BoomtownUSA by Jack Schultz

Premiumization of Chocolate--Stepping it Up

2008-05-15T05:15:00.001-05:00

One of the top ten trends that I identified in January for 2008 was the premiumization of products. Here is what I wrote, “Premiumization—It started with coffee but has been embraced in many other products like honey, chocolate, vodka, cheese, breweries and others.”

I’ve discovered a company that is carrying this idea of premiumization to a new level. Sir Hans Sloane, in England, has clients sit down with its master chocolatier, Bill McCarrick, to discover which types and flavors of chocolate they enjoy most. Just as a master vintner might help a wine connoisseur stock their wine cellar, Sir Hans Sloane is helping them to determine which chocolates they are going to like best.

Don’t you think that will help them to build life-long customers?

Growing Again

2008-05-14T04:32:00.001-05:00

Rick Killion edits and publishes Prairie Business, the premier business magazine in the Dakotas and Minnesota. Each monthly issue includes wonderful stories about companies and communities that are succeeding in this part of the USA. This past month’s 62 pages featured the diversity of the architecture and design of new buildings in the region.

Killion’s monthly column celebrated the fact that the population decline in ND appears to be turning around. As he says, “North Dakota’s population increased again, making it three years out of the last four for an addition of more than 7,000 people from the low of 632,620 recorded in 2003.”

He goes on, “This most recent population gain matches the growth in good jobs in the state, with an increase in the total workforce of about 6,500 per year and average of 2,700 jobs being filled each year by workers under the age of 35.”

The last part of his quote is particularly important because parts of ND have some of the oldest populations in the country and the state has to replace the older workers who are going to be retiring in the next decade.

NAIOP Take-Homes

2008-05-13T05:45:00.000-05:00

As I mentioned on Friday, the National Association of Industrial and Office Properties (NAIOP) has been the absolute best source of knowledge for someone who didn’t have any experience when I started down the path of building manufacturing and high tech facilities in rural America. Fortunately, those with more experience from urban areas have been very generous in their assistance over the years and I will always be indebted to NAIOP. The organization was also the one that took a chance on me and published BoomtownUSA.

The mood at NAIOP was probably as subdued as I can remember at any NAIOP event, with many concerned about the long term impacts of the meltdown in the credit markets over the past nine months. However, the general consensus was that these problems would be behind us by later this year or early in 2009.

USA infrastructure is rapidly falling behind the rest of the world and we are not spending the funds needed to keep us world class. We are spending about 3% of our GDP on infrastructure compared to 10% in Japan and 8% in China. We are $1.6 Trillion behind, the Highway Trust fund will be bankrupt by next year and we don’t seem to have the political will to correct.

Mark Doutzer, a very entertaining economist from Texas A & M University, gave a very sobering talk about changes occurring in Washington and the impact that they will have upon the USA, “The worst risk that we face in the USA is Congress trying to fix everything. We are migrating from a land of opportunity to a land of entitlement.”

Another observation that looks like it will be hotly debated in the presidential campaign, “If we change the Capital Gains Tax from 15% to 24% it will cut the value of stocks and real estate by 11% overnight!”

Stuart Rothenberg, Managing Director of Goldman Sachs, related some of the changes that have occurred in their investment thinking since the credit meltdown, “A year ago we were looking at deals in the mezzanine arena where we were helping to take 4% equity up to 13%, getting LIBOR + 200 to 225 bp and maybe 65 bp in upfront fees. Now we are helping to take deals from 25% equity to 40% equity, getting paid LIBOR + 850 bp with 150 to 200 bp upfront and with LIBOR floors. We are cleaning up since there is no debt in the market.”

My summary from these talks is that we are going to very quickly come out of this downturn which I still refuse to call a recession since we continue to have positive GDP growth of around 0.5% for the past two quarters (a recession is defined as two consecutive quarters of negative growth). The credit problems of Wall Street will be history within a year and have not had the same impact on Main Street. In fact Main Street has probably benefited from the much lower interest rates.

The USA economy has always climbed a “wall of worry” and probably always will. We are in one of those times but will be quickly through it.

America on Sale!

2008-05-12T05:54:00.000-05:00

Betinha and I just love to visit New York City and while she could probably be enticed to live there, it would be the last place that I would want to live. There is an incredible vibrancy to the city and we spent hours just roaming the streets of the city.

Two things that impressed us both about this visit were the number of foreigners that were here and the amount of shopping that everyone seemed to be doing. There were lines at every checkout and while everyone talks about how the credit meltdown impacted NYC as much as anywhere, you sure couldn’t tell it at the theaters, restaurants or stores.

