"Regional Perspectives of Agricultural, Credit/Finance and
Thursday, February 11, 2009
Scribe: Dana Bessinger
Advance Foods in Enid – a big company in a little town.
Kandi Nelson, the PR manager for the company, greeted us. Craig Ellerbach, Food Safety Quality Assurance Manager and Dan King, Employee Manager gave tours and enlightened our class on the company. We toured the newest facility, Enterprise. The equipment and facility are state of the art, built with food safety and production in mind. The cook-side and raw-side are kept totally separate, even down to the lunchroom for the employees. The smocks worn by the employees signal the type of work produced. There are two production shifts and a clean up shift. Most of the food goes to commercial use, food service, and school lunch. The brand Fast Fixins’ is their product available for consumer purchase.
Advanced was started by Paul Allen and Dave McLaughlin. The company is privately owned. Their sons and daughters are now involved in the running of Advance. Chicken fried steak was the premier product for Advance and what got the company its start. Both men worked for Hereford Heaven – Hormel Foods.
The meat used in Advance’s processing comes from USDA inspected facilities, most of it from Cargill. The main security is card swipes. There are cameras everywhere. The product can be traced by pallet. There are 435 employees in the Enterprise facility, 1800 in Enid, and 2300 company-wide. Scranton, Pennsylvania is the home to the other Advance facility. The company provides benefits to keep employees.
Lunch was served in their 54th Street facility boardroom. The kitchen manger, Karen Crosley, fixed chicken fried steak; chicken fried chicken, mashed potatoes, gravy, green beans, corn, hot rolls, and strawberry cheesecake or short cake. What a way to end the tour!?
Equity Marketing Alliance – in Enid
Tom McCreight, CEO, met us at the door and took us to a conference room. He explained that Equity Marketing Alliance is a marketing company. They have a staff of 6, an origination base of 47,000,000 bushels of grain this year, 65 elevators, and 13 cooperatives.
Equity Marketing Alliance was formed because the regional coops were losing clout in the market. The more volume, the great attention is brought to the market and the more profitability. The starting 6 elevators gave up their licensing authority and the alliance got the license. 100% of the grain is sold through the alliance.
I took lots more notes on hedging, futures, prices, elevator operator revenue, wheat market, etc….e-mail me or anyone else that took notes if you need more details. Also we were given handouts that explained much of the business. This stop was a little hard after a large lunch. Many of the group needed a nap! We needed an exercise break or as John Cothren said, “a shot of adrenaline.”
Muegge Farm/Feedlot - Lamont
Chad Muegge, Don and Bonnie Muegge, John Muegge, and DW Cinnamon all met us in a milking barn that is being remodeled for the feedlot business. Chad is a banker, farmer, oilman, as well as feedlot owner. He is working to find a business to bring about community and economic development to his community. He looked at several different venues before settling on the feedlot. He believes beef cattle to be environmentally friendly.
The feedlot has bunk space for 2500 head and 4000 head on feed. They have 1 loader and 1 feed truck. The loading and unloading stairs and ramp were interesting, the scales were too. There was a five-bay commodity barn also. Chad has done much research in developing his facility. Some of his help has come from Gary Bledsoe, a co-worker of mine, who works with the diversified agriculture grants.
We took a windshield tour of the feedlot. Most of us got out of the vehicles to observe the cattle up close. DW graded them for us and discussed weight.
Head Country BBQ – “One taste will hook you!” – Ponca City
Paul Schatte and Danny Head, co-owners of Head Country Barbeque, both gave a tour of their amazingly clean plant. Head Country BBQ industry has been growing nationally and worldwide. They are shipping to Sweden. We heard the story of Head County BBQ sauce. Danny’s uncle was a cook in WWII. He began making the BBQ sauce out of his home. Danny bought the recipe from his uncle in 1977 for $5,000. The ingredients that are used in the sauce are the same ingredients used by Danny’s uncle. The men stressed they use the best, highest quality ingredients, all A1 products.
One of the interesting aspects of their business is the Barbeque Cook-offs won by Paul and Danny. Paul has won all of the big contests in the US at least once. He gave details of the meat that has to be cooked in a contest.
