Here's some interesting background on Engler and Cactus from The Livestock Weekly.
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Well-Known Panhandle Feeding
Pioneer Began By Milking Cows
By Colleen Schreiber
AMARILLO — It started with one milk cow and grew from there.
At least that was part of the impetus which later steered Paul Engler, co-founder and chairman of the board of Cactus Feeders, into the cattle industry.
When he was just 12 years old he went to the local auction barn and bought 100 head of cattle without his parents' permission. He didn't have a penny to his name, but he bought them anyway. That turned out to be the first of many profitable cattle ventures.
Today, 78 year-old Engler is arguably one of the best known cattle feeders in the world. In 1985 Cactus Feeders, with its one-time capacity of 335,000 head, became the world's largest cattle feeding company, a title they held until just recently. Today Cactus owns and operates 11 feedyards with a one-time capacity of 520,000 head. Three feedyards are in western Kansas, one is in Argentina, and the rest are in Texas.
This self-made man who has made his fortune in the cattle industry came from humble beginnings. His father made his living by operating a filling station.
Born in 1929, Engler grew up in Bassett, Nebraska, then populated by about 450 people. He describes the 1930s and 40s as a "great era" in which to be a kid.
"The country was coming out of the Depression. We didn't know we were poor, because we were all poor," he says. "There were some periods of hardship for some families. Luckily, we didn't have that in our family. We always had plenty to eat. We went barefoot in the summer, but we got a pair of shoes in the fall."
Growing up in that era, he says, turned out to be a huge advantage.
"I learned to work; I learned frugalness, the value of a dollar — that's the way we were raised, but it wasn't just me. All of us of that generation were raised that way."
Engler says his father was old-fashioned enough to think that every boy should learn how to milk a cow, so he bought one cow for his son to milk.
Engler was about six years old. He got pretty good at milking and actually liked it, so one cow led to two and so on. At one time he was in charge of milking as many as nine cows.
This was before pasteurized milk, so he and his older sister started a bottling and milk delivery business. It was his job to deliver the milk in the evenings and collect the bills.
"That was another lesson — how to collect bills from people who were a little short on money. I knocked on a lot of doors," he recalls.
The worst part of the business was that once you got home from making deliveries, all the milk bottles had to be washed.
"I used to say that one of the best days in my life was when we collected enough money — $26 — to buy a cream separator. That meant we could sell the cream and I no longer had to deliver the milk and wash those damn bottles."
It was that childhood experience that allowed Engler to learn early on not only that he had an interest in livestock, but also that he was, well, pretty good at it. Thinking back over what he learned from his milking days, Engler says that ideally, a well thought-out training program for pen riders would start with a lesson in how to milk a cow.
"You learn a lot by milking cows," he remarks. "You learn a lot of cow psychology. You learn a lot, too, when you break that cow to milk. You also learn what's best for the cows.
"During the cold Nebraska winters, my father would bring hot water down in cream cans to mix with the cold water so that the cow had a warm drink of water. It helped keep her milk production up," he explains.
In time the elder Engler rented a little piece of land and expanded into the stocker business. He'd buy about 100 head of weaners in the fall, overwinter and summer them, and then sell them as yearlings the following fall.
Young Engler was responsible for tending to the cattle after school. He says his father was a really good man and a good father, but the young lad resented the fact that his dad didn't believe in paying him anything for work well done. Eventually he rebelled and took matters into his own hands.
It happened one Wednesday afternoon. Engler was excused from school on Wednesday afternoons to work at the local sale barn. Bassett always had a weekly sale on Wednesdays, even so today. On this particular Wednesday, his father happened to be out of town. He went to the auction barn as planned, but instead of going to work he bought 100 head of cattle. He was only 12 years old and he didn't have a dime to his name.
"After the sale, the owner of the sale barn said, 'Well, Paul, I see where you bought some cattle today. You don't have any money, either, do you?'
"His name was Otto Lamprecht. He was a tough guy. When he asked me what I was going to do, I told him that I guess he'd have to loan me the money, and he did."
When Engler got home that evening his mother was understandably upset with him.
"She was just sure that I got cheated. So she went over to the neighbor, who was a rancher and who happened to be at the sale that day. He told her that I did a good job buying the cattle. No matter, Mother was sure I was really going to get a lickin' from my father."
Engler remembers paying about 12 cents a pound for the 100 head of Hereford heifers. The next day he brought them home and branded them with his own brand, the U Lazy L.
The following day his father came home, and together they took a drive out to take a look at the cattle. On arrival, his father commented that he noticed the herd had gotten a little bigger since he'd been gone, and he asked for an explanation.
"I told him what I'd done, and I kept waiting to get a real dressing down, but it never came. I told him where I got the money to buy the cattle, and then he said that we should go on down to the bank, because he thought I could probably get a little better deal down there.
"After we finished signing the paperwork at the bank, instead of a licking, he turned around and said, 'Son, I'm proud of you,' which was a very touching thing for me."
So with that first 100 head of cattle Engler got his real start in the cattle business. Three years later, at the age of 15, he graduated from high school. He figured he was getting along pretty well in the cattle business and he planned to just stick with it, but his father, who only had a fourth grade education, insisted that he go to college.
He eventually received his degree from the University of Nebraska at Lincoln. After that, he came back to Bassett and took a part-time job as a college instructor. He also started back again in the cattle business.
After he got going pretty well and had made a little money, he bought 100 head of old cows from his then in-laws, the Kraycek family, who had one of the best known commercial Angus herds in Nebraska. Willow Grove Land and Cattle Co. had won the competition at the International Livestock Show in Chicago four years in a row, and there was a long waiting list for those who wanted to buy some of their older females. Because Engler was a son-in-law, he got preference.
The cows ranged in age from 12 to 14 years. He paid $140 a head.
By this time his father was in ill health, but Engler drove him out to the place he was leasing to have a look at the cows he'd just purchased. The only thing his father said was, "I thought I raised you to be smarter than this."
Turns out his father had rightly pegged the deal.
"I didn't mouth the cows before I bought them, and in the end I had a hard time keeping them alive. I got a few calves out of them and then I sold them, but by then the market had gone down."