The city has always attracted people from all over the world, but the falling dollar has probably enticed even more of them to come here for the bargains. Foreigners spent $120 billion in the USA last year and are expected to spend even more in 2008. This compares to a peak of $100 billion in 2000 and a low of $80 billion in 2003 as fears of another 9/11 kept many at home. Canadians are our most frequent visitors, followed by guests from Mexico, Britain, Japan and Germany. But, the fastest-growing increase in visitors is coming from India, France, Venezuela, Brazil and Spain. Chinese visitors will be in this classification soon.

The fall in the value of the dollar makes our goods less expensive to foreigners even as it makes our imports more so. Over time the dollar rises and falls in value. We saw a similar fall in value in the 70s and 80s and there was great concern then that the Arabs (70s) and Japanese (80s) would end up owning America. It didn’t happen then and I’m convinced that it won’t happen now. Meanwhile our farmers, equipment manufacturers and others are reaping the benefits of increased export values from the value of the dollar.

How could this increase in foreign visitors impact rural areas? In talking with several foreigners over the years, I’m convinced that some of them are looking for very unique experiences here and would love to have authentic American experiences. Surely some rural region can figure out how to package a number of such experiences like working on a farm/ranch. If you know of an area that is doing this, please let me know what they have done.

'T' on our Forehead

2008-05-09T06:11:00.003-05:00

Betinha, Dean Bingham (Agracel president) and I were in NYC for a National Association of Industrial & Office Properties (NAIOP) conference. It is a great opportunity to exchange and learn what others in the industrial real estate market are facing and the one organization that has helped me to learn what to do/not do. Just a couple of those ideas have more than paid for ALL of the future NAIOP conferences that I could possibly attend.

The first night, prior to the conference, my wife and I went to an upscale fresh fish restaurant near Time Square. As we were walking back to our hotel, someone approached us and asked, “Hey, how would you like to go see some stand-up comics at one of the best clubs in the City? The next show starts in 20 minutes and it is only a couple of blocks from here.”

The guy handed us a coupon that gave us ½ off. A block later another person approached us with the same message. Betinha asked me, “Do you think we’ve got a T on our forehead or something else?”

“Maybe it’s just the straw in our hair.”

We trekked to the club and were pleasantly surprised that this was not just a NYC club but actually was named The World Stand-up Comedy Club! Wow!!! The World!! This was going to be good!

We noticed that there were about 30 people in the club as we paid our $10 cover and were informed that there was also a 2 drink minimum at from $5 to $9/drink. We each got a beer at the bar and the waitress told us not to worry, because she would find us later in the theater. Wow! This young lady has got quite a memory.

A few minutes later the usher opened the doors and announced that we could take our seats. Betinha and got right in line and filed in, getting the choice seats a couple of rows from the front. Her theory is that you never want to sit in the front row at an event like this, because you are going to be an easy target of the comedian. A couple of minutes later a second couple strolled in and the show started. Later a third couple and two women filed in, swelling the audience to 8. The waitress didn’t seem to have any trouble locating us for our second beer.

Sitting three rows back didn’t seem to jive with my wife’s theory. When the other couples are from CA, Quebec and Slovakia and you admit that you are from Effingham (when you grow up with a town name, you don’t always realize how other people might find it funny), there seemed to be a much bigger T on your forehead. Although the Slovakians helped to increase the audience dramatically, the fact that they couldn’t understand the language didn’t result in even one laugh from them. I, on the other hand, having had to give some early talks to as few as 4 or 6 people, gave each one of the comedians the benefit of the doubt and continued to embarrass my wife with my belly laughs. Later one of the comedians offered to hire me as his manager and another whispered as she left the stage, “Thanks so much for laughing!”

“Oh there’s the guy that gave us the first coupon and there’s the second one!” They were both also doubling as comedians. It was definitely a bootstrap operation but we ended up having a good time.

NYC is a wonderful place to visit. There is such diversity and unique things to do. Didn’t say I want to live here, though.

Global Warming as Campagin Issue

2008-05-08T06:52:00.001-05:00

One of the surprises for me of the current presidential campaign is how little the issue of global warming is in the campaign. The issue is highlighted in much of the elite media especially on CNN. However, it doesn’t seem to be much of an issue on the campaign trail and is seldom raised in Q & A sessions after my talks. Local papers, which I religiously read, seldom have anything but wire service articles about the issue.

The candidates for President seldom talk about global warming. In the recent PA primary global warming was such a peripheral issue that exit pollsters didn’t even bother to question voters’ attitudes about it.

So imagine my surprise when I picked up the S. F. Chronicle and found that the entire front section of the paper was filled with articles on the issue. On the front page was this headline, “Shiver of Worry in Wine Country”. Inside articles were “Coal’s comeback raises alarms;” “Europeans turning backs on cars;” “Greenhouse gases growing faster than ever, report says;” and “Crisis faces the Andes as glaciers melt.” Out of the 21 major articles in that section of the paper, one out of four was devoted in some way to climate change.

