Kenneth Eng personal book

Kenneth Eng, Started Small And Just Got Lucky, book, September, chapter 8, chapter 9

Kenneth Eng Discusses Boom Times On The Southern Plains

This is Part 4 of BEEF magazine’s continuing weekly serialization of consulting nutritionist Kenneth Eng’s upcoming book, “Started Small & Just Got Lucky,” a combination of an autobiography and a 50-year cattle industry history.

Consulting nutritionist Kenneth Eng’s book, “Started Small And Just Got Lucky,” will be released in September. It’s an entertaining and fascinating look at the icon’s career and a 50-year history of the U.S. beef industry, and is complemented with scores of Eng’s photos, anecdotes and poetry. You can order a book and learn more about the upcoming 2014 Kenneth & Caroline McDonald Eng Foundation Symposium, set for Sept. 18-19 at the Embassy Suites – Riverwalk in San Antonio, TX, by calling 210-226-9000 or clicking here.

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CHAPTER 8

Return to A&M – Part-Time Teacher

In 1969, Dr. O. D. Butler, A&M department head of animal science, contacted me and asked if I would design and lecture the first class they planned to offer in the Feedlot Management Master’s Degree Program. It was to be a three-hour credit, graduate-level course, and he said I could schedule the lecture times so they wouldn’t interfere with my consulting. We agreed on my fee and I scheduled it for 7:30-9 a.m. on Monday, Tuesday and Wednesday mornings. The problem of travel is never simple to and from College Station, TX. I finally settled on a routine of flying in and out of Austin, and driving a car from Austin to College Station. Because of the travel, it turned out to be more work than I anticipated, but it was enjoyable and fulfilling.

Dr. Lowell Schake was on the A&M staff and had done a lot of the ground work on the overall master’s degree program so I was spared most of the paperwork and bureaucracy. Lowell later became department head of animal science at Texas Tech and I believe he is now retired in Corpus Christi and writing books.

I was blessed with a lot of good graduate students in these classes. At the time, A&M had the students rate classes for quality and content, and my class was fortunate to get top ratings both semesters I lectured. In later years, Bill Mies taught the class, and I understand that due to his efforts, it continued to be very popular.

The second semester I taught at A&M, I kept a room at the Ramada Inn on the corner of the campus and Highway 6. At that time the Aggies didn’t have a good football team, and the joke was the sign out front that said Highway 6 – Texas A&M 0. Times have definitely changed.

I liked the Ramada Inn location because it was close to campus, had one of the few private clubs in town, the Camelot Club, and the Bank of A&M was across the street. My future wife Caroline was working at the Bank of A&M and I first met her one day when cashing a check. The airline had lost my luggage, and I was to give a talk later that night. I asked her where I might buy some clothes. She said, “It’s almost bank closing time, and if you’d like. I’ll take you to a clothing store.” It was an invitation I couldn’t refuse.

We became good friends, and when my teaching appointment was over, she said, “Kenneth, someday I am going to marry you.” Like John Wayne, I said, “That’ll be the day.” I didn’t see her for almost two decades, but 18 years later, when I was once again single, she called from Houston. After a brief conversation, she asked what I was doing. I said, “Not much. There’s a late flight to Houston Hobby, and I’ll be on it.” She met me at the gate and it was a storybook beginning to a 22-year ride of a lifetime.

CHAPTER 9

’70s Consulting – Texas Style

The cattle feeding industry in Texas, especially the Panhandle, began growing in the early 1960s, and then experienced spectacular growth in the late ’60s and early ’70s. Much of this was fueled by an entrepreneurial spirit and “can do” attitude. Perhaps the biggest driver was the advent of hybrid grain sorghum in the late ’50s, which resulted in surplus grain sorghum, or milo, in many parts of Texas.

Before this, milo was often shipped to the Panhandle with the price determined by the Panhandle price less freight from wherever it was produced. Other factors included a strong Texas Cattle Feeders Association, which was located in Amarillo, and the advent of tax and investor feeding. There were also lots of Texas and Southeast calves and wheat pasture yearlings. Keep in mind that the distance-hauling of grain or calves wasn’t a big item at that time due to low fuel prices. It was easy to put wheels under your commodity and ship it long distances.