The heifers that he'd purchased at the same time turned out to be a much better buy.
Engler eventually gave up the part-time teaching job, which he didn't much like anyway, and went to work for Brickley Cattle Co., headquartered in Valentine, Nebraska. Emmett Brickley became one of Engler's two best tutors. From him, he learned the art of buying cattle in the country.
"He was a remarkable trader," Engler says. "He had a way about him. Maybe the rancher wouldn't sell him the cattle, but they would tell him to be sure and come back again."
Once, when Brickley was down in his back, he sent Engler out to do the buying for him.
"I bought one set, and when I returned he asked me what I thought about them, and I told him that maybe they'll make money. He said, 'Why don't we leave the maybe ones in the country?' He was a very exact guy, and a great teacher, and he was very good to me."
Brickley partnered with Max Rosenstock, who had emigrated to the U.S. from Nazi Germany. The cattle that Brickley bought were typically sold to one of Rosenstock's customers. Rosenstock had three brothers; two worked at the stockyards at Chicago and another operated out of Kansas City. When Brickley and Rosenstock disbanded their partnership, Rosenstock tried to get Engler to go to work at the Sioux City Stockyards. Instead, he applied for a job with legendary Nebraska cattle feeder Louis Dinklage.
The day Engler drove to Wisner to meet with him, Dinklage was tied up with serious water problems at one of the feedyards and Engler was left waiting for him the entire day.
"Sitting there all that day, I had a lot of time to rehearse my story," Engler recalls. "I told him that I was making $700 a month and I had a couple of children and another on the way. I wanted a job where I could make a little more money, but more importantly, I told him that I wanted to have an opportunity to earn my way into the business. This is the honest to God truth — he looked at me and said, 'I'll give you $300,' and he got up and walked out.
"Obviously, I was really down in the dumps on that deal, but on the drive back I decided that if I wasn't worth more than $300, it was time that I find out, so I took the job."
He left his young family behind and moved to Wisner, where he took a room in a private home because there were no hotels or motels in Wisner at that time. One of the locals advised him to get a room in the funeral home, because it was a big house up on the hill. This was before air conditioning. He did, and it was a fine room. The only problem was that the shower was in the basement, and to get there he had to pass through the embalming room.
Dinklage put Engler in charge of straightening out the feeder cattle books. He didn't much like the desk job, but he tolerated it. Eventually Dinklage entrusted him with more responsibility. In addition to his bookwork, he put Engler in charge of one of the feeding operations. He fixed up the old house on the place and Engler moved his family out to Wisner.
Back then, most all of the feeder cattle were still being shipped by rail. The trains often came in at night, and when they were going full bore, Engler says, he went for days at a time without ever going home to change clothes.
The rations, Engler says, weren't as sophisticated as they are today, yet they really weren't all that different, either, up until in recent years when byproducts began to be included as part of the ration.
"We called it rolled corn, but it was actually dried cracked corn," Engler notes.
Back then each feed truck driver was assigned a pen of cattle. The driver was not only responsible for feeding that pen of cattle, but he was also responsible for getting the cattle on feed, their health, etc. They were his cattle, so to speak.
They didn't weigh the feed then, so there was no way of figuring feed conversions. They did, however, calculate daily gain, as they kept separate weights on the cattle coming in and they had the payweight on the other end.
When Engler first started working for Dinklage, all cattle, fat cattle included, were sold through one of the main terminal markets. The cattle were sorted load by load on the farm prior to shipping.
"We often had cattle on Omaha, Sioux City, St. Joe, Kansas City, all at the same time, and sometimes even St. Paul and Chicago."
In time, country buying became more common.
"The central markets fought it, the commission men fought it, but it really was a great improvement over the central markets," Engler says.
The first packer buyer who bought direct from them was a fellow who worked for American Stores. American Stores was a large retail chain at the time, but they also had a packing plant at Lincoln. When those on the Omaha market learned of his defection, they boycotted him and the store, but in time not only were the packer buyers coming to the country, so were the commission men.
By this time Dinklage had long made Engler a full partner on most of his cattle deals.
"He was my second mentor, and really my benefactor," Engler says of his former partner. "From him I learned first of all about how to feed cattle. I also learned how to buy feeder cattle and how to merchandize them as fed cattle."
While on a cattle buying trip to the Texas Panhandle, the young Engler discovered a potential opportunity, one that would change his life forever.
"I was loading cattle on the trains at Hereford," he recalls. "The train that pulled into the siding was loaded half with grain and the other half with feeder cattle. It was headed to the Imperial Valley."
He happened to be buying Joe Reinauer cattle that day.
"I told Joe it was all wrong that the cattlemen were exporting the two main resources necessary for establishing cattle feeding in this area, and he told me that ranchers here were just waiting for someone like me to come down and show them how to do it."
Engler thought about that statement all the way back to Nebraska. The next day he asked Dinklage what he thought, and Dinklage agreed with Engler that the Texas Panhandle was the perfect spot in which to expand the cattle feeding industry.
With Dinklage's blessing, Engler went back to Texas to try to put a deal together. That was in early 1960. He found some land and committed to a deal, thinking all the while that Dinklage was going to be his partner in the venture. However, when Engler returned to Nebraska to share the news with his partner and friend, Dinklage, for reasons unbeknownst to Engler, had a change of heart.
Engler, however, was committed to the land deal back in Texas and couldn't pull the plug, nor did he really want to. So after a decade-long partnership, the two split their interests and went their separate ways.
Engler was able to muster support from some of the local businessmen, men like banker Henry Sears, attorney Jim Witherspoon and a few grain dealers and ranchers such as John Douglass Pittman, Palmer Norton and Owen Seamand. With that financial backing, Engler began construction on the first feedyard in the Texas Panhandle. Some 48 years later Hereford Feedyard is still in operation, though under different ownership.
As soon as he arrived, Engler began "talking up" his custom cattle feeding idea. It was a tough sell, though.
"We were getting close to being ready to start moving cattle in, and I still didn't have any cattle committed," he recalls. "I called on my investors for some help. Every one of them told me they'd never fed any cattle, and they'd just wait and see how I got along."