Global warming seems to be a much bigger issue in SF than what I’m seeing in my tours around the country. I think it would be helpful if the candidates and city dwellers spent a bit of time in places like Modoc County in NE CA.

Bud or Weed? Big or Small?

2008-05-07T06:13:00.002-05:00

Who knew that someone named Abner Weed, a timber baron who opened a lumber mill and named the town for himself, would set off a controversy with the Alcohol and Tobacco Tax and Trade Bureau of the Federal Government? The town which sits along I-5 in northern CA is the most recognized name along the interstate according to Siskiyou County Supervisor Michael Kobseff.

I’ve been to Weed several times in the past six months and found it to be a wonderfully quaint town with a historical downtown. It also is the site that a Milwaukee craft brewer, Vaune Dillmann, decided to start Mt. Shasta Brewery in 1999, after cleaning up a badly contaminated industrial site. His brews, Abner Weed Amber Ale, Lemurian Lager; Mountain High IPA, Shastafarian Porter; and Weed Golden Ale all promote the fact that they are made with 100% Pure Mt. Shasta Spring Water.

It was the last brew, Weed Golden Ale that got Dillmann in trouble with the Feds which is threatening to impose fines and/or sanctions against the brewer for promoting a beer named Weed with bottle caps that say Try Legal Weed. Evidently, they feel that the bottle caps tell consumers to support an illegal drug.

Dillmann feels that he is being unfairly singled out and that if the Feds wanted to go after someone they should go after Anheuser-Busch for their use of the word “Bud”, another name for marijuana, rather than a little brewer like him.

High Gas Prices Impact

2008-05-06T06:09:00.001-05:00

In my travels through the very remotest areas of CA, I started to give some thought to the impact that increasingly high gasoline prices are going to have upon places like Modoc County. It is three hours to a reasonably sized town (Redding, CA; Medford, OR; or Reno, NV) and rapidly escalating gasoline prices are making it increasingly expensive to make what used to be considered fairly routine trips for people in the county.

I almost paid $4.00/gallon ($3.999 to be exact) and gas prices over the pass in Cedarville were $4.12/gallon and $4.68/gallon for diesel.

Jim Brown who runs the JNR Hotel in Cedarville told me, “I’ve seen my business go down by one-half primarily due to high gas prices.”

Fortunately, the higher end Surprise Valley Hot Springs hasn’t seen much of an impact, although the local manager Nicki Mulnholland told me, “We’re becoming much more concerned as prices go over $4 and the impact it has upon tourism.”

Remote places like Modoc County are probably going to feel the impact first. It could have some devastating ramifications for the most remote areas. I hope that they are able to survive and find ways to prosper.

Remote?

2008-05-05T06:58:00.000-05:00

Modoc County, CA (population 9,197) is rated as the only county in the state as “remote”. It is in the NE corner of the state with OR to the north and NV to the east. With 3,944 square miles, its population density of 2.3 per square mile makes it one of the lowest in the USA.

I had a wonderful 3 hour drive through incredible mountains and valleys from Redding to Alturas, the county seat for Modoc. Amee Albrecht, head of the Modoc County Employment Center, which brought me in for the talk/tour told me prior to the drive, “Be careful because we can get all four seasons in just one day!” She was right as I drove from balmy, sunny weather through rain, snow and hail. At one point hail was pounding my car, even as the sun was brightly shining in the west.

I got an indication of how rural the county was when the local newspapers lead story was, “Spring drive…Tips for driving through cattle drives.” The second paragraph is a classic, “Some of us never imagined we’d one day live in an area where a “traffic jam” involved huge animals with four hooves rather than four tires.”

Amee and another dozen passionate, committed citizens gave me a wonderful tour of Alturas (population 2,898) and Cedarville (population 600), driving me through the same pass (6,300’ altitude) that separates the Sierras from the Cascades and which was part of the original Oregon Trail. Some of the wagon wheel ruts are still visible today in the rugged terrain.

Laura Williams, who heads up the local Forest Service, told me of the importance that the Federal Government plays in the local economy, “We control over 1.5 million acres in this county which is 72% of the total land area in the county. The county gets all of the receipts from timber sales but the spotted owl changed that greatly. Today there is only one large mill operating in the entire county.”

Unfortunately, Washington DC often doesn’t understand how changes in policy can dramatically impact places like Modoc County. In 2001, DC didn’t allow ANY timber to be harvested, not one log! Last year 10 million board feet were harvested and one of the county supervisors on the bus told me that they figured that 15 million board feet per year could sustainably be harvest each year for an indefinite period of time.