In many ways, the heyday of the Texas and Southern Plains cattle feeding industry was a boom time rivaling that of the gold rush in California and Alaska and the early oil industry in Texas and Oklahoma. One of my favorite George Strait songs is “Amarillo by Morning,” but “Amarillo by evening” during that time was more exciting. Every commercial plane to Amarillo was full of cattle people or those in allied industries. The motels, restaurants and clubs were full. It wasn’t unusual for large business transactions to be consummated on a restaurant or club napkin. Many of those deals hung together better than some of the later sophisticated ones. It has been my experience that, if you use good judgment, a cattleman’s word is his bond; however, beware of people who require complicated contracts and everything signed in triplicate.

Time, space and poor memory don’t allow me to cover all my clients in this book. Many of the events I discussed are the more exciting and humorous ones. This doesn’t mean the business was all excitement and humor, but I’ll spare you from most of the negative or boring stories.

One of my first clients was Producers Grain Corporation (PGC) of Amarillo. They were the world’s largest buyer and handler of milo, and they were interested in feedlots not only as investment but also as a way to expand milo usage. They first built a 25,000- to 30,000-head feed yard west of Plainview, TX, in ’69 or ’70, and later another one about 30 miles west of Amarillo. Moody Taylor was their manager.

At one time, he had managed both south and west Texas feed yards and also traded a lot of cattle. Moody was a clever and sometimes mysterious fellow. Regardless, he was the kind of person you would want on your side if you got in real trouble.

PGC also had a feed company, and they wanted me to hire a nutritionist for their feed division that could eventually work into the feedyard nutrition business. I suggested Ray Hinders and they subsequently had a long association until Ray decided to move to California and take up independent dairy consulting.

PGC also planned a partnership with the Shah of Iran on an Iranian feed yard, but the project never got off the ground. Just before it was planned to begin, the Shah was thrown out and the Ayatollah had other interests. No one wanted to do business with him anyway.

Originally, they wanted me to go to Iran on the preliminary project. I refused because it was a one-month trip and I didn’t have the time to spare. I told the PGC man in charge that I wouldn’t be going, and he said, “You have to go because we’ve already put your name in, and they’ve accepted it.” I replied, “Why don’t you send Ray Hinders because he’s your employee.”

We finally agreed that I would fill out the application required, then when it was time to go, I would be ill and they would send Ray in my place. I filled out a complicated application and then signed another form and asked their Amarillo secretary to type and submit it.

When I came back to PGC a month later, the Iranian project leader met me at the door and saying, “Who the hell do you think you are? Nobody gets that kind of consulting fee.” I had asked for $500 per day plus expenses and the secretary mistakenly typed in $5,000 per day. In the end it didn’t make any difference because the project crashed when the Shah was overthrown.

Owen Brothers feedyard

Another early client who built a feedyard about 40 miles west of Lubbock, TX, was Wayne Owen. The feedyard was named Owen Brothers. Owen Brothers had originally been horse and mule traders in the Arkansas and Missouri area. They were said to be the biggest supplier of horses and mules to the Army during WWII and thereafter. They were used when mules were needed in countries such as Greece which were fighting the communists. An acquaintance who accompanied some of the mules from the U.S. to Greece said the biggest problem with the program was that many of the mules were eaten by the starving Greeks shortly after they got off the ship.

Wayne had a big heart, but he was also extremely independent along with a volatile temper and colorful language. Furthermore, he had the soul of a trader, and whether it was the futures, Las Vegas, or trading cattle, he was “all in.” Nonetheless, he ran a successful feedyard for several years until bad markets and personal health problems won out.

Wayne developed an extreme dislike for most packers and packer buyers. His manager, Ed Bricker, tells a funny story about how he, Wayne and an Excel buyer were driving around the feedlot in a snowstorm looking at fat cattle. Wayne always wanted to drive his Lincoln, and when they got to the far side of the feedyard, about a mile from the office, Wayne told the buyer to look at a pen of cattle. The buyer said they didn’t look fat, but Wayne insisted he get out and walk the pen. When he did, Wayne drove back to the office and left him to walk back in the snowstorm. Ed told Wayne he thought he should go pick him up, but Wayne said if he did, he was fired so the buyer walked.

Another illustration of Wayne’s volatile personality is a time when he called and insisted I meet him at his office which was on the top floor of the bank building in downtown Lubbock. He was with two feeding customers who were associated with a packing plant back East. They were unhappy with the death loss in cattle they were feeding with Wayne.

I said, “Wayne, why do you want me when it’s a death loss problem? Get your veterinarian.” Wayne explained, “You’re tougher than the vet, and besides, the vet can kill more cattle than IBP.”