They make 5000 gallons per day. There are 3 flavors, original, smoky, and hot. Head County also sells dry rub, salsa, and marinade. There have only been two price increases in the past ten years. Made-In-Oklahoma is a great partner with Head Country and helped catapult both in the commodity industry.
Big V Ranch
This stop was our supper stop. Big V is a restored agritourism stop and part of the Salt Fork Valley Ranch and Farm Tours. The dining room held all 26 of our class and guests for a Head Country Barbeque supper of ribs, beans, potato salad, cobbler and ice cream sundaes. Supper was courtesy of Silver Top Farms, Blubaugh Angus Ranch and Blubaugh Insurance Agency.
At one time, Big V ranch sold more mules than anywhere in the nation. The mule barn has also been restored. The upstairs is available for functions. It looked like a great place for a barn dance.
Jeff Weeks, Eastern Agritourism Director for the state visited with the group about the agritourism industry and its growth. He noted that agritourism is agriculture diversification. It can add income to farms and ranches without adding acres. It allows for creativity in the agriculture industry. There are over 400 agritourism type destinations in Oklahoma.
Mary Beth Moore, Ponca City Chamber of Commerce Tourism Director also visited with the group regarding the marketing of agritourism for her area.
The vans loaded here and headed for Wichita after a full day!
Thursday, February 12, 2009
a.m. Scribe: Jared Cullison
Good start from the Comfort Inn at 7:15am. Arrived 15 minutes early to enjoy a great continental breakfast sponsored by Farm Credit.
Dr. Joe Williams opened with thanks and welcomes, and tells of winning first Farm Credit scholarship given at New Mexico State University in 1963.
8:00 am Rose Bonjour takes over and has all persons introduce themselves.
8:15 Greg Reno from AgBank opens his presentation with help from Paul Bardic on Today’s Financial Crisis and its Impact on the Farm Credit System. Points out that 30-40% of all farm related credit is held by Farm Credit Systems, and that the FC system is stable in contrast to other credit organizations. Paul takes over. Gives overview FC lends only to agriculture and rural America, is well capitalized, has stable earnings, as well as being self insured and has greater that 97% top tier loan classifications. Paul points out that 25% of all Ag production in US comes from AgBank districts that stretch from California to Kansas, Oklahoma west to east and Idaho to Arizona north to south.
AgBank lends to 28 FC associations 7 in Oklahoma, down to 42,000 retail borrowers. AgBank has a capital to asset ratio of over 15.4%, a total capital of 4.5 billion, and a net income of 303.3 million. In Oklahoma alone over 10,000 loans to farmers totaling 2.3 billion have been divided out.
Paul Bardic explained what led up to our current home mortgage bubble situation. Lenders lending more than the borrowers can afford so that they could reap higher dividends and profits, thus causing prices to rise and a saturation of the housing market, allowing for any small bump in the economy to pop the bubble. But what is worrisome is that the Subprime mortgages are only a small piece of the debt pie. And in my opinion this will cause a ripple effect through the other debt categories in which we have begun to see with the auto and credit industry. It all comes down to Adjustable rate loans began to adjust upward, borrowers began to default, housing market depresses, and big losses in the mortgage backed securities crush the confidence in further borrowing. Now banks are begging to fail, banks are cautious to lend further and we have government bailouts.
Both Paul and Greg left us with a few words: “Stay Liquid and that the economic situation looks to get worse before we see any improvement so plan accordingly.”
9:30 Rose introduces Dennis Blick and Jason Lawrence of CoBank. CoBank is one of the largest on the FC system and loans mostly short term loans 5 to7 years rather than the 1to2 of the other banks.
Jason moves through handouts first pages that refer to each of CoBanks divisions and the holdings thereof. And then tries to drive home the importance of the coop. He points out that it levels the playing field with price stability of commodities, limits competition, and helps return profits to the producer. Also points out that Coop members use the coop and then has equity invested, so that he and he alone will reap benefits in the end. Questions, Allen asked should coops merge Dennis states only if it strengthens the organization.
10:10 Dennis introduces Jim Mock whose comments on the Wichita Agri-business Council.
He states that in the area Ag is the second largest money earner for the area after the AFB. He is trying to infuse Ag into the urban community by offering speakers, encouraging opportunities to network on common areas of interest, as well as push innovation. He also is trying to open an office geared toward innovation of the Wichita area. The council meets every other month and the major aspect of the meeting is networking.
