Bucking the Trends
Mike Pearson is moving slowly this late-spring afternoon. Getting out of his pickup is a chore, punctuated by only the slightest wince or audible exhalation. To say he’s sore is an understatement. He could’ve been killed.
The previous day, while working 22 feet atop the framing for an entryway to a new cattle barn, Pearson stepped onto a knot in a 2×4, which gave way, and he fell to the concrete pad below.
You could say Pearson’s effort to diversify the operation is responsible. In an area of central Iowa that is decidedly crop heavy and livestock light, Pearson has turned back the clock to a mind-set of diversification to hedge his resources. He’s simply doing it on a larger scale than would have occurred 30 or 40 years ago.
Amazingly, Pearson broke nothing in the fall, but every part of him now ached. That he survived as well as he did is a testament to luck. That he’s back at work the next day is a testament to something else: drive, pride, or just bullheadedness.
Started Small and Kept Adding
Pearson’s drive is apparent. This 43-year-old who lives just outside Coalville, Iowa, has carved out a 5,500-acre operation in 13 years that includes 14, 2,500-head contract hog houses; a 1,300-head cattle operation; and a farm tiling company whose crews are capable of installing up to 60 acres of pattern tile in a day.
“Before the livestock, I would look at my balance sheet and there would be 85% of value in ground and 15% in other assets,” says Pearson. “That didn’t make sense. Why would I risk everything in just ground?”
The hog buildings have created more cash flow. The recent addition of a cattle operation – from bottle-feeding dairy and beef calves to finishing them to market weight – gave Pearson an opportunity to use his own corn. The hogs are raised on contract, so all the feed is provided by the contractor.
Pearson built this agriculture operation off his prior success as a contractor painting farm buildings, installing steel roofs, and doing construction. He even helped start a successful flooring business in Des Moines (now owned and run by relatives).
“What I really wanted to do was farm,” says Pearson. His father, Ted Pearson, a contractor, was killed in a car accident when Mike was 15. His grandfather, Nels Pearson, who farmed, wasn’t keen on Mike simply going to work for him after high school.
“He [Grandpa] told me, ‘You’ll never learn anything driving a tractor for me. Prove you can do something else, and the farm will always be here,’ ” says Pearson.
By 2003, after some success in other businesses, Pearson bought two small farms and used his grandfather’s equipment. Within several years, his grandfather retired and Pearson began renting (and still rents) his grandparents’ 800 acres. Since then, Pearson has continued to expand by acquiring new acres through purchase and lease. He then builds hog facilities on or near the new property and uses the hog manure as fertilizer. That cost savings has allowed Pearson to go after parcels of land for sale or rent. That aggressiveness – as well as the construction of numerous hog-confinement facilities – can ruffle feathers.
“A lot of neighbors have been pretty critical about things I’ve done,” says Pearson. “At some point, I think they respect me, though. Most know I started with almost nothing.”
The growth is not without challenges. Pearson admits he can find himself trying to do too many things at once and wearing too many hats.
“Diversification can be a negative in the farm business if you can’t get the size and scale right and don’t have the management expertise in each of the enterprises,” says Chris Hurt, an agricultural economist at Purdue University. Hurt is not familiar with Pearson or his operation but generally lauds the move into contract hogs.
“He’s buying into someone else’s high-level knowledge and technology by working with a hog contractor,” says Hurt. Beyond that, Pearson’s job is to maintain a trained labor force. The cattle business is another story.
“Cattle finishing is one of the riskiest farm enterprises,” says Hurt. “There are wide fluctuations in returns from one pen of cattle to the next. Bankers want a lot of equity and a manager who understands hedging. Most of us can’t and don’t take that kind of risk.”
Pearson moved into cattle to diversify and to market his corn through those animals, something he couldn’t do with the contract hogs. He also believed the timing was right.
“When I started plans to build the cattle-feeding barn, commodity prices were really high and the cattle market was really low,” he says. “So when things seem desperate, it’s a great time to get into something.”
There is a learning curve. “I’m still trying to get the feeding thing right with the cattle,” he says. “Everybody I talk to has different ways to do it. I take that in, and I kind of live and learn by experience.”
He bought calves at the bottle-feeding stage because of the costs involved when he entered the business.
“Cattle were sky-high at the time, and I was afraid to pay $1,400 for a 400-pound steer,” he says. “It was risk management.”
Finding, Keeping Good Employees
Pearson employs 10 people full time, including a business manager, and he supplements with students at nearby Iowa Central Community College, who bottle-feed calves and help load and unload pigs.
“My allegiance is to my people,” says Pearson. “I have a handful who have gotten me to where we are.”
His lead employees receive the use of a company pickup, and their fuel is paid for. The farm foots 100% of its employees’ health insurance costs, although that generosity is in jeopardy.
“The cost now almost brings me to my knees,” Pearson says. Still, retaining good workers is key, and benefits play a big role in that retention. He needs those workers.
“If I’m not there tomorrow, everything still runs without me,” Pearson says. “That’s not a problem.”
That didn’t stop him from working on the framing of a cattle barn, though. “You have to be willing to do the work,” he says. “I’m willing to do the work.”
The old-fashioned way to save money on fertilizer
Manure is a significant cost saving for Iowa farmer Mike Pearson, who buys little to no commercial fertilizer.
“Mike has a competitive advantage the way he structures his inputs by owning those hog units,” says Josh Gerig, a former vice president with Murray Wise Associates, which buys and manages agricultural land for investor groups and individuals. Gerig had worked with Pearson, who rents some land from investor clients.
“I’m going out on a limb here,” says Gerig, “to say, in a given year, that manure saves Pearson $60 to $80 – or more – per acre. That can be your profit for the year. There is a trend for operations to undo some of the crop-only or livestock-only mentality and rediversify.”