When the 10,000-head one-time capacity feedyard finally opened, Engler only had 120 head of cattle go into the yard, and those were cattle he owned that he had out on wheat.
Roger Brumley, who ranched west of Hereford, stopped by the feedyard one day. Engler and Dinklage had been buying Brumley's steers for several years running, and he was ready to sell. He asked Engler if he would call his former partner to see if he was still interested in buying his steers. Engler hadn't spoken to Dinklage since he left Nebraska — it had actually been a difficult splitting of their partnership — but Engler was happy to accommodate one of his former customers.
Dinklage arrived the following morning, set to buy Brumley's steers. He went with Engler to look over the steers, and after he got them bought, he told Engler to show him what he had going at the feedyard. That day Dinklage ended up reserving several pens for himself, and soon after he had those pens full. Other cattlemen in the area took notice. Dinklage was highly respected, and soon others began sending their cattle to Engler as well.
"I guess they thought if he was doing it, it was probably a good deal. From that point forward, we couldn't build pens fast enough."
In 1971, Engler sold his feedlot interests to IBP and went to work for them as a group vice president. He was in charge of cattle procurement. He also headed up carcass sales and was in charge of the hide and byproduct divisions for the company's eight plants. In addition, he sat on the board.
In 1972 IBP opened the largest beef slaughtering plant in the U.S. in Amarillo. Engler played a large role in bring the opening of that plant to fruition.
His time at IBP afforded him yet more valuable experience, but after three years, Engler was ready to leave the corporate world behind. He returned to the cattle feeding business. He bought another feedyard, and again his old mentor partnered with him on 3000 head of steers they bought off the Bivins ranch north of Amarillo.
The second time around was even better than the first, Engler says. The industry was just healing up, and the timing of his return worked out well for him. He partnered with Tom Dittmer, and together the two co-founded Cactus Feeders with only $200,000 in start-up capital. Over the next few years the company acquired several feedyards, essentially one every two years or so.
"When we grew, we grew out of our earnings," Engler points out.
In addition to the feedyards, Engler and Dittmer also bought three ranches encompassing more than 140,000 acres. There they raised more than 30,000 head of stockers annually and ran 2000 mother cows.
Engler bought Dittmer out of the feedyard part of the business about 20 years ago, but they continued to partner on the ranching operations until about 10 years ago.
When Engler and Dittmer first started Cactus, it was almost 100 percent custom feeding because, as Engler points out, they didn't have enough capital to fill their own yards. In time that changed, and today, ideally anyway, it's about 50 percent customer cattle and 50 percent company owned.
"We've pretty well been able to maintain that 50/50 ratio up until these tough times that we're in now," he notes. "Unfortunate markets literally eliminated some of our customers.
"We've managed to survive, though. Cactus has never had a losing year. We've come damn close a couple of times, but we've never gone into the red."
The company has survived in part, he says, because of good risk management.
"I like to kid about it. We were zigging when we should have been zigging and zagging and when we should have been zagging. But, no question, it took good risk management.
"The other thing is that we've been very careful about our credit arrangements. Louis (Dinklage) used to have a saying, and this was before livestock cattle futures days — he told me that you just need three things to be successful. First, buy your cattle right. That's a given. Second, do a reasonably good job of feeding them, and third, protect your credit so that you could keep your cattle numbers. As a result, we've always had very good lenders and good relationships with them."
Engler is thought of as a pioneer in the Texas cattle feeding industry, an entrepreneur and a forward-thinking kind of a man, but not all of his concepts and the new ideas he initiated have necessarily been looked upon favorably by all. It understandably goes with the territory.
One of his founding concepts that has received considerable attention over the years is formula pricing, or what some call value-based marketing.
"One thing that always disturbed me was the way packer buyers would come in and buy cattle, particularly at these bigger operations. Instead of buying them pen by pen, they'd wrap them up in a package and buy them all at one price when you knew and they knew and everyone knew there should have been $150 to $200 difference in the best pen compared to the poorest," Engler remarks. "That used to irritate me so bad that I finally decided we had to do something about it. We had to get paid for what we were producing, and the only way to do that was to get the hide off and see what we had grade-wise and dressing percentage-wise," he explains.
With that in mind, Engler went to IBP and in essence formed a relationship with IBP to market cattle on a formula type arrangement based on carcass value.
Not only was it important to have a formula whereby the true value of the cattle was determined on an individual animal, but Engler says another important part of the arrangement was that Cactus was able to schedule when they wanted to market their cattle.
"For the first time, we were able to pick a date of when to sell rather than the packer buyer doing it," he explains. "That's a big advantage, because it kept us from overfeeding the cattle."
One of the biggest complaints critics have with the formula pricing arrangement is that it guarantees a packer a predetermined kill, a given "captive supply," which they argue in the end gives the packers even more of an upper hand because they have to compete less aggressively or some weeks not at all in the cash market.
"Guaranteeing the packers a number — that's the 'con' argument, no question about it," Engler admits. "When we set up the formula, I said this could be a transitory thing, because the more people that got in on formula selling, the less value it would have to us."
Still, Engler points out that the cash method of selling is still predominant, and it's predominant, he says, because it serves the packer well. Some in the industry would argue Engler's comment about the predominance of cash selling in Texas.
There have been plenty of other changes during Engler's 60-plus years in the cattle feeding business. One of the most recent changes that he and many others are thinking a lot about is consolidation, specifically the acquisition of Smithfield and National by foreign-based JBS.
What does it mean for the independent cattle feeder, the small ones as well as the bigger ones like Cactus?
"We've spent a lot of time thinking about that one," Engler admits. "I think we are going to see considerable restructuring of the industry. We always see some of that when we come out of these wrecks.
"I think its probably bad news for the small independent cattle feeder," he laments. "As bad as that might be — I know exactly what it's like — I started small," he reminds.
"You hate to see these small independents go. It's a little like the small family farm. They've been the backbone of agriculture in the U.S., but if we're still operating in a free enterprise system, these things are going to happen," he remarks.
