Million Dollar Mentor: Feature Interview with Merrill Oster
by: Russell Wasendorf, Sr.

Merrill Oster has touched more futures traders’ lives than anyone past or present—as a journalist, publisher, educator, author, public speaker, entrepreneur and mentor. I met Merrill in 1973. I was fresh to the futures industry after a short but successful career in the motion picture business. By mid-1976 I began working full time in one of the most dynamic cadres of futures industry professionals ever assembled. Merrill brought me into the fold after he purchased Commodities magazine (today’s Futures). I also worked with Oster Communications, a consulting firm, and eventually ran the Commodities Educational Institute. All the while I, like so many others, was being mentored for a lifetime career in the futures industry.

Clearly Merrill’s business strategy was to hire the best talent he could find, pay them well, provide a stimulating work environment and give his top people plenty of opportunity for independent thought and action. Merrill’s growing group of related companies was an entrepreneurship of entrepreneurs.

He regularly staged lunches to which he invited his top core and often an industry leader. These synergistic meetings enabled us to share and test ideas with each other and some of the industry’s leaders. We were frequently challenged to come up with a $50,000 idea, a challenge met more often than not. Given inflation since the early 1970s, these might be $1 million ideas today.

Although Merrill amassed considerable wealth and national influence over his career, it was from the rolling fields of Iowa that he developed a foundation of knowledge and ethics on which he built all of it. Growing up on a farm, he learned the challenges producers have, the entrepreneurial spirit and the value of community and helping others.

In 1973 these lessons converged with his journalism training when Merrill launched Professional Farmers of America (Pro Farmer), a news service aggregating vital market information from various sources in one place for farmers to access in real time. He and his partner also conducted seminars that taught farmers how to manage their risk by using futures contracts and then how to broker land deals. This movement of turning farmers into futures market players helped spur growth within the futures industry.

As business opportunities presented themselves, Merrill jumped. He bought Commodities magazine in 1976 and ran the publication until 1997. He recognized the growing demand for online access to software, futures prices, charts and analysis when in 1981 he purchased a company that turned into FutureSource. Along the way, he developed a partnership with Dow Jones to create OsterDowJones Commodity News, which provided commodity and economic news to traders and risk managers around the world.

In total more than 250,000 worldwide users of futures markets, including brokers, bankers, money managers, traders and producers, read publications or receive real-time information from companies founded by Merrill.

By the end of 2004, Merrill had mostly divested his communications companies and was in the full swing of a second phase of his life: volunteer service. Starting about a decade before, he helped establish a movement of community leaders who use their influence, skills and money to change the world for the better. He has supported various community projects in his hometown of Cedar Falls, Iowa, and created a “temporary city” in Brookhaven, Miss., where Hurricane Katrina survivors could live in dignity until getting back on their feet. In addition, he has served as a board member of colleges and charities, has been a business mentor and advisor to young executives and has sponsored college scholarships.

His life has enriched the lives of many, and I am personally grateful.

RW: Tell me about how you went from journalism student to entrepreneur.

MO: I watched a group of guys put together one of the biggest deals in the history of Wall Street back in 1963 or ‘64, which became Terra Nitrogen of Sioux City. It was being around that that popped my eyes open. And, being a farm boy, I had natural entrepreneurial instincts: I knew how to take raw materials and make a business out of it.

RW: How did you avoid getting into trouble during the 1980s farm crisis? You were buying a lot of land at that time.

MO: I had a desire to be where there was high risk, but I would always do something to mitigate my risk. On the ag side, I used the commodity futures markets. On the land side, I wrote nonrecourse loans. I bought with a 10- to 15-percent down payment. From ’82 to ’85, I couldn’t make some of my farm payments. So I told the landowners that I didn’t have the money. Because my loans were not collateralized by my own net worth, some landowners just took back their land. Others asked what I could afford. As fellow entrepreneurs, we were in a crisis together and worked out a mutually beneficial solution.

The people who didn’t buy land on a nonrecourse basis went to the Federal Land Bank. And when they couldn’t make their payments, the bank went right down the row and shut down one farmer after another after another. And that’s what caused the cascade of land values. But I was able to avoid that bullet.

RW: I have wanted to interview you for quite a while. I think you are one of the least-known pillars of the futures industry. You did more at the grassroots level to get people involved in the futures markets in a safe way—or, at least, in a way that they understood what they were doing—than any other person in the industry. But you are not a member of the Futures Industry Association Hall of Fame. Clearly you are overlooked, but, more important, you have flown under the radar. Did you try to do that?