10:30 we have closing statements from Dr. Joe and then adjourn to bus.
Thursday, February 12, 2009
p.m. Scribe: Carol Cowan
Oklahoma Agricultural Leadership Class Members and Dr. Joe arrived in Colwich, Kansas for our next session. Our chairperson for Thursday afternoon was David McMullen. The first item on the agenda was the overview of ICM and the ethanol industry with a look to the future. Our first speaker was Eric Mork, who is Director of Domestic Business Development at ICM. Before being with ICM, Mr. Mork worked with Koch Oil for 17 years while living in OKC. . Mr. Mork has been with ICM for almost 8 years. He is also on the National Sorghum Producers Board of Directors.
While many people think ICM is an acronym, according to their website, it isn’t. ICM stands for the first choice in designing, building, and supporting ethanol plants. (www.icminc.com). ICM was founded in 1995 and is a privately held company based in Colwich, Kansas. They employ over 400 people with about 70% of the employees at the Colwich office and the rest stationed at construction sites across North America. ICM process technology is utilized by 101 ethanol plants across North America. They have 92 completed facilities, with 5.8 billion gallons per year produced, which includes 4 Canadian Biorefineries, and 9 plants under construction, with the ability of .89 Billion gallons per year produced. Their mission is to provide innovative technologies, solutions and services to sustain agriculture and advance renewable energy. Ethanol is ethyl alcohol (C2 H6 O), a renewable motor fuel made from corn, other high starch crops, and cellulose. Just around the corner from the plant, was a blender facility, Flex Fuels that sells unleaded E10, E20, E30, and E85 at their station. ICM is proud to be a part of an industry the makes the world a better place:
Ethanol is good for your car. Gasoline enriched with ethanol outperforms
straight gasoline in many ways, and E10 (10% ethanol) can be used in all cars.
Ethanol is good for the environment. Gasoline enriched with 10% ethanol helps
protect air quality by reducing harmful tailpipe emissions by 30%.
Ethanol is good for your community and country. American ethanol production
creates tens of thousands of jobs, revitalizes rural communities, and reduces
oil consumption by 600,000 barrels per day and growing.
Mr. Mork stated that $40.00 for a barrel of oil will yield 19.6 gallons of gas. $40.00 worth of corn @ $3.50 per bushel will yield 32 gallons of ethanol. ICM’s job is to get more efficient, and farmers should get more efficient also. A quote he gave us was “American’s are not addicted to oil, our cars are.” He also spoke on their water statistics. Three to five gallons of water is required per gallon of ethanol produced. The actual process uses one gallon of water due to part of the water being used for cooling. All the processed water is re-used in the plant and only non-chemical water is released. Next generation fuels considered is Isobutanol, a new product being developed that has a higher octane and higher BTU’s.
Next on the agenda was Alan Goodnight, with a presentation on the growing demand for ethanol. Mr. Goodnight is the president of NewGen Fuels, LLC. and Director of Marketing. (www.newgenfuel.com). their vision is: In order to increase demand beyond the renewable fuel standard, we must create a new customer. To do so, they will elevate consumer awareness and acceptance of ethanol and all new generation fuels via retail distribution, reducing national dependence on foreign oil. Their mission is: To stimulate demand growth of ethanol beyond RFS floor through the rapid development of blender pumps. They are focusing efforts on installing blender pumps within Crescent Oil Network of consignment locations - 6 locations by Feb. 27th. In the long term, they hope to have 500+ locations.
Conoco Philips/Shell Oil companies are allowing New Gen Fuel at their businesses. It will not be labeled NewGen on anything, since New Gen is the name of the ethanol, not the name of their company. Mr. Goodnight said, “When ethanol becomes dramatically less expensive than gasoline, you will not have any problem getting consumers to fill their cars with ethanol. “Currently New Gen is not in Oklahoma, but they plan to be by the summer, hitting the Tulsa market first.
Dr. Scott Kohl, PhD, Technical Director in Research and Development spoke to us next. Dr. Kohl did his post doctorate research in soils, and how contaminants move in the environment. In 2002 he came to ICM. His research is on fermentation and enzymes, and moving in the direction of cellulose research, and how they treat waste water. He is a chemist by training.