"Efficiency, credit-worthiness, those are all reasons why we see consolidation," he adds.
Specific to the JBS acquisition, Engler said they had almost a two-hour interview with four officials from the Justice Department.
"Our position on JBS is that we hope they succeed, because if they don't succeed, it will be catastrophic because it would have impacts across the entire industry," Engler remarks.
As for whether or not such extensive consolidation is good for the industry, Engler admits that he really does have a difficult time with that one.
"I've heard what JBS said about offering a more global marketplace. I don't buy that. Look at Cargill — they're a multinational company. I think they're probably as good a world trader as anyone else, and IBP was extremely successful with their export markets, so I wouldn't say that JBS can add to it."
All of these points, the good and the bad, will be argued and debated, but ultimately it will be up to the Justice Department to make the final decision.
"What we told the Justice Department — assuming it does go through — our main hope, our fervent hope, is that they succeed," he reiterated. "I'm still old-fashioned enough to believe in free enterprise. They should have a chance to make it work. It will be a huge operation to manage. We just hope they have the management skills to do it. They're remarkable people. We've met with the family, and their track record for a family is really very impressive."
The feeding industry will continue to shrink, Engler predicts, in part because of supply.
"It's unfortunate, but I don't know how you reverse that. We won't ever rebuild numbers to where they've been in previous cycle highs."
Engler is also of the opinion that there will be more packer feeding or at least more joint ventures in the coming years.
"Who should feed the cattle? When you ask yourself that question and you look at other enterprises — who buys the tires, for example — the car manufacturer, because he needs the tires. So really, who should feed the cattle? From that sense, well, it would be the packer.
"The reason you haven't seen more of that is because the packer doesn't like that end of the business," he continues. "He's used to carrying accounts for 14 days. We have to keep these cattle for 150 to 200-plus days. The packer would rather let someone else take that risk, but he will likely be forced to change whether he likes the risk or not."
Engler says high corn and high feeder prices are impacting the cattle feeding industry in ways never experienced before.
"I'm tired of talking about it — why are feeder cattle so high with all the losses, for goodness sake? Availability of feeder cattle is one thing, and then there are too many guys like Cactus around," he admits. "We have to keep pens full. There's the old saying, which unfortunately, we don't follow — we know what that empty pen is going to cost us, but we don't know what that full pen is going to cost us."
Numbers are down at Cactus, but Engler says they've never had to close down or sell a yard yet, and he's hopeful they won't have to this time around, either.
"So far this year, we're in the black."
Asked if he would buy more feedlots, Engler responded, "That's a good question. You hear that there are a lot of feedlots for sale, but none of them that I know of would fit our model. But I guess if one was attractive enough, we probably would consider buying it.
"When you have a crew of people like we have, you don't stand still. Staying steady and tightening your belt, that's the first step to mediocrity," he insists.
Like many, Engler fears the country is headed into a "critical and drastic" meat protein shortage. Rough estimates are that there could be a 10 percent shortage in the red meat complex, and that does not take into account exports.
No one is willing to speculate, really, on just what that could mean.
"We'll see prices we've never seen before," Engler says. "They are going to be very inflationary, and there's a good bit of our economy that's going to go through the throes of a recession. It's not a very pleasant scenario to talk about."
In recent weeks the food versus energy debate has been front and center, and blame is being passed around by all parties on both sides of the issue. Ethanol, high oil prices and the weak U.S. dollar are all part of the problem, experts say.
Engler is on that side that believes it's government intervention that has pushed corn prices to record highs. He insists that if the free market were allowed to rule, we wouldn't have the problems we have right now. He's primarily referring to the tax credits and mandates with respect to the ethanol industry.
"I said at the time when people began talking again about ethanol that it would change the face of American agriculture, and that's happening right now.
"I was in Canada a couple of years ago, right about the time the Canadian government was looking into implementing their own tax credits to encourage the ethanol industry. They asked me for my opinion, and I told them that anything that is politically motivated instead of economically motivated normally has a short life, and that's what I believe is going to happen to the ethanol industry."
Engler is also frustrated about the fact that the industry is still getting conflicting research reports on the efficacy of feeding dry distillers grain.
"Now, that's a hell of a deal. We're feeding it because we have to. Things are kind of screwed up."
Engler admits that for years government policies, specifically farm subsidy programs, have kept corn prices pushed down, which in turn benefited the cattle feeder, so in essence they, along with the corn growers, have been subsidized for many years. However, as Engler points out, it all goes right back to the government's long-held support for a cheap food policy.
"Currier Holman, one of the founders of IBP, often referred to that cheap food policy, and he said it started in the days of Thomas Jefferson."
So where will corn prices go? Will things turn around?
"I don't know how we can go back the other way when there is such a demand for corn globally," Engler points out. "It's really a frightening scenario. We know the problems we have with $6 corn, but $8, $9 corn is not out of the question, especially if we have a short crop," he remarks.
The wild card, he says, could possibly be the government.
"A price freeze? To hell it can't happen. It happened with Nixon, so we can't rule it out. That's why it's absolutely essential that we get John McCain elected."
Despite all that, Engler says he's confident that Cactus can be a survivor.
"Normally, when we come out of one of these wrecks is when we have good times — that is, if free enterprise is allowed to work," he reiterates. "You've got to have faith in that.
"So yes, I am optimistic, and the reason is because this is the United States of America, and the reason I feel very strongly about this is because of our operations in Argentina. We've seen first-hand how another government works."
Engler says he doesn't regret his decision to build a feedyard in South America, but he admits he is disappointed.
"I really thought we could build another Cactus in Argentina."
Does he have plans to sell it?
"Well, you know the old saying, everything is for sale other than my wife."
Engler still goes into the office on a daily basis, and while his eldest son, Mike, is now at the helm, he admits that sometimes he forgets who is really in charge.
"I'm sure I say more than he'd like me to say. That's probably not a good thing, but my problem is that I enjoy what I do so much."
