Rain From Nowhere

Ted is a sheep grazier just out of Orange in Millthorpe, NSW. Great bloke, brilliant farmer.

The farm is a family operation plus they have one part-time worker named ‘Sterlo’. Sterlo’s a tad mad but he has a heart the size of a watermelon and you wouldn’t swap him for anyone. You need blokes like him when things are grim.

Right now, Ted and everyone around him are going through one of the worst droughts on record. For some, it’s worse than the naughties. (2000-2010).

A few weeks ago, Ted took delivery of his seventh load of grain in as many months to hand feed his sheep. Each load costs about $15,000 and so far he’s $100k out of pocket. That’s basically all his profits for the year. Gone. Up in dust.

And just as we roll into the new Financial Year, Ted kicks things off with two empty hayshed’s and a bank of silos completely drained of grain. Not even enough to feed a stray mouse.

Naturally, Ted doesn’t want this Financial Year to be the same as the last so he has some big decisions to make:
1. Does he keep buying more feed hoping the drought will break soon? Or,
2. Does he begin selling stock because the drought may go on for years (knowing he will have to replace them later)? Or,
3. Does he look for greener pastures elsewhere and agist his sheep?

None of these questions are easy. If he buys more feed it increases his cost base, if he starts selling stock it reduces his earning capacity, and if he agists, it will increase his expenses but should also increase his income (hopefully).

Ironically, the financial markets are exactly the same. Do you buy, sell or hold when things go against you?

Wool or Beef?
This is not Ted’s first drought. He’s walked down this long and hopeless road a few times before.

His worst drought was his first back in the early nineties. It almost broke him.

At the time, he was running mostly beef cattle and only a few sheep.

Beef cattle are a good example of how most people purchase investments…they buy low and sell high.

When the seasons and markets are good, beef cattle can be a great earn for farmers. However, when a drought strikes and there’s little feed to fatten them, the returns for beef cattle can be very poor, enough to send a bloke to the wall.

Sheep are similar to beef cattle but with one significant difference.

At least once a year sheep need to be shorn which means the ‘wool clip’ provides the farmer with some predictable income. He may not make as much money as the beef producer in a good season (possibly) but at least his ‘clip’ gives him assured income.

Consequently, after Ted got badly knocked about during his first drought in the nineties, he decided to stop producing beef and focus on sheep.

Put simply, by focusing on wool production, Ted could budget according to his wool clip instead of the vagaries of the clouds and the beef markets.

Investing is the same.

Capital gain is great, but investment income like dividends and rental income is more important. It’s the only way you can manage the down side.

Everything cycles and it can feel like an eternity when you’re waiting for the clouds to appear again.

Predictable income is the only way out of the dust.

Have a great weekend!

Adam

Back Paddock – the title of this Moowsletter comes from one of my favourite poems by Murray Hartin, ‘Rain from Nowhere’.

Rain from Nowhere

His cattle didn’t get a bid, they were fairly bloody poor,
What was he going to do? He couldn’t feed them anymore,
The dams were all but dry, hay was thirteen bucks a bale,
Last month’s talk of rain was just a fairytale.

His credit had run out, no chance to pay what’s owed,
Bad thoughts ran through his head as he drove down Gully Road
‘Geez, great grandad bought the place back in 1898,
Now I’m such a useless bastard, I’ll have to shut the gate.’

‘Can’t support my wife and kids, not like dad and those before,
Christ, Grandma kept it going while Pop fought in the war.’
With depression now his master, he abandoned what was right,
There’s no place in life for failures, he’d end it all tonight.

There were still some things to do, he’d have to shoot the cattle first,
Of all the jobs he’d ever done, that would be the worst.
He’d have a shower, watch the news, then they’d all sit down for tea.
Read his kids a bedtime story, watch some more TV.

Kiss his wife goodnight, say he was off to shoot some roos.
Then in a paddock far away he’d blow away the blues.
But he drove in the gate and stopped – as he always had
To check the roadside mailbox – and found a letter from his Dad.

Now his dad was not a writer, Mum did all the cards and mail
But he knew the style from the notebooks that he used at cattle sales.
He sensed the nature of its contents, felt moisture in his eyes,
Just the fact his dad had written was enough to make him cry.

‘Son, I know it’s bloody tough, it’s a cruel and twisted game,
This life upon the land, when you’re screaming out for rain.
There’s no candle in the darkness, not a single speck of light
But don’t let the demon get you, you have to do what’s right.’

‘I don’t know what’s in your head but push the bad thoughts well away,
See, you’ll always have your family at the back end of the day.
You have to talk to someone, and yes I know I rarely did,
But you have to think about Fiona and think about the kids.’

‘I’m worried about you son, you haven’t rung for quite a while,
I know the road you’re on ’cause I’ve walked every bloody mile.
The date? December 7 back in 1983,
Behind the shed I had the shotgun rested in the Brigalow tree.’

‘See, I’d borrowed way too much to buy the Johnson place,
Then it didn’t rain for years and we got bombed by interest rates.

The bank was at the door, I didn’t think I had a choice,
I began to squeeze the trigger – that’s when I heard your voice.’

‘You said “Where are you Daddy?
It’s time to play our game, I’ve got Squatter all set up,
you might get General Rain.”
It really was that close, you’re the one that stopped me son,
And you’re the one that taught me there’s no answer in a gun.

‘Just remember people love you, good friends won’t let you down,
Look, you might have to swallow pride and get a job in town.
Just ’til things come good, son, you’ve always got a choice
And when you get this letter ring me, cause I’d love to hear your voice.’

Well he cried and laughed and shook his head then put the truck in gear,
Shut his eyes and hugged his dad in a vision that was clear,
Dropped the cattle at the yards, put the truck away
Filled the troughs the best he could and fed his last ten bales of hay.

Then he strode towards the homestead, shoulders back and head held high,
He still knew the road was tough but there was purpose in his eye.
He called for his wife and children, who’d lived through all his pain,
Hugs said more than words – he’d come back to them again.

They talked of silver linings, how good times always follow bad,
Then he walked towards the phone, picked it up and rang his Dad.
And while the kids set up the Squatter, he hugged his wife again,
Then they heard the roll of thunder and they smelt the smell of rain.