ICM is growing crops in the field. They have 5-6 test plots on approximately 120 acres. Some of the test plots are planted to sorghum. They will learn what works and what doesn’t. Sometimes they process the sorghum in a solid state, like silage, and other times as sugar cane - in a rolled process to get the juice out. There is good use for stover (corn cobs and stalks - all but the grain), but it will probably be used for solid fuel combustion.
Dr. Kohl gave an extensive discussion of carbon in soils. He suggested we goggle: terrapreta. This is dinosaur soil found in South America rain forests. There are different levels of soil, with rich dark soil in the middle that is very fertile. That material was manmade - by burning wood, brush, etc. We could burn stovers and take them back to the soils If you look back in history, the dark soils of Iowa came about by tall grasses that were occasionally burned off by lightening strikes. The ashes were incorporated into the soil thus making a carbon content. ICM is looking at using stover and the carbon sequestration option for fertilizer. Dr. Kohl said their role in the industry is to bring it to the market place in a practical application.
Our class then adjourned for a tour of the shop where parts for the ethanol plant were being made. We all wore protective eye glasses and ear plugs. The shop was extremely loud, and the ear plugs kept us from hearing the tour guide as well as the noisy equipment! We saw them fabricate rolled material for the cyclones dryers where air will circulate through like a cyclone. Wet distillers’ grain is often sent through a drying system to remove moisture and extend shelf life. We saw a dryer drum being made at the shop. They begin building from the ground up, building it in layers of bars in a grid-like system, and when the inside is finished they will put the outside around it. Their dryers can be sized to meet any drying need. The one we saw was quite large, and was turned by a chain driven process with the chain wrapped all the way around it on a track system. There are four dryer drums in one system.
We were on the bus again, for the drive to Cargill Meat Solutions in Wichita KS. We were met by Katie Blick, Beef Procurement Assistant, Cargill Women’s Council, who did introductions. (www.cargillmeatsolutions.com). We were introduced to Bill Thoni, President of Cargill Regional Beef. He was from Midwest City, and is an Animal Science graduate in 1984 from OSU. Among other occupations, he was a cattle buyer for Cargill for 8 years. Four months ago he got into the regional beef business, and manages Cargill Regional Beef in Wichita, KS and in Canada.
The animal protein side of Cargill is based at Wichita, KS. Cargill is a family owned company. Owned by the Cargill and MacMillan Families, and was started in 1865. Their mission is to be the global leader in nourishing people. Cargill has about 158,000 employees in 66 countries.
Cargill’s mission is:
Cargill meat solutions based out of the building we were at, has 40 different countries with products, $15 billion in revenues, with 35,000 employees. They are the 2nd largest beef producer, 4th largest pork producer, the largest producer of whole turkeys; they have two case ready businesses in the US and two in Canada, and are the largest supplier of ground beef in North America.
At Caprock, they feed about 725,000 head of cattle annually. They process 7.4 million cattle per year, and 9 million hogs. and 45 million turkeys. They produce more than 5,000 products under different names, including: Plantation, Good Nature, Circle T, Rumba, Better, Honeysuckle White, Sterling Silver, Angus Pride, and Shadybrook Farms.
Current production for Excel is: 1.5% prime, 55% choice, 40% select = 96.5% of their current production. Advanced technology assures production consistency safety, and reliability. To be a leader they have to be concerned with food and employee safety. They incorporate interventions such as anti - microbial verify systems which shoots a picture of the carcass and shows any material on the animal that needs to be cleaned. They have cameras in all their feed yards, and have humane handling which is monitored from unloading to the bleed. Their case ready facilities are in Chambly, OT, Hazleton, PA, Marshall, MO, Newman, GA, and Toronto, ONT. Their world class processing methods result in more tender, juicy and flavorful pork. Their biggest customer is Oscar Mayer.
Cargill food distribution locations are in: IL, CO, 2/FL, 2/CA, OK, UT, TX, MO, and NJ. Cargill has experienced $5 million worth of expense due to Country of Origin labeling. Mr. Thoni mentioned that the beef industry is going to have to lower their price point if they want to continue sales during the economic troubles. The company will use lower end products, marinate or spice them and be retail ready to provide a more cost effective product.