It's the challenge and the competitiveness of the business that he loves so much. It's been the driver of his success, and that's not likely to fade away any time soon.
http://www.livestockweekly.com/papers/08/05/15/whl15engler.asp
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Well-Known Panhandle Feeding
Pioneer Began By Milking Cows
By Colleen Schreiber
AMARILLO — It started with one milk cow and grew from there.
At least that was part of the impetus which later steered Paul Engler, co-founder and chairman of the board of Cactus Feeders, into the cattle industry.
When he was just 12 years old he went to the local auction barn and bought 100 head of cattle without his parents' permission. He didn't have a penny to his name, but he bought them anyway. That turned out to be the first of many profitable cattle ventures.
Today, 78 year-old Engler is arguably one of the best known cattle feeders in the world. In 1985 Cactus Feeders, with its one-time capacity of 335,000 head, became the world's largest cattle feeding company, a title they held until just recently. Today Cactus owns and operates 11 feedyards with a one-time capacity of 520,000 head. Three feedyards are in western Kansas, one is in Argentina, and the rest are in Texas.
This self-made man who has made his fortune in the cattle industry came from humble beginnings. His father made his living by operating a filling station.
Born in 1929, Engler grew up in Bassett, Nebraska, then populated by about 450 people. He describes the 1930s and 40s as a "great era" in which to be a kid.
"The country was coming out of the Depression. We didn't know we were poor, because we were all poor," he says. "There were some periods of hardship for some families. Luckily, we didn't have that in our family. We always had plenty to eat. We went barefoot in the summer, but we got a pair of shoes in the fall."
Growing up in that era, he says, turned out to be a huge advantage.
"I learned to work; I learned frugalness, the value of a dollar — that's the way we were raised, but it wasn't just me. All of us of that generation were raised that way."
Engler says his father was old-fashioned enough to think that every boy should learn how to milk a cow, so he bought one cow for his son to milk.
Engler was about six years old. He got pretty good at milking and actually liked it, so one cow led to two and so on. At one time he was in charge of milking as many as nine cows.
This was before pasteurized milk, so he and his older sister started a bottling and milk delivery business. It was his job to deliver the milk in the evenings and collect the bills.
"That was another lesson — how to collect bills from people who were a little short on money. I knocked on a lot of doors," he recalls.
The worst part of the business was that once you got home from making deliveries, all the milk bottles had to be washed.
"I used to say that one of the best days in my life was when we collected enough money — $26 — to buy a cream separator. That meant we could sell the cream and I no longer had to deliver the milk and wash those damn bottles."
It was that childhood experience that allowed Engler to learn early on not only that he had an interest in livestock, but also that he was, well, pretty good at it. Thinking back over what he learned from his milking days, Engler says that ideally, a well thought-out training program for pen riders would start with a lesson in how to milk a cow.
"You learn a lot by milking cows," he remarks. "You learn a lot of cow psychology. You learn a lot, too, when you break that cow to milk. You also learn what's best for the cows.
"During the cold Nebraska winters, my father would bring hot water down in cream cans to mix with the cold water so that the cow had a warm drink of water. It helped keep her milk production up," he explains.
In time the elder Engler rented a little piece of land and expanded into the stocker business. He'd buy about 100 head of weaners in the fall, overwinter and summer them, and then sell them as yearlings the following fall.
Young Engler was responsible for tending to the cattle after school. He says his father was a really good man and a good father, but the young lad resented the fact that his dad didn't believe in paying him anything for work well done. Eventually he rebelled and took matters into his own hands.
It happened one Wednesday afternoon. Engler was excused from school on Wednesday afternoons to work at the local sale barn. Bassett always had a weekly sale on Wednesdays, even so today. On this particular Wednesday, his father happened to be out of town. He went to the auction barn as planned, but instead of going to work he bought 100 head of cattle. He was only 12 years old and he didn't have a dime to his name.
"After the sale, the owner of the sale barn said, 'Well, Paul, I see where you bought some cattle today. You don't have any money, either, do you?'
"His name was Otto Lamprecht. He was a tough guy. When he asked me what I was going to do, I told him that I guess he'd have to loan me the money, and he did."
When Engler got home that evening his mother was understandably upset with him.
"She was just sure that I got cheated. So she went over to the neighbor, who was a rancher and who happened to be at the sale that day. He told her that I did a good job buying the cattle. No matter, Mother was sure I was really going to get a lickin' from my father."
Engler remembers paying about 12 cents a pound for the 100 head of Hereford heifers. The next day he brought them home and branded them with his own brand, the U Lazy L.
The following day his father came home, and together they took a drive out to take a look at the cattle. On arrival, his father commented that he noticed the herd had gotten a little bigger since he'd been gone, and he asked for an explanation.
"I told him what I'd done, and I kept waiting to get a real dressing down, but it never came. I told him where I got the money to buy the cattle, and then he said that we should go on down to the bank, because he thought I could probably get a little better deal down there.
"After we finished signing the paperwork at the bank, instead of a licking, he turned around and said, 'Son, I'm proud of you,' which was a very touching thing for me."
So with that first 100 head of cattle Engler got his real start in the cattle business. Three years later, at the age of 15, he graduated from high school. He figured he was getting along pretty well in the cattle business and he planned to just stick with it, but his father, who only had a fourth grade education, insisted that he go to college.
He eventually received his degree from the University of Nebraska at Lincoln. After that, he came back to Bassett and took a part-time job as a college instructor. He also started back again in the cattle business.
After he got going pretty well and had made a little money, he bought 100 head of old cows from his then in-laws, the Kraycek family, who had one of the best known commercial Angus herds in Nebraska. Willow Grove Land and Cattle Co. had won the competition at the International Livestock Show in Chicago four years in a row, and there was a long waiting list for those who wanted to buy some of their older females. Because Engler was a son-in-law, he got preference.
The cows ranged in age from 12 to 14 years. He paid $140 a head.
By this time his father was in ill health, but Engler drove him out to the place he was leasing to have a look at the cows he'd just purchased. The only thing his father said was, "I thought I raised you to be smarter than this."
Turns out his father had rightly pegged the deal.
"I didn't mouth the cows before I bought them, and in the end I had a hard time keeping them alive. I got a few calves out of them and then I sold them, but by then the market had gone down."