Remote often means forgotten. The wonderful people that I met in Modoc County deserve much better.

An American Success Story

2008-05-02T05:54:00.001-05:00

On April 15th I wrote about a ribbon cutting we held in Ripley, MS for three empty buildings we purchased that had been used by a furniture manufacturer there. Our plan with this purchase is to retrofit the buildings, take care of delayed maintenance and promote them to other manufacturers as an economical way to start new operations. The high percentage of manufacturing workers in the county, 39.5%, is an added bonus as is the close proximity (<30 minutes) to the new Toyota plant being built in nearby Tupelo, MS.

On Tuesday the Tippah County Development Foundation held a ribbon cutting for the first success with these buildings. We sold one of them, a 230,000 sf plant to Carolina Accents, which plans to create 125 new jobs in Ripley.

The owner of Carolina Accents is Daniel Lim who moved to the USA in early 1980s with his wife Janet. Their first job was cleaning motel rooms for $1.00/day in addition to being able to board there. The two saved their money (you’ve got to clean a lot of rooms to save much!) so that Daniel could attend the University of North Carolina to study electrical engineering. While at UNC he cooped at a local utility company and later worked there for six years.

In the early 1990’s, when the U. S. was just emerging from one of its few recessions, Lim and his wife started a company to import goods from China, reinvesting their profits back into the business. Today their SV International which owns Carolina Accents has plants in China, Malaysia, Vietnam, NC and MS. The Business Journal of Greensboro, NC ranked it as the fastest growing company in the Greensboro-Winston-Salem-High Point region of NC.

Such growth doesn’t happen by accident. It takes creativity and hard work. And it shows that the American Dream is still alive and well. I’m thrilled that he is our first success with refocusing these buildings into new uses.

Secluded...Pristine

2008-05-01T05:42:00.003-05:00

It really was a surprise when we drove up to the Surprise Valley Hot Springs, a wonderful retreat that sits at the center of the valley surrounded by the Warner Mountains and Nevada’s Hays Range. It doesn’t get much more secluded than this.

Manager Nicki Mulnholland told me, “The resort was started by Great Grandpa Rose who bought the hot spring dotted property in the 1950s and began building a hotel on the site. Grandpa Rose, 91, still lives on the property.” He is rumored to love cherry turnovers.

Each of their 17 rooms has a different theme to it ranging from the Cape Cottage Suite to the Out of Africa. One of their favorite promotions is the Fly-N-Soak Package aimed at private pilots who can fly into the nearby Cedarville Airport (elevation 4,623’—runway 4,415’ asphalted and lighted), get a complimentary car and stay at the Springs. With the new Very Light Jets (VLJ) that I’ve written extensively about, the Bay Area will be less than an hour from a wonderfully relaxing soaking.

Surprise Valley Cares

2008-04-30T06:37:00.004-05:00

I didn’t find out for sure, but can only guess that Surprise Valley was named by an earlier settler on the Oregon Trail who came upon this wonderful high altitude (4,000 ft) valley on their trek to the west coast. The valley hugs the Nevada border and stretches for 60 miles up to Oregon. About 1,600 people live in the valley, most dependent upon agriculture. The high altitude hay from Modoc County is prized by horse breeders in southern CA, Japan and other locations.

The valley’s only hospital closed in 1982 but the local citizens got together, voted to levy a $225/dwelling unit tax upon themselves and re-opened it in 1986. The local k-12 school has just over 100 students but when the school held their 100th anniversary reunion in 2007, over 1,000 alumni came back home to help celebrate. There is obviously a great deal of pride in a place like Surprise Valley and Cedarville.

A local craftsman, Louie Vermillion, has taken it upon himself to save and preserve some of the old ranching structures, moving them to the local fairgrounds with the help of the local Rotary Club. At 78 years of age, Louie is also restoring some of the old covered wagons that stopped in Cedarville on their trek to Oregon.

The local farmers have a very old but practical way of determining whether to cut their hayfields, “If you can’t see Mt. Shasta, don’t cut your hay today.” Mt. Shasta, California’s highest peak at 14,179 feet is 86 miles as the crow flies (but a 4 hour drive) from Alturas, but looks like it is just next door.

Laura Williams told me that the National Forest in Modoc County is visited by the second lowest number of Americans. It is pristine and I hope to return with my wife. Tomorrow, where I plan to stay.

Greensburg, KS - One Year Later

2008-04-29T15:13:00.004-05:00

May 4, 2008 will mark the one year anniversary of the massive F-5 tornado that set down in the town of Greensburg, KS, virtually wiping it off the map.

I have been to Greensburg a number of times since that fateful day in 2007. After each visit, I come away amazed at the progress that has been made, and the positive outlook that the residents have in bringing their community back, better than before.