Our next speaker at Cargill was Alan Smith with a market outlook. Mr. Smith graduated from Colorado State University in 1981. He has been with Cargill 28 years and in animal nutrition 7years in merchandising/feed formulation. He worked at Caprock in Texas for 4 years. Last year Mr. Smith started with Cargill in Beef Risk Management.
Mr. Smith mentioned that demand is the volatile factor concerning beef markets, Beef supplies are down, pork production is down 3%, and half of marketing is psychological. If a person is a risk of losing their job, they will be less likely to buy beef. Recessions in previous years have hurt the retail beef demand. Is there a potential bright spot? If the export arena grows….such as - S. Korea doesn’t produce enough beef so we could export more to them or to Japan. Some other points Mr. Smith made: 1) Due to lack of profitability in all meat sector, meat production is declining. 2). Protein export markets will be very important in helping return protein industry back to profitability 3). Poor macroeconomic conditions have effected beef and fed cattle demand. US cattle industry is again in a liquidation phase.
Michelle Morales was our last speaker at Cargill. She is a product manager and was the 1st woman and 1st minority to be ground beef production manager at Cargill. Rumba is a product that was designed for the multicultural groups. (Hispanic, Asian, and African American.) Wal-Mart is the biggest carrier of Rumba products. Ms. Morales spoke about the by products, where pet food is made, cattle feed, soap, fatty acid splitters, etc., and products that are developed from fatty acids, soap, toothpastes, candles, mule soap, lamp oil. We also viewed a Canadian beef variety meat merchandising guide. They use every part of the beef!
The top 10 importers of US hides and skins are: 1) China - with 11,417,998 pieces imported with a value of $817,387 2) Mexico 3)Korea 4)Hong Kong 5)Taiwan 6) EU-27 7)Vietnam 8)Thailand 9)Japan 10) India- with 170,907 pieces imported with a value of $4,326.
Sixty-five percent of employees are Hispanic at Cargill. Their research areas are: Food Safety, Plant Safety, Robotics, and Consumers. Ms. Morales stated that if it takes 6 months to find a market for cattle ears. Ears- for example - it will be great to keep those ears out of the landfill! This stresses the importance of environment around the Cargill plants. Her presentation was very interesting. Informative websites are:
Our afternoon at Cargill ended with a fantastic barbeque dinner at the facilities. We all left stuffed, full of good food and information, as we boarded the bus for the Drury Inn in Shawnee Mission, KS.
Friday, February 13, 2009 Scribe: Allen Entz
The day started off with a little coincidence, Friday the 13th and Kent Switzer’s birthday! He wouldn’t ever tell me how old he was. I think he is so old he can’t remember!
It was a cool crisp morning with light showers the night before. We boarded the bus piloted by Les Streuber, the best driver ever! Unfortunately, we were three members short. Burton was sick and missed the trip entirely. Michael and Mary had business obligations Friday. We missed you guys!
In route to the Kansas City Board of Trade, we watched an educational DVD on KCBT.
The shouting and yelling, that is synonymous with the board, is called open outcry. There are many hand gestures, each with an important meaning. Such as 2 fingers represent a quarter, back of hand means buying, palm of hand means selling. The quantities are relayed by the number of fingers they touch to the forehead.
Everyone, from producer to consumer is affected by the KCBT. A consistent theme and most important characteristic of the KCBT is the transparency it allows. The KCBT also allows millers and others to lock in input prices while guaranteeing producers a price.
Hard Red Winter Wheat (HRW) is the dominate wheat in the United States. The U.S. is the leading exporter in the world of wheat; approximately 25% of all wheat in the world is produced here.
Steve Campbell with Louis Dreyfus Commodities (www.louisdreyfus.com) spoke with us next. Originally from Enid, Mr. Campbell received his undergrad from OSU and masters in 1986. The coffee and homemade muffins were much appreciated!
Mr. Campbell explained to us that Louis Dreyfus is one of the world’s leading commodity merchants and processors of agriculture products. They are not asset heavy like their competitors (Cargill, ADM, etc.). They are a private company started in 1851 by moving grain in from the Black Sea to Europe. Their largest product is cotton and they touch 1 out of 6 cups of orange juice. They have a major presence in over 50 countries around the world.