MO: Yes. I was selectively a public person. When it was important to be public for the causes I was involved with, I put myself in the public sphere. I was excited about helping farmers use commodity futures in 1973 when I launched Pro Farmer. At that time, there was a plethora of free information being dumped on farmers, so I decided that for $50 a year, I could provide farmers with marketing information and timely information from multiple sources in one place.

In those early days, the vision was to get farmers excited about something. Here’s how I capsulated the issue for them: “If you look up and down the railroad tracks all across America, you see all these silos. They are owned by Cargil and Dreyfus and Bunge, but you and I paid for them with our marketing ignorance.” It was that kind of emotion that I brought to that cause, and with that part of my life, I wanted a high profile.

One day in Des Moines, 1,100 people showed up to pay $100 to hear my thoughts on land value. That caused some things to happen that I wasn’t comfortable with. People wanted to get on airplanes with me and follow me around and The Wall Street Journal did an article on me in August of ’82, calling me a guru. I knew that was not me.

RW: To be in the limelight in a small town is not a very comfortable place to be. I admire you for the things you have done in Cedar Falls, but you have done it in a subtle way. You aren’t building monuments to yourself.

MO: There is a balance to it. Part of that comes from being a farm boy. You wanted to be like your neighbors; you wanted to be liked by your neighbors.

I remember an older farmer came to me one time while I was buying land right and left. He said, “Merrill, I like you, and I’ve been through some stuff in life that I want you to know about. In this community, as long as you are about the same size farm as the rest of the guys, 160 to 240, you’re one of the guys. You are passed 1,000 acres now. Don’t be surprised if you don’t get treated with the same love and respect.” I never experienced that, but I was conscious of the sentiment. So I decided that if I was going to be a big farmer, I was not going to put up signs on every farm with my name on it.

RW: I think keeping a low profile is certainly good for the family as well.

MO: The other thing is that this is all here and now stuff. I grew up in a Sunday school that gave me a broad picture of where we are going eternally, and it helps me keep the stuff I’m doing in life in perspective. In my career, I could take big risks, but I remembered that it was only money. Carol, my wife, helped me in that regard one day. In 1980, I had all of my publishing companies cross-collateralized with some land, and the bank came in and told me that I needed to pay back a loan or the bank would take it all away from me. I came home one night and said to Carol, “You know it’s possible that everything we have built could be down the drain.” She said, “Oh, so what? We started with nothing. If we are supposed to have more, God will give it to us. If we’re not, we’re happy as a family.” That’s a piece of our upbringing that I had lost for a while, and she brought me back to my grounding.

At the time, interest rates were 14 percent at the local bank, so to get entrepreneurial money, I had to pay 25 percent. To an entrepreneur, all you need is to buy time to figure out stuff. I borrowed $2.2 million—we had FutureSource going at the time—and people around me were saying “Just shut things down, lay off people.” I had never seen people get rich by cutting back. That didn’t square with me. So, we put all of our eggs in one basket and made a big bet right at the bottom of the market. We put a bunch of money into software development at FutureSource. At the time, we leapfrogged the technology. It took 18 months for everyone to catch up to us.

RW: But that 18 months bought you a lot of market share.

MO: And margin. We were selling a service to a brokerage firm for $600 a month. That technology was not as sophisticated as what I can get free from FutureSource today. So we came out of that just roaring. But FutureSource was a little guy in a big pond, and any one of our competitors could have just crushed us. FutureSource was a tough company to manage; a tough market to be in. The magazine [Futures], of course, just went up and up, and I got out of that sort of at the top. But FutureSource was work. We ended up doing very well with it, but, boy, there were two or three years in there when it was nip and tuck.

RW: You started with Top Farmer.

MO: I was an employee of Top Farmer until I was 29 years old. The monthly newsletter was an idea I had forged as an employee and ran it from 1967 to ’69. Then I decided I wanted my kids to grow up in Iowa, so I left my job. I was being paid $12,000 a year. On my way out, Top Farmer asked me to stay. I said, “No I’m moving to Iowa.”

The next conversation I had, they asked if I would stay for $20,000. “No,” I said. “I’ve decided to go. It’s not about money. Let’s get that clear.” Then they offered me $30,000. Now I’m halfway ticked off, because that morning I was worth $12,000 but worth $30,000 by the afternoon.

So I turned my anger into creativity. I offered to manage the newsletter from Iowa on a consulting basis for $24,000. And that’s what launched my consulting business. At the same time, I was talking with Chet Randolph at the American Soybean Association. I went to work for him on the same arrangement. So I put together two small deals and went from a $12,000 salary one day to a $48,000-a-year consulting business. So it was just a matter of the right timing.