The heifers that he'd purchased at the same time turned out to be a much better buy.
Engler eventually gave up the part-time teaching job, which he didn't much like anyway, and went to work for Brickley Cattle Co., headquartered in Valentine, Nebraska. Emmett Brickley became one of Engler's two best tutors. From him, he learned the art of buying cattle in the country.
"He was a remarkable trader," Engler says. "He had a way about him. Maybe the rancher wouldn't sell him the cattle, but they would tell him to be sure and come back again."
Once, when Brickley was down in his back, he sent Engler out to do the buying for him.
"I bought one set, and when I returned he asked me what I thought about them, and I told him that maybe they'll make money. He said, 'Why don't we leave the maybe ones in the country?' He was a very exact guy, and a great teacher, and he was very good to me."
Brickley partnered with Max Rosenstock, who had emigrated to the U.S. from Nazi Germany. The cattle that Brickley bought were typically sold to one of Rosenstock's customers. Rosenstock had three brothers; two worked at the stockyards at Chicago and another operated out of Kansas City. When Brickley and Rosenstock disbanded their partnership, Rosenstock tried to get Engler to go to work at the Sioux City Stockyards. Instead, he applied for a job with legendary Nebraska cattle feeder Louis Dinklage.
The day Engler drove to Wisner to meet with him, Dinklage was tied up with serious water problems at one of the feedyards and Engler was left waiting for him the entire day.
"Sitting there all that day, I had a lot of time to rehearse my story," Engler recalls. "I told him that I was making $700 a month and I had a couple of children and another on the way. I wanted a job where I could make a little more money, but more importantly, I told him that I wanted to have an opportunity to earn my way into the business. This is the honest to God truth — he looked at me and said, 'I'll give you $300,' and he got up and walked out.
"Obviously, I was really down in the dumps on that deal, but on the drive back I decided that if I wasn't worth more than $300, it was time that I find out, so I took the job."
He left his young family behind and moved to Wisner, where he took a room in a private home because there were no hotels or motels in Wisner at that time. One of the locals advised him to get a room in the funeral home, because it was a big house up on the hill. This was before air conditioning. He did, and it was a fine room. The only problem was that the shower was in the basement, and to get there he had to pass through the embalming room.
Dinklage put Engler in charge of straightening out the feeder cattle books. He didn't much like the desk job, but he tolerated it. Eventually Dinklage entrusted him with more responsibility. In addition to his bookwork, he put Engler in charge of one of the feeding operations. He fixed up the old house on the place and Engler moved his family out to Wisner.
Back then, most all of the feeder cattle were still being shipped by rail. The trains often came in at night, and when they were going full bore, Engler says, he went for days at a time without ever going home to change clothes.
The rations, Engler says, weren't as sophisticated as they are today, yet they really weren't all that different, either, up until in recent years when byproducts began to be included as part of the ration.
"We called it rolled corn, but it was actually dried cracked corn," Engler notes.
Back then each feed truck driver was assigned a pen of cattle. The driver was not only responsible for feeding that pen of cattle, but he was also responsible for getting the cattle on feed, their health, etc. They were his cattle, so to speak.
They didn't weigh the feed then, so there was no way of figuring feed conversions. They did, however, calculate daily gain, as they kept separate weights on the cattle coming in and they had the payweight on the other end.
When Engler first started working for Dinklage, all cattle, fat cattle included, were sold through one of the main terminal markets. The cattle were sorted load by load on the farm prior to shipping.
"We often had cattle on Omaha, Sioux City, St. Joe, Kansas City, all at the same time, and sometimes even St. Paul and Chicago."
In time, country buying became more common.
"The central markets fought it, the commission men fought it, but it really was a great improvement over the central markets," Engler says.
The first packer buyer who bought direct from them was a fellow who worked for American Stores. American Stores was a large retail chain at the time, but they also had a packing plant at Lincoln. When those on the Omaha market learned of his defection, they boycotted him and the store, but in time not only were the packer buyers coming to the country, so were the commission men.
By this time Dinklage had long made Engler a full partner on most of his cattle deals.
"He was my second mentor, and really my benefactor," Engler says of his former partner. "From him I learned first of all about how to feed cattle. I also learned how to buy feeder cattle and how to merchandize them as fed cattle."
While on a cattle buying trip to the Texas Panhandle, the young Engler discovered a potential opportunity, one that would change his life forever.
"I was loading cattle on the trains at Hereford," he recalls. "The train that pulled into the siding was loaded half with grain and the other half with feeder cattle. It was headed to the Imperial Valley."
He happened to be buying Joe Reinauer cattle that day.
"I told Joe it was all wrong that the cattlemen were exporting the two main resources necessary for establishing cattle feeding in this area, and he told me that ranchers here were just waiting for someone like me to come down and show them how to do it."
Engler thought about that statement all the way back to Nebraska. The next day he asked Dinklage what he thought, and Dinklage agreed with Engler that the Texas Panhandle was the perfect spot in which to expand the cattle feeding industry.
With Dinklage's blessing, Engler went back to Texas to try to put a deal together. That was in early 1960. He found some land and committed to a deal, thinking all the while that Dinklage was going to be his partner in the venture. However, when Engler returned to Nebraska to share the news with his partner and friend, Dinklage, for reasons unbeknownst to Engler, had a change of heart.
Engler, however, was committed to the land deal back in Texas and couldn't pull the plug, nor did he really want to. So after a decade-long partnership, the two split their interests and went their separate ways.
Engler was able to muster support from some of the local businessmen, men like banker Henry Sears, attorney Jim Witherspoon and a few grain dealers and ranchers such as John Douglass Pittman, Palmer Norton and Owen Seamand. With that financial backing, Engler began construction on the first feedyard in the Texas Panhandle. Some 48 years later Hereford Feedyard is still in operation, though under different ownership.
As soon as he arrived, Engler began "talking up" his custom cattle feeding idea. It was a tough sell, though.
"We were getting close to being ready to start moving cattle in, and I still didn't have any cattle committed," he recalls. "I called on my investors for some help. Every one of them told me they'd never fed any cattle, and they'd just wait and see how I got along."