They do not feel it is necessary to own independent elevators; instead they rely on them for a consistent supply of commodities. Mr. Campbell explained the drastic moves in the wheat market last year as the perfect storm. Some of the factors were:
Drought in Australia
Some losses here
Market got too comfortable
Lowest stocks since Jimmy Carters embargo of 1981
We were having some production issues then along came commodity investors to
the market. They owned 1 to 1 ½ times the actual size of wheat crop.
With wheat stocks expected to be up, he anticipates prices should be near the $4.50/bu. mark around harvest time. The fact that China is in a drought, will probably not affect the price of wheat because they irrigate 85% (and not with pivots, but by hand).
The U.S. is the largest exporter in the world of wheat, but only the 5th largest producer. Mr. Campbell is anti-GMO because wheat is a food. According to Mr. Campbell it would be a colossal challenge that we would lose. We would just push acres to the Black Sea area. “What good will it do to produce more wheat?” Mr. Campbell asked. Our bins would be overflowing without any increase in demand.
In the U.S. we have the ability to move 110 cars of wheat from Wichita to the Gulf and back in 48 hours. U.S. is the leader in grain transportation and storage abilities. In some places of the world it may take 2 months to move this much wheat. U.S. elevators are very efficient at putting grain on or keeping grain off the market.
An interesting fact is that Nigeria is the leading consumer of HRW. They have disposable income and are willing to spend it. China, surprisingly, does not import hardly any wheat. They produce approximately 105 million metric tons and use that exact amount.
Next we heard from Jeff Borchart. Mr. Borchart is a staff member at KCBT (www.kcbot.com). Founded in 1856, The Kansas City Board of Trade is the oldest business in KC. It started as meetings on the Kansas and Missouri river banks to determine prices for commodities.
In the 1860’s there was not much wheat in the area. Mennonites from Russia brought wheat seeds as they migrated to this area in the 1870’s. In 1875, there was approximately 25 million bushels produced. Cash calls and pricing (early future trading) started in 1876.
Mr. Borchart mentioned that some people oppose speculators in the market. He believes they are a good thing because they allow the transfer of risk to someone willing to assume risk. Without speculators, producers would have to wait until Cargill, ADM or some larger entity wanted a commodity they had.
KCBT aligned with Chicago board of trade in 2004, allowing after hours trading. 2008 was the 3rd largest year, executing 4 million contracts. 2007 was the largest year ever for KCBT, executing 5 million contracts. Full electronic trading is in the future and they are preparing for it.
When the clock struck 9:30 a.m. exactly we got to experience “open outcry” firsthand. The efficiency of the yelling, screaming and hand signals was impressive. Offers are made and deals are done that affect every one of us in just a matter of seconds. Hmmm, what if all business was done this way?? It would make the boring trip to Wal-Mart or stressful task of buying a new vehicle a little more fun and exciting!!
Fist fights have happened in the past, but the current punishment of $5,000 fine and two week suspension keeps this from happening.
As a side note, March wheat was up 1¾ pennies on the open and closed the day at $5.74, down 2½ pennies.
The next stop was at the Federal Reserve Bank of Kansas City (www.kc.frb.org). Everybody made it thru the metal detectors, some after a couple of attempts. For once, Annette was on her best behavior. I attribute that to security guards with guns!!
Dr. Alan D. Barkema, Senior Vice President, Regional, Public and Community Affairs Division spoke to us. Dr. Barkema served a three-year term as professor and head of the Agricultural Economics Department at Oklahoma State University. He currently heads up the Research Division of the Tenth Federal Reserve District. This location employs approximately 900 people. States included in this district are Colorado, Kansas, Nebraska, Oklahoma, Wyoming, and portions of western Missouri and northern New Mexico. Something all of these state have in common is agriculture!
Dr. Barkema has said the three main jobs of the Federal Reserve Bank of Kansas City are:
Keeps the economy of its district moving on an even playing field. They have a research staff that keeps in touch with current developments in the economy throughout its district.
Clear funds. Check clearing peaked in 1996 and at one time was the largest portion of the bank. There used to be 47 brick and mortar check clearing institutions, now there is just 1! By the year of 2010, they do not expect to have any of these institutions left.
Supervision and Regulation. Specifically of state chartered banks that are a member of the Fed.
As previously mentioned, the states of the Tenth District have strong ties to agriculture. Dr. Barkema and his staff strive to understand this district, how it aligns with the national economy and what it all means.
