A3B-Lancast*r Farming, Saturday, Dacambar 13,1986
Faith And Farming
(Continued from Page A 27)
steward of the soil and everything
else and you could make money
like this, you were their prime
customer. You went out. They
encouraged you. If you were fairly
debt free, they encouraged you to
load up with debt, right. They
loaned you the money. They called
you one of their better customers.
The people that didn’t load up quite
as much in debt were not the
progressive kind of thinkers and
farmers. It makes no difference,
you in the room, whether you load
it up with debt or whether you
didn’t. That is not a crime in and of
itself. Those looked like good
decisions during those days. So I’m
not speaking to whether you should
or whether you shouldn’t have. I’m
speaking to what was really oc
curring.
If you went to your banker, he
never asked you for d cash flow.
Most bankers couldn’t even spell
cash flow. Up until about several
years ago when they got in
trouble...and I use to talk to the
bankers. You know in business
they knew what cash flow was all
about. We had to flow our cash and
if we didn’t liquidate our debt
every year at Hesston Corporation,
they wondered why. I’ll bet most of
you farmers never had a banker
ask why you weren’t liquidating
you debt during that period of time
if you were a good farmer. Most
fanners were good. They really
said well if you make the interest
payment, we’ll roll it over. Why
don’t you go out and buy more
land. You’re a good farmer. You’re
a blue chip kind of customer. So we
were feeding on that thing. Land
was going up. You’d take your
statement to the banker at the end
of the year and suddenly your net
worth was worth much more than
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it was the year before. My good
ness, what a deal.
Who could ever make money this
fast? You’re grandfather didn’t
and your father didn’t. All at once
this thing was taking off. Man we
were genuses. We all were. But
there were some things happening
during that period of time that
were not healthy.
Labor costs were rising rapidly
in our factory and every factory
across this country. As a result of
that, your price of equipment was
rising rapidly. But it didn’t make
any difference because you’d take
your equipment, run it two years,
trade it in and it was worth more
than when you bought it two years
ago in a lot of cases. My goodness,
what a way to make money. You
can really increase your balance
sheet that way. It looked good to
the banker. You went right ahead
and did it. Hesston Corporation
went to New York and geared up
and borrowed $35 million in 20
minutes. Not quite that quick. But
it was almost that quick. We told
them the story about our
stackhand and how good it was. We
went out and built those buildings
getting ready for all you farmers
who were going to buy all this
equipment. Sure enough you did.
Stackhand business went from 50
units to 5,000,6,000 units in a couple
years’ time. Now it’s back to 60
units again. So we were all caught
in it. Again it wouldn’t matter
whether you were smart or dumb.
It wasn’t a matter of what hap
pened. The people that were for
tunate enough not to get caught in
the thing may look smarter today
but they were during that time
maybe just taking a little less risk.
It was a matter of risk taking. And
the risks looked good to all of us.
Capital goods were going up.
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Fertilizer was going up. You
remember the embargo in 73 and
what happened to fertilizer, what
happened to fuel, what happened to
labor. The value of the dollar went
down because nobody believed in
our dollar anymore. What did that
do to farm exports. Well it’s fan
tastic. You put together loaning
people money that couldn’t pay it
back, the LBC countries. Along
with the cheap dollar and a thrust
and all at once you got a world
export market that was fantastic.
So everything was going right.
Inflation was rampant. Dollar was
cheap. Land prices were going up.
It looked good. We had a “feed the
world” philosophy. I remember
the chairman of our company
making a speech that we could
never build enough equipment as
long as he lived in order to get
ready to feed the world. He
believed it. And so did a lot of other
people. So we were encourage to
feed the world. Exports were going
up like this and everything else.
We also had a philosophy “buy
now” because it’s going to cost you
more tomorrow. So we put all those
things together.
Then what happened. We had
W/2 percent prime. But the real
cost of money was cheap. The
cheapest in our history. When the
prime was 14 and inflation was 17
and land prices were going up 15,
20 percent a year, your real cost of
money was less than 0. One of the
few times in history. The fact that
interest was high, sure it hurt a
little but didn’t hurt a lot because
everything else was going. Then
we decided we needed to lick in
flation. By the way we needed to
lick inflation, and we’re not done
licking inflation yet in terms of
national deficit.
We took a war on inflation.
Everybody put Reagan in office.
Felt good about it. What was his
campaign, lower the deficit, get rid
of the deficit, get rid of all of this
inflation and put the brakes on.
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Very few people, particularly
farming, oil and other com
modities begin to realize what was
going to happen if we put the
brakes on all of a sudden. So we put
the brakes on. We turned that
inflation into a deflation. That
deflation has never been more
prominent than it is in oil where it
went from $3B a barrel to $l3 or
land where it went from $4,000 to
$2,000 or whatever that ratio might
be. So in the commodities we’re
going through a hurendous
deflationary period in the ’Bos. If
we weren’t going through this
period, we’d be like an Argentina
or a Mexico pretty soon. If we keep
letting inflation take care of our
problems and cover up all these
things. So we take care of inflation.
But the rampant change from
inflation to deflation has caused an
awful lot of things to happen.
Suddenly we’ve got an expensive
dollar. So our dollar is expensive,
and we can’t export it. They said,
well, get rid of the deficit, get the
dollar lower then exports will pick
up. What happened. We got a little
bit of the deficit taken care of. The
dollar has dropped 40 percent or so
and exports still aren’t happening.
So what is going on. Don’t the
economists or anybody know
what’s going on here?
We’ve got technology tran
sferred around the world. I went to
the world food conference three or
four years ago. We are doing a
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fantastic job of transferring our
technology around the world.
That’s what we wanted to do. We
had the Peace Corps. We had our
own church programs taking our
people through college' and
teaching them how to transfer the
techonology. Sure enough they did
a good job. That’s what we wanted
them to do.
We’ve got that over credit
problem. We’ve technology around
the world. We’ve got the China
exporting product. We’ve got India
exporting product. We’ve got
Europe with all the problems in
America today. I might just bring
you up to date on that. Europe is
now in the first year or maybe the
second of going through land
evaluation and all that like North
America has been through in the
last five or six years. They’ve got
an abundance of crop. They’ve got
their land going down. They got
farmers screaming. They got
farmers who can’t make money.
So you have a lot of the lower
developed countries who can’t
afford the product. You’ve got
another group of countries who
were inporting products who don’t
need it today because they’ve got
the technology now to do it. And
you’ve the greatest technological,
efficient agricultural system in the
world. And the bread basket of
North America and western
Europe who put all of their expert
(Turn to PageA39)
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