CBS’ The Early Show is doing a weeklong series this week called Tragedy to Triumph: Greensburg Rising. Visit http://www.cbsnews.com/stories/2008/04/28/earlyshow/series/main4049309.shtml.

Greensburg residents are celebrating their progress with groundbreaking ceremonies for a new church, a business complex, and a ribbon-cutting for the water tower and arts center. The festivities will include a visit from President Bush, who’ll be the commencement speaker at Greensburg High School’s May 4th graduation ceremony.

I am looking forward to my next trip to Greensburg!

Gold!!!

2008-04-29T06:36:00.004-05:00

Gold!!! That was the cry that started a flood of adventurers to Weaverville and Trinity County in 1848. In short order Weaverville (named by the drawing of straws for one of the earlier settlers) grew into a town of over 2,000 including a sizeable Chinatown. Today there are 3,554 people who make their home in Weaverville but only 14,177 in the entire county which covers 3,178 square miles.

In his book “Lost Horizons”, James Hilton likened Weaverville’s quaint downtown to Shangri-La, “that strange and wonderful somewhere which is not a place but a state of mind.” And, with a setting in the Trinity Alps, surrounded by majestic forests and numerous mountain lakes, it is easy to understand why Hilton was enamored with the town.

My tour guides, Debbie DeCoito and Cyndy Montoya, both of SMART, told me of the locals who still prospect for gold in the hills and creeks of the county. Cyndy told me, “I know of one woman who put three kids through college and is now doing the same with her grandchildren from prospecting. We’ve got a regular trade in gold flakes and I know of at least five in Hayfork who do it on a regular basis.”

The Trinity Players is a local performing arts group that has completely redone an old warehouse, converting it into a theater for local performances and an occasional visiting artist. Plans are to add a coffee house in the building, helping to create that certain sense of place and a gathering spot in rural CA.

Best Companies to Work For

2008-04-28T08:19:00.004-05:00

I was in Redding, CA (population 80,865) for their second annual Best Places to Work Awards Breakfast put on by the SMART Business Resource Center, the job training/placement organization in Shasta County. This award has obviously awakened a great deal of interest in the community as they had 537 nominations for 65 companies with many companies having multiple employees submitting applications. Based upon the turnout of almost 500 people, you could tell that this Best Companies to Work For is a great idea and one that I hope other towns will copy.

From a TV program, I learned that Redding is the second sunniest city in the USA with 88% of the days having sunshine. I wish that I knew which was the sunniest.

Anna Bengtsson, head of SMART and my tour guide, showed me some very interesting sites. The most outstanding was the Sundial Bridge which was built by the McConnell Foundation, a community foundation set up by a ranching couple. The walking bridge spans the Sacramento River and ties the many activities (museum, arboretum, etc.) of the Turtle Bay Exploration Center together along with tying into the many trails along the river.

The McConnell Foundation was set up by Carl and Leah McConnell who had a great love for their hometown. The Foundation has grown to over $400 million in assets and has another wonderful park (Lema Ranch) that they have open to the public. The McConnell Foundation is an example of what can happen when permanent funds are set up for community betterment.

A place that was hopping with activity was the Big League Dreams Sport Park which featured replica fields of Fenway with a 30’ Green Monster wall; Yankee Stadium with the white arches; and Wrigley Field with its ivy covered brick wall.

When I asked Anna about the impact of the downturn in the economy in CA, she told me, “We’ve got about 1,000 job seekers which is about twice what it was at the peak and have 300 to 500 companies that are constantly looking for workers. We recently had a job fair with 21 companies and had 736 people who went through in a four hour period.”

First Tractor Pulls

2008-04-25T09:45:00.000-05:00

I learned from Billy Joe Miles that he also was one of the first people to promote tractor pulls, which have grown into major productions.

“I was head of the Young Farm Bureau Club and we decided to do a tractor pull to raise some money, which was something that no one else had ever done. There was a local guy who was home from Louisville for vacation who told us that the new machinery show in Louisville was struggling to get people to spend more than one day. He called us up and asked if we could come over and do a tractor pull inside of Freedom Hall. Four of us went over and looked at the building but we were concerned about all of the smoke from the tractors, but they told us that they’d had 20,000 people in there when virtually everyone of them was smoking and it didn’t seem to cause any problems.”

“We still weren’t sure and really got cold feet when they wanted us to promote the whole thing, renting us the building for $20,000. My friend, Donny Biddle, asked me: What if it snows that day and nobody comes? I was only 26 and $20,000 was an awful lot of money back then. I built my first house ten years later for $22,000. We decided to let them have all of the revenue and we’d put the show on for 10% of the gate. It was the worst decision I ever made because that show is now grossing $2.5 million and the group that we set up to promote it still gets 10%.”

