issues. Yeah, we all have to be safe, we all have to make sure we don have spills with chemicals, make sure we contain our fertilizer load pads, you know, it's all in place. But it seems to me like the regulatory people are trying to do more than whats necessary. Because of dollars. I think they have to find some dollars to keep their programs funded, and if they can find some penalty out here in the country, then they can charge a fine.
You know, one of the things last year is...it's gonna happen...have you ever been around a grain bin, trying to clean it out? Well, OSHA says we can not get into the bin with any moving parts. Well, when you get the grain run out of the bin through the holes, you got all this grain around the bottom; well, you have a sweep that brings it to the center and then it augers it out. Well, those sweeps don't run by themselves. You have to get in there and kind of manage it, keep it going, sweep up behind it, stuff like that. Well, OSHA says we cannot have anybody in the bin with any power on. So we can't go in the bin to clean it. It's like, "uhh...so, how we gonna do it?"
Is that regulation coming because there have been issues, or is it just overly cautionary?
Oh, they think that there's been some injuries because of it. And there has been. But most of them don't come from walking behind a sweep. Just things we gotta deal with, figuring out new ways to do things. So we buy a power sweep that has a tractor drive that pushes it. Those work, but it just costs money. We're gonna spend $30,000 to put in six sweeps that have tractor drives on them. So it's just...we'll deal with it somehow, but we're gonna spend money to do it, and it's not necessary.
And that money could go to the farmers?
That could go to bottomline profits, which goes to the farmers.
Can you walk me through how an elevator operates through the season? How does the elevator or co-op decide how much money the farmer gets and when the co-op sells off its store?
So, we have a fall harvest. Corn comes in, soybeans come in. We try to make 20-25 cents a bushel for a margin. So if we can sell them for $10, they're gonna get $9.75, for beans. That's the margin structure that we use. Grain comes in, we try to keep as much in our facility as we can until we have to ship it. Then, once we need to start shipping it, we find the market to take our soybeans. Most of the soybeans go to a processer in Emporia that processes the soybeans into meal and oil. Some of the beans go south to the port area near Tulsa, and it hits the barge and heads on down river to the Gulf; it's put on a ship and is taken to China or somewhere.
So the grain movement is from the farm to the elevator to the end user. That's the only market we have for soybeans, is a processor or an exporter.
And is that shipped by truck or do you have rail?
Mostly truck. We do some rail, but mostly truck.
Now, corn is a little different. The corn market is...you got the ethanol users, you got the livestock users, you got the food processing, and you got export. Well, most of our corn goes to the ethanol market, because there's an ethanol plant in Garnett, which is 30 miles to the east and north. Probably 10% of our fall harvest is put on rail, and most of the time that goes south and is probably going into the Arkansas poultry, or feedlot or dairy. Most of that's going to livestock feed.
About 10% of our corn goes to our own feed mill to process and feed livestock in our communities. Then, I don't know how much of our corn is actually exported, because, like I say, we only rail about 10% of it, and I don't think there's too much going to the Gulf for export.
We don't have a food processer in this community, within 100 miles that I know of. So the corn is brought in and we ship a lot during harvest, then we ship during the winter and spring and summer. The corn marketing is a little different than soybeans. We can usually hedge the corn. So we own it. We paid the farmer for it. And then we carry that until a future month. We can make up 10, 15, 20 cents a bushel by hedging and shipping later, using the board of trade market. We're not risking the price, we're just risking the basis. So we might buy some corn in the fall and not actually market or ship it until March, April, or May.
With soybeans, the price they are, $10, we really can't afford to hold them too long. 'Cause the interest on that will really kind of eat you up.
So, is it risky at all that you...you paid all the farmers, you now own the corn...then a couple months later you're thinking you're going to sell it, and then something strange happens, and the price just drops dramatically...is the elevator then going to lose quite a lot of money?
On a hedge, we're not risking the price. Okay, if we buy the corn at $3 and the Chicago board is, say, $3.50, that's a 50 cent basis. So, we buy the corn and we sell corn on the board, not the cash market. So a true hedge is: you buy the corn, and you sell to the board. So now the price change doesn't matter. If the price goes down to $1, well the board's going to go down, and so's your cash. Now, the risk you take is...remember I said 50 cents was the basis, the spread? The risk you take is, if the cash goes higher than the board. But during all of our years of marketing, we watch the basis, and if we see a basis that's really good, we sell it. If we see a basis that's going against us, we'll get out. We won't carry it to where we have a loss on the basis. But the price of the grain is immaterial to us. It means a lot to the farmer, because that's the price he's gonna get. But to us the price of the grain is not important.
A complex system.
It is. I've heard marketing people say, "buy high and sell cheap to make money." How can you do that? Well, you give the farmer $5 for his corn, and at that time the board is $5.50, you bought it high...the price goes down $3, you sell cheap. You still make your margin. 'Cause you covered yourself with the hedge. You've got two sides of the marketing...the farmer that wants to sell for a high price and the end user, the feeder or the ethanol plant that wants to buy cheap. Well, not everybody can have what they want.
I'm curious about the demographics of the farmers around here. Do you see many younger folks getting into farms? Kids taking over operations, or anybody new coming in?