We met in his top floor office, and the discussion got hostile in a hurry. Finally, Wayne motioned to me and said, “Let’s you and I talk in the outer office.” He instructed me, “Eng, go back in and settle with those guys if they offer something that is remotely fair. But if they don’t, tell them when I come back and find they’re still in the office, I’ll throw one or both of them out the window.” I went back in and told them the situation and suggested that we settle and they leave pronto. They did.

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I believe my first client in Texas was Gene Newman who owned Veribest Cattle Feeders east of San Angelo. He and Johnny Bonner, who was in the cattle and feed business in San Angelo, were best friends. Gene later hired Johnny’s Aggie veterinarian son, Wes, as manager. Gene was a good cattle and horse man who readily chased new ideas and new horizons. He was on the nervous side, and his friends said he’d wear his Levi’s out from the inside.

Gene was one of the first people to bring light calves in from the Carolinas. This meant that Wes stayed very busy. Gene had also read about the short scrotum method of castration which is really not castration but pushing the testicles up into abdominal cavity and banding the scrotum. The end result is that they look like they are castrated but, there was still a lot of testosterone activity. Gene tried it on one set of calves in 1973, and they fed well and sold with no discount.

Gene had just bought a large ranch in Montana, and he told me that he wanted to short scrotum all of his bull calves. Wes and I tried to talk him out of it, but when Gene set his mind to something he was hard to change. He shipped 2,500 Montana short scrotum bull calves to the Texas Panhandle wheat pasture.

The first thing that happened is the short scrotum bulls got real active on wheat pasture and there was so much bulling and riding that he shipped them to the feedyard. At the feedyard, the fat cattle buyers informed him that they would definitely not be in the market for those cattle because they were bulls in disguise. Gene finally gave up on the project and Wes had to remove the testicles from 2,500 short scrotum bulls. Wes said that was the hardest he ever worked.

On the subject of Wes and castration, Gene sent a Simmental yearling bull on a load of cattle to the feedlot. He had left a message for Wes not to cut the bull because he wanted him for a herd sire. Wes didn’t get the message and when Gene arrived and asked Wes if he had noticed the Simmental bull on the load. Wes said, “Yes, and I castrated him off the truck.”

Wes Bonner stories are abundant and legendary. My favorite personal Bonner story is when Toad Tucker came by the feedlot one afternoon when I was there. Toad asked Wes if he could go deer hunting on Wes’s ranch. Wes said that would be fine, and Toad said, “Eng, you just as well come with me, and we will meet Wes at his ranch house and celebrate our deer kill later that evening.”

The hunting wasn’t particularly good, but I shot a small buck about twilight, and Toad and I headed back to the ranch house. To say the house was primitive would be complimentary. Among other things, there was a den of rattlesnakes and skunks under the front porch, and when you walked up the porch they let you know you were disturbing them. We skinned the deer, poured some whiskey and were sitting at the kitchen table discussing the big hunt.

Wes’s wife-to-be wasn’t home, but her African Grey parrot was there in a cage. Every time Wes would walk by, the parrot would go crazy and try to attack Wes. Wes said the bird acted up because he had removed its infected claw, and the parrot subsequently never liked him.

Toad and I thought the bird, whose name was “Bird,” needed an attitude adjustment so we offered it whiskey. Believe it or not, that parrot loved whiskey and soon it became mellow, hanging upside down from its perch and talking up a storm. About that time, Wes’s lady friend came in, said hello and then walked up to the cage and said, “Hi, Bird.” Her first clue that something was amiss was that the bird was talking 90 miles a minute and hanging upside down from its perch.

She started yelling, “You’ve given my bird whiskey. This might kill him, and African Greys are very rare and expensive. You’re just stupid SOBs.”

Toad and I exited quickly leaving Wes to sort things out. You wouldn’t have thought things could have gotten worse but I believe later that weekend the Texas Cattle Feeders Association was having their annual meeting, and Wes may have been president. The night before they were to leave for the meetings, skunks fell through the closet ceiling and sprayed all their clothes. At least, this got the lady’s mind off her parrot.

Gene later sold the feedlot to Wes and some neighbors, and Gene concentrated on Montana ranches and cutting horses. Gene was a good horseman, and really got into cutting horses. They said his main problem was he tried to buy cutting horses like calves, a truckload at a time.

Gene died unexpectedly of a heart attack in his early 50s. He was staying at a hotel near a cutting horse contest in Austin, TX. I was at a conference in Alberta, Canada when his wife called me at 5 a.m. to break the news to me. I don’t suppose there is a perfect time to die, but this surely wasn’t it. The cattle, cutting horses, land business and most other things in agriculture were a wreck.