“The tractor pull started out going to 2 nights, then 3, and 4 and finally to 4 nights plus a Saturday afternoon show. It has gotten huge!”

From that success Billy Joe’s group expanded into trade shows and arena management. They grew the business to over 100 events per year with 3 TV shows and eventually sold it to Paramount Movies.

Billy Joe finished off with a funny story of having some Russian visitors in when he introduced the first monster truck, “None of these Russians could afford to have a car. Only one in the entire group of about 50 owned a car. They were over here and we took them to one of our shows. We drove 20 cars that looked awfully good, if you had never owned a car in your life, and lined them up. They went crazy when we drove the monster truck over the top of them.”

Billy Joe is one of those entrepreneurs that can help transform a town. He has not only had that kind of impact in his hometown of Owensboro but in all of NW KY.

Downturn??? Recession???

2008-04-24T14:59:00.001-05:00

I’ve been sitting in the Redding, CA airport all morning having seen 2 of 3 planes grounded because of mechanical problems. The third one went out completely full. I wasn’t on it. I’m now waiting for one at 2:22 pm that will take me to SF, then another to Denver and finally my last leg to St. Louis. Hopefully, I’ll get home by early tomorrow morning, but if I miss one of the tight connections, home by Friday afternoon. Such is the life of a road warrior.

In catching up on emails at the airport (thank goodness for mobile air card broadband), I was struck by the number of emails that I’ve gotten from Team Agracel on projects they are working on. We’ve got expansions being talked about or in the works for food manufacturers (3); auto parts (2); fulfillment; doors; furniture; and several others.

In my 20+ years in the business, I can’t remember when I’ve seen as many companies looking at adding onto their existing facilities. You would think that with all of the negative talk in the media that they’d be contracting rather than expanding. It’s probably a good thing that they are watching their order books and backlogs rather than the talking heads on TV.

I’m becoming more convinced with each passing day that this downturn (I refuse to use the R-word yet!) will be shallow and swift. Every indication from our business is that manufacturers are bumping up against capacity constraints because of demand for their products. The problems on Wall Street aren’t having much of an impact on Main Street.

Transforming Western KY Agriculture

2008-04-24T07:57:00.003-05:00

Rick Siemer who grew up two blocks from me has grown into a good friend and confidant, so I paid attention when he wrote to me, “One of the most extraordinary entrepreneurs I have ever met is Billy Joe Miles, whose company Miles Enterprises (ME) is located in Owensboro, KY. I consider Billy Joe personally responsible for the development of a successful wheat-growing culture in western Kentucky beginning in the late 1980s, when he (literally) imported intensive wheat cultivation techniques from England. We have partnered with ME our entire time in Kentucky to source wheat and develop relationships. Without ME’s initiative, we probably couldn’t have justified a mill, and farmers down there would be much less successful.”

With those words, I knew that I had to get to Owensboro to meet Billy Joe, so after my talk to the Kentucky Association for Economic Development in Henderson I headed east to meet him.

When I asked him why he got involved in transforming KY ag, he replied, “I did it to keep from going broke. We were only averaging 33 bushel/acre and wheat was selling for $2/bushel. I knew that we had to do something to change that because being able to double-crop wheat and soybeans held so much potential but without even a little profit in the wheat crop, we were sunk.”

His first thought was to go to the University of Kentucky, which told him that he was wasting his time. Kentucky didn’t have the right climate to properly grow wheat, according to the extension service of the University. He next turned to ICI Chemicals, an English company that had several no-till chemicals, which asked him to travel to Great Britain in the mid 80s to take part in an ag think tank which brought together two researchers/marketers from each country in the world.

“I agreed to go if they would get me an appointment with the best agronomist in the world and I met Derrick Hall who showed me some printouts of how he was growing 100+ bushels of wheat in Russia and other places. I hired him as a consultant and had him hire an agronomist who knew how to plant wheat. We then took 20 of our best customers along with 20 journalists and went back to Great Britain. We made a big deal about it which made the university mad, exactly what we wanted because they came out and said that they were going to do research to prove that what we were trying was impossible. We got them engaged which was a big help because prior to that they were the number one enemy of making wheat into a profitable crop.”

It didn’t take long for the results of that effort to have an impact, or as Billy Joe told me, “By the third year we had doubled the wheat yield in the entire state. Now we’ve got farmers growing over 100 bushels/acre virtually every year and with the prices like they are now of $5 to $10/bushel we’ll be up to over 150 bushels/acre quickly.”