When the 10,000-head one-time capacity feedyard finally opened, Engler only had 120 head of cattle go into the yard, and those were cattle he owned that he had out on wheat.
Roger Brumley, who ranched west of Hereford, stopped by the feedyard one day. Engler and Dinklage had been buying Brumley's steers for several years running, and he was ready to sell. He asked Engler if he would call his former partner to see if he was still interested in buying his steers. Engler hadn't spoken to Dinklage since he left Nebraska — it had actually been a difficult splitting of their partnership — but Engler was happy to accommodate one of his former customers.
Dinklage arrived the following morning, set to buy Brumley's steers. He went with Engler to look over the steers, and after he got them bought, he told Engler to show him what he had going at the feedyard. That day Dinklage ended up reserving several pens for himself, and soon after he had those pens full. Other cattlemen in the area took notice. Dinklage was highly respected, and soon others began sending their cattle to Engler as well.
"I guess they thought if he was doing it, it was probably a good deal. From that point forward, we couldn't build pens fast enough."
In 1971, Engler sold his feedlot interests to IBP and went to work for them as a group vice president. He was in charge of cattle procurement. He also headed up carcass sales and was in charge of the hide and byproduct divisions for the company's eight plants. In addition, he sat on the board.
In 1972 IBP opened the largest beef slaughtering plant in the U.S. in Amarillo. Engler played a large role in bring the opening of that plant to fruition.
His time at IBP afforded him yet more valuable experience, but after three years, Engler was ready to leave the corporate world behind. He returned to the cattle feeding business. He bought another feedyard, and again his old mentor partnered with him on 3000 head of steers they bought off the Bivins ranch north of Amarillo.
The second time around was even better than the first, Engler says. The industry was just healing up, and the timing of his return worked out well for him. He partnered with Tom Dittmer, and together the two co-founded Cactus Feeders with only $200,000 in start-up capital. Over the next few years the company acquired several feedyards, essentially one every two years or so.
"When we grew, we grew out of our earnings," Engler points out.
In addition to the feedyards, Engler and Dittmer also bought three ranches encompassing more than 140,000 acres. There they raised more than 30,000 head of stockers annually and ran 2000 mother cows.
Engler bought Dittmer out of the feedyard part of the business about 20 years ago, but they continued to partner on the ranching operations until about 10 years ago.
When Engler and Dittmer first started Cactus, it was almost 100 percent custom feeding because, as Engler points out, they didn't have enough capital to fill their own yards. In time that changed, and today, ideally anyway, it's about 50 percent customer cattle and 50 percent company owned.
"We've pretty well been able to maintain that 50/50 ratio up until these tough times that we're in now," he notes. "Unfortunate markets literally eliminated some of our customers.
"We've managed to survive, though. Cactus has never had a losing year. We've come damn close a couple of times, but we've never gone into the red."
The company has survived in part, he says, because of good risk management.
"I like to kid about it. We were zigging when we should have been zigging and zagging and when we should have been zagging. But, no question, it took good risk management.
"The other thing is that we've been very careful about our credit arrangements. Louis (Dinklage) used to have a saying, and this was before livestock cattle futures days — he told me that you just need three things to be successful. First, buy your cattle right. That's a given. Second, do a reasonably good job of feeding them, and third, protect your credit so that you could keep your cattle numbers. As a result, we've always had very good lenders and good relationships with them."
Engler is thought of as a pioneer in the Texas cattle feeding industry, an entrepreneur and a forward-thinking kind of a man, but not all of his concepts and the new ideas he initiated have necessarily been looked upon favorably by all. It understandably goes with the territory.
One of his founding concepts that has received considerable attention over the years is formula pricing, or what some call value-based marketing.
"One thing that always disturbed me was the way packer buyers would come in and buy cattle, particularly at these bigger operations. Instead of buying them pen by pen, they'd wrap them up in a package and buy them all at one price when you knew and they knew and everyone knew there should have been $150 to $200 difference in the best pen compared to the poorest," Engler remarks. "That used to irritate me so bad that I finally decided we had to do something about it. We had to get paid for what we were producing, and the only way to do that was to get the hide off and see what we had grade-wise and dressing percentage-wise," he explains.
With that in mind, Engler went to IBP and in essence formed a relationship with IBP to market cattle on a formula type arrangement based on carcass value.
Not only was it important to have a formula whereby the true value of the cattle was determined on an individual animal, but Engler says another important part of the arrangement was that Cactus was able to schedule when they wanted to market their cattle.
"For the first time, we were able to pick a date of when to sell rather than the packer buyer doing it," he explains. "That's a big advantage, because it kept us from overfeeding the cattle."
One of the biggest complaints critics have with the formula pricing arrangement is that it guarantees a packer a predetermined kill, a given "captive supply," which they argue in the end gives the packers even more of an upper hand because they have to compete less aggressively or some weeks not at all in the cash market.
"Guaranteeing the packers a number — that's the 'con' argument, no question about it," Engler admits. "When we set up the formula, I said this could be a transitory thing, because the more people that got in on formula selling, the less value it would have to us."
Still, Engler points out that the cash method of selling is still predominant, and it's predominant, he says, because it serves the packer well. Some in the industry would argue Engler's comment about the predominance of cash selling in Texas.
There have been plenty of other changes during Engler's 60-plus years in the cattle feeding business. One of the most recent changes that he and many others are thinking a lot about is consolidation, specifically the acquisition of Smithfield and National by foreign-based JBS.
What does it mean for the independent cattle feeder, the small ones as well as the bigger ones like Cactus?
"We've spent a lot of time thinking about that one," Engler admits. "I think we are going to see considerable restructuring of the industry. We always see some of that when we come out of these wrecks.
"I think its probably bad news for the small independent cattle feeder," he laments. "As bad as that might be — I know exactly what it's like — I started small," he reminds.
"You hate to see these small independents go. It's a little like the small family farm. They've been the backbone of agriculture in the U.S., but if we're still operating in a free enterprise system, these things are going to happen," he remarks.
"Efficiency, credit-worthiness, those are all reasons why we see consolidation," he adds.
Specific to the JBS acquisition, Engler said they had almost a two-hour interview with four officials from the Justice Department.
"Our position on JBS is that we hope they succeed, because if they don't succeed, it will be catastrophic because it would have impacts across the entire industry," Engler remarks.
As for whether or not such extensive consolidation is good for the industry, Engler admits that he really does have a difficult time with that one.
"I've heard what JBS said about offering a more global marketplace. I don't buy that. Look at Cargill — they're a multinational company. I think they're probably as good a world trader as anyone else, and IBP was extremely successful with their export markets, so I wouldn't say that JBS can add to it."
All of these points, the good and the bad, will be argued and debated, but ultimately it will be up to the Justice Department to make the final decision.
"What we told the Justice Department — assuming it does go through — our main hope, our fervent hope, is that they succeed," he reiterated. "I'm still old-fashioned enough to believe in free enterprise. They should have a chance to make it work. It will be a huge operation to manage. We just hope they have the management skills to do it. They're remarkable people. We've met with the family, and their track record for a family is really very impressive."
The feeding industry will continue to shrink, Engler predicts, in part because of supply.
"It's unfortunate, but I don't know how you reverse that. We won't ever rebuild numbers to where they've been in previous cycle highs."
Engler is also of the opinion that there will be more packer feeding or at least more joint ventures in the coming years.
"Who should feed the cattle? When you ask yourself that question and you look at other enterprises — who buys the tires, for example — the car manufacturer, because he needs the tires. So really, who should feed the cattle? From that sense, well, it would be the packer.
"The reason you haven't seen more of that is because the packer doesn't like that end of the business," he continues. "He's used to carrying accounts for 14 days. We have to keep these cattle for 150 to 200-plus days. The packer would rather let someone else take that risk, but he will likely be forced to change whether he likes the risk or not."
Engler says high corn and high feeder prices are impacting the cattle feeding industry in ways never experienced before.
"I'm tired of talking about it — why are feeder cattle so high with all the losses, for goodness sake? Availability of feeder cattle is one thing, and then there are too many guys like Cactus around," he admits. "We have to keep pens full. There's the old saying, which unfortunately, we don't follow — we know what that empty pen is going to cost us, but we don't know what that full pen is going to cost us."
Numbers are down at Cactus, but Engler says they've never had to close down or sell a yard yet, and he's hopeful they won't have to this time around, either.
"So far this year, we're in the black."
Asked if he would buy more feedlots, Engler responded, "That's a good question. You hear that there are a lot of feedlots for sale, but none of them that I know of would fit our model. But I guess if one was attractive enough, we probably would consider buying it.
"When you have a crew of people like we have, you don't stand still. Staying steady and tightening your belt, that's the first step to mediocrity," he insists.
Like many, Engler fears the country is headed into a "critical and drastic" meat protein shortage. Rough estimates are that there could be a 10 percent shortage in the red meat complex, and that does not take into account exports.
No one is willing to speculate, really, on just what that could mean.
"We'll see prices we've never seen before," Engler says. "They are going to be very inflationary, and there's a good bit of our economy that's going to go through the throes of a recession. It's not a very pleasant scenario to talk about."
In recent weeks the food versus energy debate has been front and center, and blame is being passed around by all parties on both sides of the issue. Ethanol, high oil prices and the weak U.S. dollar are all part of the problem, experts say.
Engler is on that side that believes it's government intervention that has pushed corn prices to record highs. He insists that if the free market were allowed to rule, we wouldn't have the problems we have right now. He's primarily referring to the tax credits and mandates with respect to the ethanol industry.
"I said at the time when people began talking again about ethanol that it would change the face of American agriculture, and that's happening right now.
"I was in Canada a couple of years ago, right about the time the Canadian government was looking into implementing their own tax credits to encourage the ethanol industry. They asked me for my opinion, and I told them that anything that is politically motivated instead of economically motivated normally has a short life, and that's what I believe is going to happen to the ethanol industry."
Engler is also frustrated about the fact that the industry is still getting conflicting research reports on the efficacy of feeding dry distillers grain.
"Now, that's a hell of a deal. We're feeding it because we have to. Things are kind of screwed up."
Engler admits that for years government policies, specifically farm subsidy programs, have kept corn prices pushed down, which in turn benefited the cattle feeder, so in essence they, along with the corn growers, have been subsidized for many years. However, as Engler points out, it all goes right back to the government's long-held support for a cheap food policy.
"Currier Holman, one of the founders of IBP, often referred to that cheap food policy, and he said it started in the days of Thomas Jefferson."
So where will corn prices go? Will things turn around?
"I don't know how we can go back the other way when there is such a demand for corn globally," Engler points out. "It's really a frightening scenario. We know the problems we have with $6 corn, but $8, $9 corn is not out of the question, especially if we have a short crop," he remarks.
The wild card, he says, could possibly be the government.
"A price freeze? To hell it can't happen. It happened with Nixon, so we can't rule it out. That's why it's absolutely essential that we get John McCain elected."
Despite all that, Engler says he's confident that Cactus can be a survivor.
"Normally, when we come out of one of these wrecks is when we have good times — that is, if free enterprise is allowed to work," he reiterates. "You've got to have faith in that.
"So yes, I am optimistic, and the reason is because this is the United States of America, and the reason I feel very strongly about this is because of our operations in Argentina. We've seen first-hand how another government works."
Engler says he doesn't regret his decision to build a feedyard in South America, but he admits he is disappointed.
"I really thought we could build another Cactus in Argentina."
Does he have plans to sell it?
"Well, you know the old saying, everything is for sale other than my wife."
Engler still goes into the office on a daily basis, and while his eldest son, Mike, is now at the helm, he admits that sometimes he forgets who is really in charge.
"I'm sure I say more than he'd like me to say. That's probably not a good thing, but my problem is that I enjoy what I do so much."
It's the challenge and the competitiveness of the business that he loves so much. It's been the driver of his success, and that's not likely to fade away any time soon.
http://www.livestockweekly.com/papers/08/05/15/whl15engler.asp