After about two to three years of running the newsletter for Top Farmer, they were not interested in my idea of providing real time information. Jerry Carlson and I had from our college days talked about a real-time news service, and so I announced I was going to start Professional Farmers of America. I hired attorneys to make sure everything I was doing was consistent with law. Then Jerry and I started it.

Top Farmer then threatened a lawsuit. We had 1,000 members that had joined in the first six weeks of a direct mail program, and now this outfit in Milwaukee was trying to get an injunction to shut us down. My attorney said that it was possible a judge could grant a temporary injunction while this all got sorted out. I said, “Jerry, let’s go for it. Let’s double it up. Before they get the injunction, let’s throw another 100,000 pieces in the mail.”

As it turned out, that extra mailing gave us critical mass. We wouldn’t have had money to serve those people all year had we not gotten that extra mailing out. So running halfway scared was what got Pro Farmer off the ground in 1973 or ‘74. It wasn’t so much my cunning as it was responding to the marketplace. The fear of the lawsuit, which never came about, caused us to launch Pro Farmer at a much larger and faster rate.

And then the Russian grain deal came along. We were at the right place at the right time. This is not Merrill’s careful, calculated brilliance, it’s the hand of God, saying “Hey, look, I had you born in 1940 to get you here at the right time.” So how can I be arrogant and run around with a high profile knowing that the Lord has laid it out for me?

RW: You bought Commodities magazine in 1976.

MO: This is the story of how I acquired the magazine—again, it’s not my brilliance. I was sitting at an ag editor’s conference. I was a journalist, so one ear was listening behind me. I happened to hear somebody say that his boss, Todd Lofton, was spending a lot of time on his yacht. I knew Todd Lofton was the founder of the magazine. I put two and two together: a lot of time on his yacht and said in a tone that indicated maybe this guy would not have a job in the future. I walked into the hallway, put a dime in the telephone and used my credit card to call Lofton. I said, “Any chance that Commodities magazine might be for sale?” He said, “Oh, no, no, no. But where could I come to talk to you about it?” The next test: “Well, I’m going to be in Champagne, Ill., tomorrow night,” I said. “Oh, I can get there.” He was coming from Maryland.

As a farm boy, I had been listening to my father dicker with the seed man, the feed man, the cow man and the calf man my whole life. So I could recognize buy and sell signals. Here was a man who really wanted to sell. So I bought the magazine. But I did it in such a way as I had been teaching farmers to buy land: 10 percent down and the rest on a 10-year contract at 6 percent. But there was a problem; I didn’t have the $50,000 down payment.

This is why I love my hometown: I went to Louie Beecher and said, “I bought a magazine and got a heck of a deal, but I don’t have the money.” He said, “Well, that’s a problem. I’ll take you to my bank.” We go to the National Bank of Waterloo, and I was introduced to a loan officer. That man still considers me one of his boys, because he went out on a limb for Merrill Oster.

So buying Commodities magazine wasn’t my brilliance. It was another piece of timing that I heard this conversation and put things together. The Lord put me in the right place at the right time with the right talent, I guess.

RW: And you continued to build. You had this systemic entrepreneurial growth of bringing out new products and publications. What do you think is your greatest success of all of this, aside from land because that is a whole different topic?

MO: I think being able to see the eyeballs of farmers when they got it. I was teaching them how to use the commodity futures markets and talking longs, shorts, puts, calls and basis change, and all of a sudden, I could see a farmer move to the edge of his seat and lean forward when the light went on. I realized that I had a piece of information that could help a guy manage his risk. What we were doing was putting farmers’ situations in this context: Each one of us only has so much risk-bearing ability. But I told them how to take their market risk, transfer it to a bunch of guys in Chicago and then take their risk-bearing ability and put it on land. So farmers learned that if they quit speculating on their grain, they could afford more risk in land. Then I taught them how to broker the land deal right.

I really felt I was helping the families who came to my seminars. I was helping them survive in an atmosphere that was going to be changing very rapidly—only a few would survive that. There was a tremendous consolidation of farms taking place, and we were helping the farmer survive in periods of rapid growth and descent and rapid growth again. Farming experienced a huge market dip in the early 1980s. So helping people in the ’70s to see and use the basis change to their advantage to bring revenue back to the farm that had previously gone to grain companies was a thrill. And then helping farmers construct and manage their risk in such a way that when all hell broke loose in the late ’70s and early ’80s they would be OK was a good feeling. We got letter after letter from people who said that they would not have survived had it not been for our seminars.