Billy Joe who started ME in the car port of his house along with his Dad, who is still his partner at age 87, has now expanded to over 20 plants scattered in KY, TN, IN and IL. His daughter has taken over running the company, his two sons both farm on their own and his 25 year old grandson heads up Billy Joe’s farming operation. Billy Joe continues to travel the world looking for new ideas and recently started a farming operation in Santa Cruz de la Serra, Bolivia. He shut down farming operations that he used to have in Russia and Romania because of the work ethic of the locals which he attributed to the culture of the old Soviet Union, “All they ever had was what they could steal. No one looked upon that as being wrong because of what they saw going on in their country.”

I’m glad that Rick Siemer suggested that I go meet Billy Joe Miles. It was a great visit for me.

Success After Failure

2008-04-23T07:30:00.001-05:00

In 1810, John James Audubon moved his family down the Ohio River to Henderson, KY (population 27,373) where his fortunes quickly rose, making him the third-richest person in the town. However, a doomed venture into a steam powered flourmill bankrupted him 1819. It was only after that failure that Audubon decided to put his energies into painting birds. When he couldn’t find any U. S. publisher who was interested, he travelled to Europe where his Birds of America was published and found great success. Perhaps we can be grateful that there is no longer an Audubon Flour but there is an Audubon Society.

I was in Henderson to give a talk to the Kentucky Association for Economic Development, the statewide ED organization that just celebrated its fortieth anniversary. It was in Henderson that I felt the first major earthquake, if you can consider a 5.2 to be major, in forty years. Henderson was my second of five talks in a row with the rest in CA. When the earthquake hit at 4:37 am I sat straight up in bed and the first thought was that somehow I’d missed KY.

In reading a bit of the history of John James Audubon it was interesting to read about his experience in the 1811 earthquakes that transformed the Midwest. These earthquakes, which achieved high 7s or low 8 readings on the Richter Scale, caused the Mississippi River to flow backwards for two days and literally moved river channels. Audubon was galloping on his horse when the horse came to a sudden stop, sat down and braced itself for what Audubon had not yet felt. It must have been a very frightening experience in those days.

The impact of Audubon is everywhere in Henderson. There is a 700 acre state park on the outskirts of town, named in his honor; a series of nine sculptures of Audubon’s work graces the downtown streets with his osprey sitting on the site of his defunct mill; and the John James Audubon Birding Trail, a series of four trails that showcase the almost 100 birds that are found in northwest KY.

Henderson is doing a wonderful job of leveraging one of its failed but famous former residents.

A Missed Investment Opportunity

2008-04-22T06:59:00.005-05:00

“We wanted to give this signed offering memorandum to you, as a remembrance of what you missed,” Clarence Schutte told me as he and Randall Matheny gave me a 2002 offering for 15 million shares of stock in Lincolnland Agri-Energy, a 40 million gallon ethanol plant that was started that year in Palestine, IL. More later in the blog on what my non-investment cost me!
I was there for a tour of the plant and town and to do a talk sponsored by the Palestine Public Library. Sue Lockhart, head librarian, has developed a program called “Looking Within”, to encourage the community to look within themselves to build upon the skills and talents of those within the community to help encourage more economic growth in the town. Part of the program is aimed at former residents who are starting to move back home to retire close to their roots.

I took a tour of Lincolnland Agri-Energy with board member Robin Guyer, who also runs Bunker Hill Supply, a fertilizer, chemical and seed retailer in the area. He talked about getting the plant started, “We started up the plant in 2004 with 453 investors. It was a tough sell at the time but we had one local person who stepped forward and put us over the top. We made a 100+% return on investment in the first 18 months, but are now down to about a 15 to 20% return which still isn’t bad but doesn’t look as good when you compare it to that first year and a half. We used those early returns to pay off all of our debts and returned the entire investment to those 453 investors.”

Robin went on, “What makes me proudest is how the entire community worked together to make this project happen. Even those who didn’t invest in it have been supportive and our builder told us that it was the easiest plant to get started that they’ve been involved with.”
Lincolnland has continued to plow money back into the plant, growing from an initial storage capacity of 400,000 bushels to 2.8 million bushels. Consuming 50,000 bushel/day means that they can now store 58 days of their needs compared to only 8 days when they started. They’ve also been able to increase production from 40 million gallons rated capacity to over 50 million gallons.

Robin explained the current economics of ethanol to me, “$6 (per bushel) corn isn’t causing us any problems. At 40% of that, or $2.40/gallon for ethanol, we are able to make about 15 to 30 cents per gallon.”

From my untrained eye, it looked like the plant is selling everything they are producing. There were tanker trucks lined up waiting for the next batch of ethanol to be sent to the storage tanks which were dry and the DDG pile (the feed by-product) was tiny. The plant is going to be one of the first in the country to begin separating out corn oil, which will be used for biodiesel. The plant is also going to begin using 10% of its energy needs from local methane production being drilled with horizontal drilling technology.