Gene had an insurance policy for Johnny Bonner in compensation for him to be executor of his will. To illustrate what a good friend of Gene’s and the family Johnny was, he signed the policy over to the family and didn’t take a cent for handling an extremely large and complicated estate.

One winter night in about 1987, I met Johnny in the San Angelo Airport. He looked totally wore out. He had just come back from Montana trying to sell cows and the ranch for Gene’s estate. He had fallen on the ice in Miles City and broke his collarbone. Johnny, who had been a fighter pilot in WWII, a rodeo hand, and whatever else you might think of said, “You know this is the toughest job I’ve ever had. I know that someday Gene and I will meet again, and the first thing I’m gonna do is punch him the nose. After that we’ll be best friends again.”

Changes in the early '70s

Two significant negative events occurred in the early ’70s as a result of changes in government policy. The government eliminated restrictions on grain exports to communist nations and subsidized the exports. The result was a rapid increase in grain price, which reached its peak in the mid ’70s, and also a shift in grain market premiums. Any export point like Corpus Christi or Houston became a premium market where previously the market for grain in the South Texas area was determined by the Panhandle price less freight.

The second major negative event was that as a result of meat boycotts and political problems, the government put a price freeze on beef at the retail level in June of 1973. Ever-optimistic feedyard owners assumed that when the price freeze was lifted, prices would go up rapidly but the opposite occurred.

When the freeze was lifted, fat cattle prices dropped from 55-60¢ down to 35-40¢, while grain prices continued to increase. Gain costs that had previously been in the 30¢ range increased to over 50¢ per pound. The resulting cattle wreck in 1974 was catastrophic. Many feedlots and cattle feeders went bankrupt and the problems didn’t stop there. Outside cattle numbers had risen to an all-time high and packer cow prices dropped to 10-15¢ a pound and feeder cattle prices to the low 20¢ range.

At that time, as an individual, I was probably consulting for more cattle than anyone in the country and it was over a wide range of geography. I made a critical analytical mistake by assuming that the big drop in feedlot numbers would obviously result in a large increase in fat cattle prices. This was true for a short period in mid-1975, but inexpensive non-fed slaughter prices, which included not just cows but also yearling and calves, overwhelmed the fat cattle market. Currently, the opposite is true and we now have a large shortage of “outside cattle,” which tends to make the fat cattle market somewhat bullish even when feedlot numbers are relatively high.

In addition to the financial beating I took in 1974, the inability to sell fat cattle at any price left an emotional scar on my psyche. I had never experienced this before and promised myself unless it looked like a sure bet, I wouldn’t own fat cattle again. Rather than speculate on feeding, I’d speculate on the futures. This was based on the assumption that if things went bad, at least I could unload my futures positions whereas I might not be able to sell fat cattle.

My futures speculation rules were simple: 1) Never go long in months that you own cattle; 2) Never go short in months you don’t own cattle; and 3) Never let your wife or girlfriend see your margin calls. Over the years, I’ve violated each of these rules—usually to my regret.

However, even though my future’s trading have had some rough times, I’ve seldom lost money on live cattle. Furthermore, in three years (1975, 1987 and 2003) I was fortunate to make significant profits feeding cattle. The 1987 profits occurred when land prices were low, and allowed me to buy a couple of ranches.

Around 1973, I began working with a new 25,000-head feedyard south of Eagle Pass, TX. The owners were well-known in the area. In addition to the cattle business, they owned banks, and they also built a packing plant. It was a well-designed feedlot, but the owners were a bit on the wild side. Because of their proximity to the Mexican border and their Mexican connections, they fed a lot of Mexican cattle and had some pretty colorful border traders involved. As with most cattle people, 1974 was hard on them. I believe the feedlot closed in 1976.

Around 1975, I got an unexpected call from a friend working for the government. She said, “Kenneth, I shouldn’t be telling you this but your name is in an FBI file.”

I replied, “What the hell is that all about?” She informed me, “It relates to the time and people you supposedly associated with in the Eagle Pass area.”

I was young and brash and mad as hell. I said, “Who can I call to find out more?” She gave me the phone number of the FBI director in Dallas, and I called him and introduced myself. His reply was, “I have no idea but, I’ll put you in touch with an agent in charge of that area. He’s a good guy and will tell you what’s going on.”

So I called him and his response was, “I have no idea what you’re talking about and I don’t recognize your name.” I then mentioned a couple of names of persons whom I had heard they were pressing charges against and he denied knowing them, too. Long story short, I decided the FBI wasn’t telling me the truth, and if you really want to make me mad, lie to me about something important.

