MBAg by Adam Erwin

If you have ever shopped for semi trucks, you quickly learn there are two kinds: owner-operator rigs and fleet trucks.

Fleet trucks are Spartan beasts with dull gray cab interiors and painted wheels lacking the bodacious shine of polished aluminum. Fleet trucks are the 18-wheeler version of the old avocado-colored station wagon you drove in high school.

Owner-operator trucks are the "King of the Road." Sporting hundreds of little orange lights, oncoming cars could mistake such a rig in the nighttime sky for the Aurora Borealis. Their customized cab interiors have that saddle-shop smell of fine Corinthian leather. With hoods the size of Texas, owner-operator trucks look naked without a set of steer horns complimented by chrome "Barbie doll" mud flaps.

So does truck shopping hold lessons useful for farm management? It sure does good buddy, c'mon!

In September I "convoyed" to the Global AgInvesting Conference in Singapore. While there I received a big "Breaker 1-9" that the international investment community views U.S. farmers as owner-operators. Yes, we carry the load, but they see us as long on glitz and sporting lots of extra chrome.

Elsewhere in the world, where the route for agriculture is still being paved, farmers are more likely to plan their journey in no-frills, plain-Jane truck fleets where size is the key strategy.

KICKING THE TIRES

This international conference was really a rally to drive people with lots of money, such as hedge funds, rich folk like Rothchilds and money managers to agricultural investing destinations. Most of these investors don't bother with projects under $10 million and prefer minimum deals 10 times that size.

I took my turn at the podium with two other road warriors. Each of us spoke about what agriculture investing looked like in our respective countries. The first driver was a 125,000-acre Ukrainian farm CEO who was in the process of merging with a French/Argentine farm. The second was the CFO of a New York Stock Exchange-listed Brazilian firm, who was transforming Bahian and Maranhao cerrado into farmland from his office in southern Sao Paulo.

Even if I had told the story of the largest farms in America with tens of thousands of acres, it would have gotten lost in the traffic. But I went the other direction. I showed a few slides of my family farm as it transformed from grandfather's dairy, to my father's feedlot operation and now as my cash grain enterprise.

Traffic came to a stop as the crowd marveled at the fact that I was the only person in the room who had ever castrated a pig, planted a crop that I actually owned, or knew how to program the auto-steer in a tractor. I didn't see that one coming.

RUBBER NECKING

For the next two days, I sat in bumper-to-bumper traffic telling the tale of the U.S. owner-operator farmer.

Neither I, nor the conference attendees, had fully appreciated how much U.S. farmers prize their productivity. The forgone conclusion was that American producers were much like I view my European counterparts -- productive in a smallish way, really in it for the lifestyle, and probably not viable without substantial subsidization.

They just assumed that the U.S. owner-operator farmer faced some sort of behavioral risk that we just couldn't organize any longer in a profitable way. They suspected that we really farmed to justify owning $60,000 crew-cab pickups and satellite radio-equipped tractors. That we farmed in sort of a "Beverly Hills" of agriculture and were only productive because we had paved roads, three-phase electrical power and processors seemingly everywhere. They believed that if infrastructure improvements ever came online in South America, the former Soviet Union and Africa, our fate was no better than the opossum in front of the wheels of the speeding Kenworth -- road pizza!

But my surprise message was that U.S. farmers were not coasting on multiple generations of accumulated equity, but rather, were pedal-to-the-metal in relentlessly refining their business model for efficiency and increased productivity. By being organized as nimble owner-operators versus giant fleets, we could quickly adjust for changes in the road. Need renewable energy? No problem. Integrate livestock production? We can handle that. Implement precision farming? Done.

Meanwhile, the fleets in the developing regions deal with less intricate risks. In some countries, if combines sit in a field during a rainy spell, either the operators sleep in the machines, or the tires and fuel will be stolen from it!

KEEP ON TRUCKIN'

I don't think the American model of owner-operator agriculture is in any jeopardy. Obviously if our ancestors could have seen the road ahead, they might have planned things differently. U.S. farmland might have been platted out in bigger tracts. Enterprise zones might have been set up for neighbor-free livestock farming -- things that the fleets are banking on for competitive advantage. But our efficiency and ability to adopt new technology are a tough match for their scale.

Another way to summarize it is that they, and I, realized that in the real trucking world, owner-operators don't take the routine freight jobs hauling paper towels from warehouses to Wal-Marts. Fleets do routine stuff like that. Owner-operators bring home the bacon by hauling the specialty loads and oversize cargo. We are the "Ice Road Truckers." And American owner-operators are in the hammer lane implementing the best new technologies and constantly "tricking our trucks" to efficiently produce what the market is ready to buy, and doing it in style!

Editor's note: Real Midwest farmer Adam Erwin is a former banker who writes under a pseudonym. He farms more than 10,000 acres of corn, soybeans and wheat in several states.

(MZT/AG)

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