The plant has had a very positive economic impact upon the local and regional economy. Thirty seven high paid people work at the plant, local farmers are selling their corn at a premium and local gas producers are going to begin to sell what used to be a by-product. How did I ever miss this investment? Don’t you want to kick yourself sometimes?

Preservation in Illinois' Oldest Town

2008-04-21T05:36:00.005-05:00

Palestine, IL (population 1,366) sits along the Wabash River, a river that was critical to the early development of the state. The town was incorporated in 1811, making it the oldest continuously incorporated town in the entire state. Fort Lamotte, on the outskirts of town, served as the site of The Battle of Africa Point, in the War of 1812, one of the few battles to take place in the Illinois Territory.

Palestine has a wonderful history and is fortunate to have a small group of committed citizens who are volunteering to help preserve it.

Steve McGahey, my tour guide prior to my talk in Palestine told me, “The Palestine Preservation Projects Society (PPPS) got started about 20 years ago in preserving our history. They tried to buy an old church but it collapsed before they could get that accomplished. Then they tried to buy an old schoolhouse that was built by Governor French, one of the first governors of Illinois who lived two miles south of town. But it burned down before that deal could get done.”

Most groups would have thrown their hands up by now, thinking that this just isn’t meant to be. But PPPS was not led by such people. They pushed on.

Steve explained to me, “They bought the old Fife Opera House which was built in 1899 and featured operas here until 1912. The opera house was on the second floor and the first floor was a series of retail businesses like a fertilizer retailer, a hardware store, funeral home, furniture store and carpet retailer. When they lit the lights in the building for the first time, the local power plant shut down because it was more load than it could take.”

The scenery from the early 1900s is still well preserved and PPPS hopes to have the opera house back in operation by the 200th year centennial of the town in 2011. The first floor serves as a wonderful community center.

PPPS has also helped to restore and maintain the Judge John Harper House, dating from 1830, which is the oldest remaining house in Palestine.

Greg Parrott and a group of 15 are rebuilding old Fort Lamotte, which they hope to use as a tourist draw. One of their goals is to rent out the fort for groups that want to spend the night sleeping in a recreated old fort. Parrott told me, “Joseph Lamotte was a French trader who first settled here in the mid 1700s. We’ve got a group that is doing archeological digs and think that they have found his old trading post.”

His group has created an 1812 shooting range for muskets but his real goal is to “build a cannon range. There are still some of the old cannons around and they are a real crowd pleaser.”
PPPS has restored one of the old downtown buildings into an artist gallery. The local school is redoing the 3 apartments above it into wonderful apartments and the town has developed their own artist relocation program to add to the dozen plus artists who make Palestine home.

What Recession?

2008-04-20T09:52:00.005-05:00

From the level of activity we are seeing at Agracel with companies expanding production and looking at ways to increase their capacity, I continue to think that the so-called recession is centered more on Wall Street than on Main Street. This graphic of industrial production shows it best. As you can see industrial production in the USA continues to hold up very well when compared to other periods of recession.

Back Home

2008-04-20T08:25:00.006-05:00

Well we made it to Golconda and finished the race in under 11 hours, got our t-shirts, walked a block to the Ohio River for a picture and had some jambalya on the square in town.

Right next to the river was this fixer-up house. My wife has been talking for sometime about going further south and living on the water. The only thing seperating this house from the Ohio River is a forty foot levee which takes a bit away from the view. Not sure that this is exactly what she had in mind.

I finally arrived home after 11 pm, slowed down a bit by a state trooper who pulled me over for speeding just 2 miles from home. Even though he was impressed that I'd been part of a 80 mile run from the Mississippi River to the Ohio, he was sufficiently impressed to not give me a $95 ticket.

2008-04-19T18:18:00.002-05:00

We are on the downhill side of the hills of the Shawnee National Forest and should hit the finish line about 7:15. We've only got two legs yet to run and then we'll be in Golconda (population 726), on the banks of the Ohio River.

I've been very impressed with how they organized this River to River Run. They have 240 teams with 8 runners each, in addition to family and friends who come to watch the race. That is a lot of motel rooms, gas, snacks and meals for a very rural region.

Our team is talking of doing the Market to Market, an 86 mile race in NE. Who knows, some of us might make it out there.

A regional initiative like these road races can help to tie a region together and provide an economic boost.

I'm Done!

2008-04-19T16:19:00.003-05:00

Well I was able to finish my last leg in a blinding 11 minutes/mile which didn't greatly endear me to the rest of the team. They were hoping to get to Galconda by 7 pm but my slow speed just made that a bigger hurdle.

Michael and Davis: Your Mom and Dad said to let you know that they were doing fine and that they are having a great time in Illinois. Take care of things in Georgia until they get back home.