Drama

Anyway, I decided there was too much drama in the Eagle Pass area for me, and I resigned my consulting position. I was sorry to do it because there were a lot of people involved whom I liked, but there were also rumors of other illegal problems in the area.

One of the rumors revolved around the smuggling of guns from the U.S. into Mexico, and then shipping them to the Irish Republican Army. Supposedly, this was related to a large Las Vegas debt. I’m not certain the story was true, but it was a widespread scuttlebutt in the area for several years. In the end, some people went to jail on various charges.

Moody Taylor went to jail for mishandling prepaid feed expenses. That’s a charge a lot of cattle feeders could have been in trouble with at that time. Moody’s lawyer told me it was obvious the law was going to get him for something.

If you’re a country boy like me and always assumed that the law is your friend, this is confusing and can make you paranoid. I remembered thinking my phone might be tapped and told Andy and Brenda Binion Michaels. Brenda didn’t make me feel any better. She said, “Hell, Kenneth, don’t worry, they tap my phone all the time, and I don’t do anything bad except smoke.”

I thought I had quit Eagle Pass until one night in the late ’70s my airplane was getting an annual inspection. I called a fellow in Amarillo who had said I could borrow his plane whenever I needed to. I called his house and fortunately didn’t give my name—only asking if he was there. His wife replied, “No, he is in Eagle Pass with Dr. Eng looking at cattle.” I asked her if he and Dr. Eng did that often and she answered, “Yes, at least once a month.” I’m not sure there’s a moral to this story, but it does prove you can get into trouble even when innocent.

Around 1970, Ed Cox, Jr. from Dallas began making noises in the Texas cattle industry. Cox Sr. was a successful oilman in the Dallas area and the Southern Methodist University Business College is now named after him. Ed had a large ranch operation near Athens, TX, named Valley View Farms. Ed and I, along with his right hand man Rod Moss, became good friends and flew around the country in Ed’s jet looking for investments and places to run cattle. That’s how we happened to buy the ranch in California in 1971, but more about that later.

In the mid-’70s, after the ’74 wreck, Mesa Petroleum was controlled by Boone Pickens. They owned several Panhandle feedyards and decided to get out of the feedlot business. Ed bought the 60,000-head Randall County feedyard for a song.

In addition to the feedyard purchase, Ed also purchased a large silage and hay inventory at the feedyard. Their silage pits were huge and I was there when we opened the first pit—and what a surprise! Layered through the silage horizontally was sawdust. If I recall correctly, the sawdust layers were about two-feet thick and spread evenly through the silage pit. I remember Ed and I looking at this together and Ed asking, “Is this normal?” I replied, “Not until now.”

Apparently the sawdust came from a sawmill on the south side of Amarillo. The roughage, which was supposed to be alfalfa, also proved to be a problem. Long stacks of bales had alfalfa on the top but bales inside the stack were mostly straw and milo stubble. I’m sure Pickens didn’t know this, but someone in the feedyard did. Ed asked for an adjustment, but I suspect they thought Ed had already made a great deal and he shouldn’t ask for more. A lawsuit followed and Ed won. I’ve always wondered about the real story behind the sawdust in the silage pit.

Forest Warren, my oilman/cattleman friend and client from Houston, bought a feedlot west of Amarillo on Interstate 40 and named it FSW. The F & S were for two other partners who later got into trouble and Forest brought them out. Forest sent his friend, Tommy Gleason, who had been a fat cattle buyer for Armour and a feeder cattle buyer to manage the feedlot.

Tommy knew cattle but not feedlots. I told him he first had to get control of the feed truck drivers because the feed delivery, feed distribution and damage to the bunks was getting out of hand. The first thing he did was pull one of the drivers out of the truck and beat on him. That didn’t help.

Besides the feedlot, they also had a grow yard east of Hereford on Highway 60. They milled their feed for the grow yard at the FSW yard and delivered it in feed trucks. One morning on his way to the grow yard, their feed truck driver tipped the truck over in the ditch by Highway 60. It was at 10 a.m. that the highway patrol came by and gave the truck driver a DWI. I told Tommy, “I think we’ve identified at least part of our feed truck driver problem.”

When Tommy was buying fat cattle for Armour during the ’74 wreck, he drove up to one of my clients in a new Oldsmobile. “Tommy, that’s a pretty fancy car for hard times.” I said. His reply was, “Whenever you see you’re going to get into one of these really big wrecks, first thing you do is buy a new car because you’ll be driving it a long time.” Makes sense.

 

 

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