Today, I’m buying land in Wisconsin, and I walked into a farmer’s yard. He said, “You’re Merrill Oster.” I said, “Yep, you’re Maury.” He said, “You don’t know this, but in 1981 or ’82, you were doing a seminar to help those of us who were near bankrupt figure out our rights. I came away from that seminar and went to my bank and said, ‘This is the way it is: I can do this, this and this, or you can take the whole farm. If you’re going to deal with me, you’re going to deal with these terms.’ You gave me the wherewithal to construct a reasonable deal with my banker. I saved the farm.”

Pro Farmer was the genesis of our involvement in commodities. That’s really where my emotional heart was.

ProFarmer then led us to Commodities magazine, which eventually became Futures. At that time, Leo Melamed and I were running around conducting seminars. I was there when the futures industry went from nowhere to something big in a hurry. When I bought Commodities magazine, the futures industry was expanding into financial instruments, currencies, Treasury Bills; the industry was growing quickly. And I needed more data for all that we were doing, and I needed quotes. So I went to Bob Bishop and he offered to sell me some quotes. He had a quote company, but said that I ought to own it.

Bishop said that he liked what I was doing with land and he wanted to be a farmer. His idea of what that quote company was worth was way off the charts. So I just marked up my land value and we swapped. He took 12,000 acres of farm land in three states, which I had little equity in. He got so excited about farming that he bought that much more land and said he knew how to make money with it. He bought machinery and decided to start with the southern Minnesota farms, then pack up his implements and go to another farm. He was going to show American agriculture how to do this right. Oh, the poor devil. He tanked the entire thing in one year. He went through all of his equity and the owners took the land back.

RW: That quote company then became FutureSource.

MO: We had at one time the first commercial product where you could take a price chart and put various studies on it. We experienced a big jump. One of our early customers was the man who owns TradeStation. He took a lot of our ideas and just did it better.

When you look at all the opportunities in the world where you can take a small amount of cash and leverage it up into a large amount with definable risk, there is no better place to do that with more liquidity than in modern futures markets.

RW: Let’s talk about modern futures markets. One of the newest things is the climate exchange and carbon credits. In fact, we have just formed a green energy division of my company. We study a farm to find out how much value it would have in carbon credits. What’s interesting is that some farmers are currently spending money to get rid of manure when, in actuality, it’s worth a lot of money as an energy source. Attach to that the solar and wind power that the farm can generate, and a farmer can gain significant additional income.

MO: How does the carbon credit figure into it?

RW: When the farm creates energy from manure, the methane (a greenhouse gas) is not released into the atmosphere, so the farmer can earn carbon credits that he or she can then sell on the climate exchange in Chicago or London.

MO: That will change our world over time.

RW: I think that’s the next big opportunity.

MO: I’ve always told people to listen to the sound of the marketplace, listen to the drumbeat. Where is the market attracting money?

Right now, you can forward contract to 2009 and 2010 for December delivery corn for more than $4 a bushel. Back that out, and you can afford to pay $5,000 or $6,000 an acre for land and it will cash flow based on that. Farmers are more in tune with the marketplace than they used to be, but there are large pockets in America where there are still 200-bushels-of-corn-per-acre land that can be bought for $3,000, $4,000, $5,000 an acre that will produce neck-in-neck for what is now selling in Iowa for $6,000 to $6,500 an acre. So the marketplace calls us to fill those inconsistencies; there are still huge economic opportunities that the futures market alerts us to and causes shifts that make our country so efficient.

Without the futures market, there wouldn’t be that assurance that you could do that.

RW: Do you still have a home in Iowa?

MO: My wife’s mother is still there; my brother is there. So in the fall, we move to Iowa and shoot pheasants and have a traditional family Thanksgiving and Christmas there. It keeps us with our feet on the ground and brings us back to our roots. I get out and jog the same road I used to walk to school; it always reminds me of who I really

RW: Of all of those components that you had at one time, where are they today and what have you kept?

MO: Professional Farmers of America was bought by Farm Journal, and I maintain no interest there. It’s run by former employees and friends, so I have a little bit of contact but not a lot.

Futures magazine was bought by a publishing group and has been sold a few times since then.

FutureSource is an interesting story. I sold a 40 percent interest in it to Bridge News. Bridge went bankrupt. I had to go to bankruptcy court and buy my 40 percent back. The good news is that I bought it back for 5 cents on the dollar; the bad news, it was worth about 5 cents on the dollar. Bridge had the thing so messed up. So I had to put together a news organization to provide information that Bridge had promised to supply. Dow Jones then approached me, saying it didn’t want to compete with me since I knew the industry better than they did and they would rather not fight me. So we created the OsterDowJones partnership. A few years later, I sold FutureSource to eSignal, which is a division of a European company. I have no interest there now. I had a put with Dow Jones and gave that put to them. It was a great time in my life. We put together a news organization around the world, Terry Wooten and I, in about 12 weeks from scratch.

