Quick-Change Artist

By Darrell Smith – 06/2001

Unlikely as it sounds, Purdue University farm management specialist Alan Miller still encounters farmers who refuse to abandon an enterprise even though it is now longer producing an adequate return. Although he tries to change their minds, he understands how they feel.

“We ‘grieve’ when something ends,” says Miller. “But it’s pretty hard to do the same thing your whole career and have it always be right. We have to evaluate enterprises periodically, and ask if they’re still performing as intended. If not, we have to view change not just as the end of something, but as an opportunity.”

As an example of someone unfazed by change, Miller points to Chris Geiger of Markle, Ind. In 1984, at the age of 22, Geiger was thrust into management of the family farm by the death of his father. Initially, he continued a family seed dealership and expanded a farrow to finish hog operation. But later, when they were no longer producing the return he wanted, he abandoned both and launched a niche trucking business based on expedited freight delivery.

Dropping the seed dealership wasn’t difficult. “I looked at how many hours I spent, and what I made and concluded I could make more by doing something else,” says Geiger. “I figure I should make as much as my counterparts in town earn at their jobs.”

Expanding the seed business was not an option, because there were too many other dealers in the area, Geiger adds.

Quitting hogs was tougher. Objectively, the decision was easy. “With 330 sows, I would have had to expand to remain competitive,” says Geiger. “I decided I didn’t want to make a 20-year commitment to something as labor-intensive as hogs,” says Geiger. “Over the years, the return on hogs had been good. But I knew other things could be just as good or better.”

But there also were some emotional factors. Although most of his buildings needed updating, Geiger had recently constructed a new finishing building. Some farmers might have felt compelled to expand because of the investment they had already made in swine facilities, says Miller. That’s what economists call a “sunk cost”—an investment in facilities that is not producing an adequate return and is irrelevant to what you decide to do in the future. “It’s hard to say ‘I’m just not going to use that building,'” says Miller. “But Chris is very good at evaluating enterprises objectively, asking if they are still doing what was intended.”

Family tradition. Tougher still was the fact that the hogs and buildings represented an enterprise begun by Geiger’s father. But it didn’t affect his decision. “Quitting hogs probably would have been easier if I had constructed the buildings myself,” he says. “But it was time to make a change.”

If Geiger’s decision needed reinforcement, $8 per cwt. prices in 1998 provided it. He leased the newest building and the farrowing and nursery facilities to a contract feeder. The old finishing buildings stand empty.

From 1984 to the late-1990s, Geiger had increased the farm’s crop acreage from 1,275 acres to 2,400 acres. “The farm is too big for me to do everything myself, but not big enough to pay a skilled full-time employee the equivalent of what he could make in town,” he says. “And there’s no land available around here for expansion. But I need a trained person who can take over the farm if I get sick or injured.”

In other words, if Geiger was going to get out of hog production, he needed something to replace it. He considered trying to add value by growing specialty corn and soybeans, but concluded the contracts being offered did not justify the increased time and investment.

But, in 1997, another opportunity arose as Geiger making his decision. The seed company he sold for revealed they were launching a new method of shipping soybeans, using bulk containers. “I asked where the seed boxes were going to be built, and it turned out to be very close to here,” he says. He bid on the job of delivering boxes from the factory to seed warehouses, and landed the contract.

“The economy was booming, and there weren’t enough trucks to haul all the freight,” says Geiger. “I was in the right place at the right time.” Besides replacing hogs, trucking offered an opportunity to spread risk by diversifying outside agriculture.

Because his own trucks were needed on the farm, Geiger purchased a semi tractor and trailer for the trucking business. He also hired a driver. “Companies expect freight to be moved when needed, regardless of whether it might be planting time on the farm,” he says.

Interestingly, Miller notes, Geiger opted not to specialize in crop production—figuring he can compete with anyone as a low-cost producer of bulk-commodity corn and soybeans—but he sought out niches for his trucking business. The first niche was shipping seed boxes. He increased his competitive advantage by purchasing step-deck van trailers used in the automotive industry and making a fee modifications so he could carry 60 containers, compared to 44 on a conventional trailer. (Competitors have since copied the design.)

Fast freight. The second niche was expedited delivery of all kinds of freight. “Over 500 miles justifies loading freight on an airplane,” says Geiger. “But under 500 miles, a truck can get there just as fast.”

Being located barely 20 miles from Ft. Wayne meant there were many companies who might need rapid delivery. Armed with a business card and references from the seed box manufacturer, Geiger called on businesses until he found more clients. He promoted his company’s record of on-time deliveries and its courteous drivers. “It takes a lot of effort to build your reputation to the point where word of mouth starts bringing in business,” he says.

Along with separating the trucking business from the farm (because of trucking’s high liability risk), calculating how much to bid on jobs was one of the toughest parts of getting started, says Geiger. “Trucking is so competitive that you have to be real close,” he says. “We kept track of our costs for every run, and after a year we had exact figures.”

“Chris is a manager’s manager when it comes to calculating cost,” says Miller. “He figures things close. When we were talking about renting out the finishing building, he told me in cents per pound what he needed from the contractor to make a profit.”

Since 1997, GEI-Corp. Trucking has grown to four semi tractors and trailers. One full-time and two part-time employees work in the trucking business, and two full-time employees, along with Geiger, float between that business and farming. An additional part-time employee is available for off-hours trucking jobs, because expedited shipping requires being on call 24 hours a day.

Unlike farming, trucking holds potential for unlimited expansion, “based on how much work you want to put in,” says Geiger, who continues to seek new clients. To make sure he stays competitive, he compares his trucking company’s return on investment to that of other companies. Industry figures are available from some computerized accounting programs.

“Chris is flexible enough to recognize he needs or wants to quit something, and look for new opportunities,” Miller summarizes. “His philosophy is that there has to be an opportunity out there somewhere. He’s willing to push a pencil and figure out how to make it pay.”

Making changes is nothing new in farming, says Geiger. “We’ve all done it—going close to 100% no-till was a big one for us, and it has helped keep us competitive in crop production. I don’t enjoy change enough to make changes for their own sake, but I enjoy the challenge aspect of it. If something fits our option, I’ll pursue it.”