Dr. Barkema went on to say that the U.S. economy is currently in a DEEP recession. An average recession lasts approximately 9 months. This recession is currently in its 14th month, with the last peak in our national economic activity being the end of 2007.
According to Dr. Barkema, the problems that took our economy ‘down’ were: A short term problem is that a large portion of our consumption is funded by international lenders and the trade deficit is viewed as debt to income.
A long term problem we are creating is consuming more today and investing less in our future.
Some more interesting points were:
1,800,000 jobs have been lost in the last 3 months alone!! A moderate recession will lose 80,000 jobs a month. And we may not even be at the end of it!!
With all this negative information, the Midwest is not in a recession. A couple things that have shielded us from a recession is the recent high energy prices is actually good for our state’s economy, we never allowed housing prices to get out of control and we experienced high commodity prices last year.
John Cothren asked a great closing question, “Shouldn’t banks that made bad decisions be allowed to fail instead of getting bailed out?”
The answer? Darkness! That’s right; the lights of the boardroom went off as Dr. Barkema was pondering his answer. And in true John Deere John fashion, he didn’t miss a beat by asking “Times are tough, aren’t they?!?” After the laughter subsided, the simple answer was that we have allowed these institutions to get too big to fail.
We grabbed our sack lunches, took a quick tour of the Reserve and boarded the bus for the Harley Davidson factory (www.harley-davidson.com). Located on 320 acres, this 470,000 sq. ft. facility is impressive. Tony Wilson and Al Hahn spoke with us before our tour began. It was interesting to hear them speak about the two unions under the same roof and how they work with Harley. Mr. Wilson is the union President of the Facility and Mr. Hahn the President of the United Steelworkers union. They are on equal levels with the Vice Presidents. This is very unique as no other company does this.
There are approximately 800 union workers in the plant and 145 salaried workers. The union population is broken down to approximately 70% workers that are in actual construction/fabrication and 30% in painting and non-fabrication type of jobs. There is no distinction between the two kinds of workers in regards to how they are treated or which union they belong to. A couple main goals of the unions are good wages, good benefits, safety and the caretaking of its member’s rights. An interesting fact is that there are not any floor supervisors in the facility. Instead, employees organize into groups and decide the best way to accomplish goals with everybody on an equal playing field. The lowest paid worker in the facility is $20/hour. No premiums are withheld and healthcare is paid fully by the company. Management makes no decision without getting union approval.
A good point was made regarding outsourcing jobs to other countries. Companies claim to do this because cost of production is too high here in the U.S. Then why doesn’t the cost of their products decrease after they outsource?!? After all, aren’t they are producing the product cheaper?!? The companies sure are not paying their foreign workers more!
Some interesting things about the actual manufacturing process of a Harley Davidson are:
Approximately 600 pieces per bike
They recycle every piece of steel not used
Bikes are not batch painted, instead painted on an individual basis according to order
Assembly line moves 4 ft/second
6 of the 9 bikes that we saw being packaged were going overseas
1,000,000th bike came off assemble line about 3 weeks prior to our visit
Beginning of each shift, 5 bikes are randomly selected for a 25 mile ride, regardless of weather conditions
In the CVO (Custom Vehicle Division), one person is responsible for assembling the entire bike. 1 to 1 ½ bikes are assembled per shift per person. These bikes get the Screaming Eagle parts and are distributed by allocation. They have 100 horsepower and all the chrome available in the Harley Catalog.
The origin of the “Hog” nickname began in 1920 when a team of farm boys consistently won races on their Harley Davidson’s. The team’s mascot was a hog. Following each win, they would place their mascot on the motorcycle and take a victory lap with him.
This proves that everything is tied to agriculture in one way or another!!
Then we boarded the bus and headed to Wichita. The seminar was intense and very educational, with not much time for rest. Although exhausted, we still managed to discuss the highlights of the seminar and share excitement for the upcoming Washington D.C. trip. And of course, like all Class XIV seminars, there were plenty of laughs and relationships were strengthened!
Once again, Dr. Joe and Kelly did an exceptional of job of planning another great seminar!
P.S. Don’t forget to watch the movie Gettysburg before the D.C. trip and take a scrapbook or something for our host families!