All the rest of the publications have been sold. The only thing I own in the publishing world is an acquisition I made this year, Naperville magazine. It’s just for fun and keeps me in the publishing business.

The only thing that has been consistent throughout is my farming operation. I still raise 30,000 head of hogs, rent out 4,000 acres in Iowa and a couple thousand in Wisconsin.

I spend my time in the winter with a ministry called Pinnacle Forum. We get CEO-level guys together to grapple with issues in groups of 10 with an open Bible talking about cultural issues. I think we have 70 groups of 10 to 15 guys around the country. It’s kind of a Pro Farmer for men who want to use their influence to change our culture, to make America a better place for our grandkids. All this crap happened on our watch, but shoot, we have time and money, so let’s influence change on our way out.

RW: What new and exciting things are you thinking about?

MO: The stuff that turns me on today is using my influence to help other people. So Carol, my wife, and I invest in many different things. Most recently was a trip to Mexico with a colleague who volunteers for Opportunity International. The organization makes microfinance loans: $150 to a little old lady making cornhusk dolls in a village in Mexico, for example. But Opportunity International teaches entrepreneurship, too.

The loan officers are Christian and teaching them the true fundamentals of entrepreneurship, which are the Ten Commandments. “Thou shalt not steal” is the foundation of the free enterprise system, because it presumes the right to private property. So the intersection of free enterprise and Christianity in these ministries really gets me buzzed.

We’re bringing hope and entrepreneurial zing to people who have been beaten down by a Communist system and a male-dominated society [in Mexico]. That really gets me turned on, as well as putting together groups of men, many of whom are CEOs or entrepreneurs approaching retirement that to some extent have isolated themselves from close fellowship with other guys, to help them work through how we are going to spend the rest of our lives.

Bob Buford’s book Halftime is about creating a second career before you finish your first one through volunteering. It was this book when I was 50 years old that caused me to realize that I had not done enough for my home community. I decided to do a little test and see what a year of me on Main Street in Cedar Falls could do.

So, I turned the company over to capable employees, and I ran the Chamber of Commerce for a year as a volunteer president. We really changed some things. We put together the Main Street Development Corporation. We sucked in a lot of cash and changed Main Street.

That was my first attempt at keeping my business going while at the same time creating a volunteer service career for myself. I liked it so much that I became a champion of it. You’re about that age, Russ, you should be thinking about volunteer service.

RW: I actually have formed a family foundation that funds orphan diseases, illnesses that affect such a small population that pharmaceutical companies and grant organizations generally don’t fund them.

MO: How did you get the passion for that?

RW: An employee’s son developed adrenoleukodystrophy. At the time, the disease was fatal and had no treatments. We raised money and worked with the University of Iowa hospitals. One of the doctors there had the idea to treat the disease like cancer: use chemotherapy and a bone marrow transplant. As it turned out, the chemo and transplant cured the child’s condition. It was one of those things that having a success like that, made us want to have more.

MO: That fueled your passion.

I’ve come to the conclusion that we, as business leaders, have had so much fun doing things that turn us on and took our lives to new higher levels that we get to the point where we realize that all this business stuff was just so we could accumulate some influence and cash to do what we were really born to do. Maybe it wasn’t about business after all.

RW: You struck a note with me when you talked earlier about the great excitement you experienced when you looked out into the crowd of farmers and saw them understand how futures markets and basis could be used to further their prosperity and security. The same type of thing is when business people realize how they can transform their financial gain into some real heart-felt ethical gains.

MO: It’s like the Lord created us as vessels through whom His love can be poured. It seems like it takes us quite a few years in life to just absorb everything for ourselves, and, then at some point, we realize, this is not what it’s all about. The next level then is the joy you feel when you see someone else’s life change. Russ, you’re doing exactly what we’re encouraging CEOs and other leaders who already have influence to do—to transfer that leadership skill into serving humanity in some way that will make this a better place for our grandkids.

RW: Many of the things I do today are because of lessons I learned from you.

MO: That’s very kind of you. But as you know, we hired the best and the brightest. And when you put them together, you feed off of each other and good things happen that not one of us is responsible for, rather there is a chemistry that takes place when you put good people with the right intentions together. It creates an atmosphere where negativism is not allowed and people are not allowed to use one another. So we had a lot of great friendships.

It’s a camaraderie that’s different than the typical business culture. Entrepreneurs can create this more easily than large corporations, I think. As entrepreneurs, our names are on the checks and we can say we aren’t going to tolerate these things; we set the standards.

RW: Merrill, this has been one of the best days I’ve had in long time. Thank you.