We have several...and they're not young, but there's several in the 35 to 50 range. I mean, that's not young, but it's pretty young for...we have quite a few that's in their 50s and 60s. As far as under 30...there's a few. But they're all sons. They're sons that are coming back or staying. Yeah there's a few. I think we've got a good bunch of under-50 farmers. Under 50 means they still have 15, 20 years, 25 years of farming in 'em. Very very few of them retire at 65, you know. They think they do, but they're still farming when they're 70, 75.
The co-op has a retirement plan. When guys reach 69 they get their equities. Well, their equities was money they earned over the years from the profits of the co-op every year. We've got some farmers that have $15, $20, $30, $40, $50, $60 thousand dollars worth of equities. And what's interesting is, we pay those down to $1,000 when they reach that age, 68 or whatever it is. But those guys are still farming at 68, so now they start earning money again. There's some of these older farmers that have $20 or $30 thousand bucks back in their equities, just because they didn't quit farming at 68. They're still farming and earning dividends.
There's farmers that won't quit till they're buried. And there's a few of them that quit and they're done. Then all they do is hang out. There's a few farmers that don't have livestock, just rowcrop. To me, they have a lot of time to kill. To me, they don't farm full time, they work 4,5,6 months out of the year, and the rest of the time they're just hanging out. But the livestock guy, he's working livestock.
We saw a lot of pasture as we were coming in here...do most of the folks have a small or midsized herd?
Yeah. But there's a lot of the farmers that don't have livestock at all.
I'm curious about...it seems like there's been negative press about chemicals. What would you like those folks to know?
I think the word "chemical" sounds like a hazardous material. Maybe the word "chemicals" is the wrong word to use. "Herbicide" is a better terminology to use. Herbicide is used by our customers to control weeds. Then there's pesticides. Pesticides are more for pest control, insects. Gosh...how do you tell the consumer that these chemicals are not hazerdous to the food?
Herbicides are safe! They're out there to control weeds. The plant that grows, like the corn or soybean, is tolerant to those herbicides, so it doesn't bother that grain that's growing. I don't know.
Do you think what the farmers do out here is appreciated by the consumer?
The consumer in which community? I don't know if the consumer actually knows what it takes to raise a crop, to make the bread on his table and the eggs in his frying pan, I don't know if they do or not. Sometimes you wonder. I think...to me, the naturalist or whoever that thinks that we can feed the world on the way it was 50 years ago, is going to go hungry. We can't feed the world on 50-bushel {per acre} corn, 20-bushel beans. We have to have genetics, we have to have fertilizer, we have to have herbicides...we have to have those traits in these crops to make higher yields.
The GMO is the traits that they put in the plant so that the plant is resistant to the corn borer. Well, think about that. The corn borer, the corn root worm is being controlled genetically in the plant instead of using a pesticide. So the use of a true pesticide, the organophosphates that we used to use to control corn rootworms, we don't use them anymore. We don't have to! Because the plant itself has got the gene in there to control that pest.
So the pesticide use has gone down bunches in our country, in corn and soybean country. Because we don't use them anymore!
What was your question? I forget!
If consumers appreciate this type of agriculture.
I doubt it. I doubt it. Do you?
Like I said, I'm from the Oregon coast, and it's all dairy around me, mostly small-scale dairy. And so, I didn't until...of course you can't really understand until you're totally around it. I'm always curious how to better communicate how agriculture works to people in the cities and even to people in other types of agriculture. That's really why we're doing this.
I don't know. Commentators...TV commentators, that's the one's you need to make sure understand agriculture. People watch TV and they hear a lot of stuff. I don't think radio as much as TV. I was on the road, traveling this week and happened to find a farm report in, I think, Oklahoma. They had a really good program on the appreciation of the farmer, and what he does to raise crop. That's what people need to hear, but how many people listen to that stuff? They're gonna put their earphones in, and iTunes...kids aren't listening to the radio.
Food's safe. I feel that food is safe. But you hear about the kids that are getting obese and the health issues we're going to have in the years to come...it's not because of the food they're eating, it's because of the foods they're buying. It's the processed foods, all the pops they drink, the snacks they eat, no exercise. But our food is safe. Personally I don't like buying a lot of processed foods, but we do. But I don't know how to tell the consumer our food is safe. Maybe the internet. But it only takes one TV commentator that has millions of followers to really ruin one good day! Mad Cow disease, you know, that started a lot of concerns years ago.
One of the big questions that we ask all the farmers is, what do you think that the role of the farmer in society should be?
Hm. Well, he's a contributer to our economy. In society we all hope to contribute to our economy. I think the role of the farmer is probably involved more in community activities than some of the people just working a job. What I see is a lot more giving, of their time, of their moneys, to the communities. At least, in our church, our farmers are big givers, big supporters. I think the farmers probably support the churches more than other groups of communities; maybe that's just what I see.
To society I think that farmers offer a lot. They're independently owned. They're their own boss. I'm not sure how to answer that, except that farmers are just a hige part of this society, in these communities. Now Kansas City or Wichita, you know, they get overlooked. What do you think?
I think there's a lot of people that wish they could be more involved in raising their own food, having their flower gardens...farming to me is just a livelihood. I don't know how anybody could beat it, to be a farmer. You're your own boss, you're out there working with your animals, you know nobody's telling you what to do everyday! The young people that don't ever experience those thoughts even, or the joy of it, being out in the country, they're missing a lot.
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