OK Sandhusker, here's the dadada deal!

[Sandhusker]

It's all cash flow, Murgen. Of course it needs to be collateralized, but lending on collateral is what got ag banks in trouble down here in the 80s.
It's got to pencil out, and I would take a dang hard look at the contract to make sure adequate income would be there for the life of the term on the note. Any back door for the buyer and I'm not interested.

 

[Murgen]

It's all cash flow, Murgen. Of course it needs to be collateralized, but lending on collateral is what got ag banks in trouble down here in the 80s.
It's got to pencil out, and I would take a dang hard look at the contract to make sure adequate income would be there for the life of the term on the note. Any back door for the buyer and I'm not interested.

Granted, but there is nothing wrong financing improvements, expansion etc. with additional contracts!

Look at dairy quota here in Canada, it's been the best investment made by producers for many years. The banks are more than happy to finance it. Doesn't mean the producer is any more "profitable", but what does he have in the end.

I believe quota here in the late 90's was about $12,000/kg, or less. Now it's $29,000/kg. It's not profit until you sell. But I bet a lot of producers are glad they were willing to "forgo" profit and build their retirement fund!

After they payed off innitial debt, they were happy to use their cash flow to finance their capital gains. Did they decrease their profits on paper, I think you know the answer to that!

Did the contract pencil out? If it didn't, then they were not profitable, and they are no longer in business!

Profits are that amount over expenses, but those expenses can be measured in many ways!

 

[Sandhusker]

Yep. Running a chicken house for Tyson and putting $50,000 in the kitty after expenses is a nice profit. Running a chicken house and putting $10 in the kitty is technicaly a profit but....

Did the growers expand because they were doing well and wanted more of a good thing or did they expand because making a nickel a chicken wasn't cutting it and they were needing either more nickels or sell out and risk a loss on assets.

 

[Murgen]

Yep. Running a chicken house for Tyson and putting $50,000 in the kitty after expenses is a nice profit. Running a chicken house and putting $10 in the kitty is technicaly a profit but....

Did the growers expand because they were doing well and wanted more of a good thing or did they expand because making a nickel a chicken wasn't cutting it and they were needing either more nickels or sell out and risk a loss on assets.

I'm not sure, but that is their choice to balance the risk and return. But I would say if they are making a nickel/bird, then produce more birds, you'll make more nickels! If those nickels are breaking even, and you are expanding, and increasing capital, then you are profitable! ( if you pick the right time to sell) Much like stocks!

I'm not sure how it works in the US, but here, at the end of the year, we can borrow money to "top" up our eligible contribution to our RRSP's. If the financing charges (interest) don't outweigh the gains, why not. Not counted as profit, but is it?

 

[Sandhusker]

Yeah, in that example you're profitable by definition, but is the expansion a result of profits or an attempt to simply make things work? That's why pointing to expansion and saying "Look, profits" simply doesn't cut it.

We don't have a RRSP. We have Social Security where payments are based on income, but I don't believe there is a limit and you don't put in any extra over what is required. Actually, one would be foolish if you could as the return on investment is pathetic. President Bush tried to allow people to invest a portion of their SS, but that didn't go far. Personally, I'd let them have all I've put in if I could manage my own SS account from here on out.

 

[Murgen]

Sandhusker, we have "old age security" also, but then a tax break on RRSP. We don't pay tax on contributions, and we are allowed a certain contribution based on income.

But that's not the question?

Did the growers expand because they were doing well and wanted more of a good thing or did they expand because making a nickel a chicken wasn't cutting it and they were needing either more nickels or sell out and risk a loss on assets

They would sell out, if not making nickels. If they are making a nickel a bird, they will expand to make more nickels! If they are covering the expense of having more birds, or building assests!

You know as well as the rest of us, by running your own business, a producer, you can show a loss, and still pay yourself and gain assests!

Is that profit, some would say yes, others would say at yearend, NO!
Thus the argument! If you are not making money (profit) you won't continue, if you are you will continue!

I can show a loss for years, but when I sell my assests, be a millionaire!

Was this not an argument when it came to Packers showng profit and loss?

 

[Anonymous]

Sandman: "There's a huge difference in making it and just getting by - use a tool that tells the story"

Nobody is going to stay in business if they are not making a reasonable profit. This is so elementary! Chicken farming is not exactly a desirable way to make a living if you are just getting by.

You don't know what they are making but the obvious is they are making enough to stay in business.

Sandman: "That's why pointing to expansion and saying "Look, profits" simply doesn't cut it.'

Why didn't you tell Randy Kaiser that when he was looking at expansion in Canada by Tyson and Cargill as examples of profitability?

Selective use of your arguments huh?




~SH~

 

[rkaiser]

SH

Why didn't you tell Randy Kaiser that when he was looking at expansion in Canada by Tyson and Cargill as examples of profitability?

Did I say profitability SH, or a major "taking advantage" of a situation handed to them.

Insane profits due to political games "influenced by themselves" does not even come close to profitabilty due to management or efficient productivity. :wink: