January 2006

2005 Review

What a difference a year makes!  Last year at this time, we were bogged down in mud, and now we can’t buy a rain.  I told Heather that we’d always remember Tanner being born in the fall of the wet moon, and now we’ll note that Chloe will arrive in the winter of the arid wind.  The weather woes, however, were overshadowed by the passing of my father.  But Paidom’s greatest challenge in 2005 was the search for the right butcher.

THE  SLAUGHTER  HOUSE  BLUES

We headed off to Lockney Meats for a trial period.  On our “TX Swing” delivery back in October, we brought meats that they had processed.  Also, all orders shipped in Oct and Nov were cut at Lockney Meats.  We ultimately wanted a large portion of our customers to get a sample and help us make a decision as to which butcher did the best job.  After all, you will be eating the majority of it.

We had feedback from about 20-25% of you, and that feedback spanned the gamut.  Some of you were content with the new butcher, others preferred Edes but could live with Lockney, and many of you were adamant that we return to Edes.  I expected the results to be consistently in favor of one butcher or the other, so I took this variability as a sign that we needed to return to Edes.  Another thing I didn’t like about Lockney was the way they cut rump roasts.  They took them from the top round, so they had to take out a bone, then roll the meat and wrap it with a net.  Edes, on the other hand, pulls the rump roast from the bottom round as naturally boneless.  It has a much more enjoyable texture, not to mention the nicer appearance.  So let’s put the matter to rest:  We’ve returned to Edes Meats and are paying the higher processing charges.  This should have resulted in an increase of approximately $0.25/lb on all cuts, but we chose to raise some cuts while holding others steady.  The new prices are shown on the website.

But the matter has not been truly put to rest.  The problem is two-fold.  First, there’s the obvious threat of another price increase by Edes later in 2006.  Usually it’s minimal, but these butchers can “nickel and dime” a guy to death!  The cost of butchering a calf at Edes has doubled since I started with them in 1997.  Have your incomes done the same?  And while a hike in taxes or fuel prices can be offset by small “tweaks” on targeted meat cuts, an increase at the slaughter house affects EVERY cut of meat.  Nevertheless, Edes undoubtedly does the best job.

The second part of this problem concerns control.  We pride ourselves that we have control over our product from start to finish, or as we prefer to say, from conception to consumption.  We know the source and the user of our meats, and everything in between.  However, there are 2 points where we entrust the quality of our meats to others, and one of these points affects every cut of meat.  That point, of course, is when we take the animal to the butcher.  With calves, we work for roughly 24 months to get the animal to a stage where it is correctly finished, only to turn it over to someone else for 3 weeks and hope they don’t ruin all that we’ve accomplished.  Yes, we trust the folks at Edes Meats that much, but this slight risk begs the question of whether we should have our own facility.  Having one would ease both problems, and it would be designed specifically for pasture-finished animals.  Still, this would be a separate enterprise that would have to stand on its own, so we would have to do better than just breaking even on the venture.  Therefore, you couldn’t expect to see our butchering costs fall to half of the current level, but at least there would be some relief.  By the way, the second point where we lose control of our product is when we ship an order.  That only affects certain customers, and if Fedex screws up, those customers don’t have to take the product, so the courier really doesn’t affect the quality of our meats.  They just affect our bottom line.  I don’t see us getting into the courier business, although I suppose we already have since we run several delivery routes.

It’s funny that just one year ago, we brought up this same subject.  We mentioned that we had contemplated the idea of our own slaughter facility, but we had backed off because of all the specialized equipment, capitalization costs, etc.   I guess that’s why they say, “Never say never.”

While owning a slaughter facility has many advantages for us and for you, our partners, it would doubtlessly be a massive undertaking for Paidom.  First, there’s the issue of raising the funds for such a venture, which would likely be near $1 million.  Then, if you somehow get a facility, you have to find trustworthy employees, and they have to possess the right skills.  Let’s face it, not everyone can gut an animal or carve the carcass into the proper cuts.  That’s especially the case in little Nazareth, TX.  Then there’s the third issue of managing another enterprise.  So while I see lots of headaches associated with a slaughter facility, my hunch is that the advantages outweigh the pains

YOUR  ROLE  IN  THE  CURE

Besides being the end-user of our meats, your role in curing “the slaughter house blues” goes beyond simply judging butchers.  You may have noticed that I often refer to you as partners, not as customers.  I do that because, as we say, we first sell a relationship, then a product.  You have bought into Paidom’s philosophies -- our way of taking care of the land, our way of nurturing animals, our way of fostering relationships between food and consumer, our way of empowering rural communities…  Now it may be time for us to ask you to buy further into Paidom, but we’re just mentioning the following so that you can react.

If we were to go forward with the slaughter facility, we could apply for a bank loan.  Considering that our credit rating allows us to borrow from our lender at ½% over prime, a bank loan may be our cheapest option.  However, I hate debt, which sounds strange coming from a recovering banker like me.  Instead, I’d like to pose the idea of issuing “shares” to those of you who are interested.

I’d be willing to bet that the toughest problem for most business start-ups is cash flow, in other words, sales.  Many infant businesses go broke while trying to generate that critical mass of sales to put them over the top.  Either the bank won’t stay with them long enough, or the idea/product that the business thought would ring the bell turns out to be a flop.  Could that happen to us?  We’ve been in the business of organic/pastured meats since 1994, which in this emerging field, makes us a grandfather of sorts.  More important, we’ve built up a rather large partnership with you, giving us a steady market for our products.  Even more important, your loyalty has pleasantly astounded us, especially those of you on our deliveries, and your word-of-mouth advertising boosts sales with every trip.  In light of this, I’d say it’s unlikely that we won’t have the sales to justify such a facility.  We have the track record to prove it, which would come in handy if we need to get a bank loan.  But I still prefer to issue shares to you.  Here’s my idea:

Let’s say we issued shares in the facility at $1,000 per share.  This needs to be a good investment for you as well as for us, so we’d pay you a return similar to the long-term stock market return of 10%.  However, your payback would come in the form of meat, so each share would buy you $1,100 worth of product from us.  You’ve essentially saved 10% on your meat bill, and we’ve ensured ourselves of sales!  At worst, you would just eat for free until we got you paid back!  From your prospective and ours, could this proposition fail, or am I missing something?

Now, I realize that some of our partners may want to purchase 10 or 20 shares, but they can’t eat that much meat in a reasonable time.  Obviously, we’d have to make other arrangements (e.g., most of the payback would have to be cash).  Still, the annual interest on 10 shares would be $1,000, and that could easily be paid in product with the principal rolling over for future years.  The exact payback schedule would have to worked out, as well as all the intricacies of such deals, but isn’t that what attorneys are supposed to do?  Incidentally, are any of you involved in this type of work just in case we go forward with this idea, or do you know someone who is?

The beauty of this arrangement is that, while we’re paying higher borrowing costs, we’ve locked in sales.  And sales (collected sales, not just booked ones) are what save businesses from the cash flow boogeyman.  Cash flow doesn’t guarantee profitability, but it precludes you from borrowing working capital to pay monthly operating bills, purchase inventory, pay employees, etc.

It will be interesting to see if this idea flies.  Ultimately, it rests on your willingness to buy into the Paidom philosophy again, but this time, I really mean BUY.  However, we first need to know (1) if you think we need our own slaughter facility, and (2) if you would invest in it.  I know our prices would be more stable, and I think we would be more mindful of the aging on pasture-finished carcasses.  We’d likely be able to perform Kosher kills since I prefer slitting the throat as opposed to using a rifle.  While a pasture kill would be stress-free, letting an animal walk through a chute for several days and find hay on the other side would allow us to humanely take its life on a given day.  And the aspect I like best is that, prior to the kill, I could offer thanksgiving for the life of this animal, acknowledging that we are aware of the sacrifice being made by this animal and that we do not take its life for granted.  Likewise, we don’t take the animal’s life as a sign of dominion over the earth, but as a sign of our stewardship of this earth.  Such a “consenting of the spirit” would be a special experience for me with each harvested animal.  Am I weird or what?

A  TRIBUTE  TO  HERMAN 

I’ve always tried to limit this newsletter to subjects that affect Paidom and its partners.  But I’m going to depart for just a bit to talk about Dad.  His death was one of the most moving events of my life.

People tell me that I’m a lot like Dad, almost too much like him.  Maybe that’s why we didn’t always see eye to eye.  Like me, Daddy started his farming career with nothing in terms of machinery, land, etc.  I know he often wondered why I was dabbling in pastured meats rather than full-time banking.  Still, he supported my efforts, and if the trip weren’t so physically demanding, I would have enjoyed taking him on one of my “TX Swing” deliveries so that he could see all of you who appreciate our products and service.  He would have been sold on the concept!  Yet even though he relied on conventional farming practices, he realized that organic production had much to offer.  He helped 3 of my brothers get started in composting, and now Soilmender’s products are offered in several states.  Dad used their composts on his fields, and we do as well.  It’s a great fit for pasture-based, certified-organic land like ours.

Some of Dad’s greatest gifts to us were his sound judgment and ability to evaluate options, his punctuality, his sense of responsible citizenship, his good word (doing what you say you’re going to do), his charitable traditions, and mostly his simple example of being an upstanding person of integrity.  Even when he finally reached a point of wealth, he was always frugal.  Yes, it was difficult to get him to buy something new unless the old one was entirely worn out, and that’s even more the case with Mom.  I guess it’s a result of having seen hard times, and it’s a good quality to have (more kids need this experience).  And even in tight times, Dad always made sure we gave to charity.

The Lord gave us a final gift by allowing all 12 children to be with Dad in his final hours.  Watching him cross over was an experience I’ll never forget and will always cherish.  In hindsight, there is no better way to leave an earthly life than the way he did, and I can only wish the same for every member of my family.  Heather and I are honored that Chloe will be born on Jan 28, Dad’s birthday.

But the lasting legacy of Herman has to be his music.  Having played fiddle in a western swing band for years, he naturally fit into the church choir.  He was always game for a jam session, and making music transcended life’s travails.  When I took up the guitar in Utah, one of the songs I learned was Dan Fogelberg’s The Leader of the Band.  That song had always reminded me of Dad, especially the chorus and the 2^nd and 4^th verses.  When I had mastered it, I told myself that someday, I would play it at Dad’s funeral.  Although I still play the guitar, I wasn’t real polished on that song, but fortunately, I have a very accomplished nephew who can play just about anything.  Needless to say, I was grateful when the rest of my family agreed that this song embodied Dad.  But the real privilege was having Dad’s 8 sons sing The Leader of the Band at his wake service.  We may have been shaky since it happened on the spur of the moment, but our hearts poured forth.  Farewell, Leader of the Band.  Until we meet on the other side, we will be your living legacy, and we shall play on…

NOTEWORTHY 

It’s time to trim the fat on our mailing list.  While we’d love to send everyone our newsletters and postcards, it’s becoming quite an expense.  If you wish to continue receiving our “propaganda,” we beg you to send us your email address.  We promise not to clutter your email box, and we never give your information to another party.  Having your email address makes it easy to send updates to you about new products (e.g., eggs) and offers (e.g., the Harvest Special).

If you don’t have email, we will continue sending you our newsletter if you’ve placed an order in the last 12 months, but we can’t inform you on short notice if we are coming to your city.  Occasionally, we flee the farm for the city, and we try to bring any meat orders along, but we only have a few days to contact all of our customers in that city.  Email makes that possible.

Thanks for supporting the vision.

-- Alan & Heather