December 30, 2024 • 51 mins
Chris Barron has weathered several Ag downturns as an Iowa farmer. He’s also helped hundreds of farming operations succeed despite farm economy downturns as an Ag consultant with his company, Ag View Solutions. Chris joins Damian Mason to discuss the Business of Agriculture at the farm level, laying out strategies smart operators can deploy to — not only survive, but prosper — during a rocky farm economy patch.
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(00:06):
Strategies that smart
farms use to weather bad ag economies.
That's the subject of this episode
of the Business of Agriculture.
Hey, Damian Mason here with a question
before we hop into this episode
of The Business of Agriculture.
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(00:27):
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Hey there!
Welcome to another fantastic
episode of The Business of Agriculture.
I've got a great one for you today
(01:31):
because I got a great guest,
name is Chris Barron with Ag View Solutions.
He has a podcast called Ag View Pitch.
I've been on it. He's been on my show multiple times.
He's been a client.
In fact, I'm gonna be speaking at his, Executive
Summit that he has for business
minded farming operations.
It's going to be in Florida.
January 23rd is when I'm going to be on stage.
It’s a great event.
And also, Mr.
(01:52):
Barron is a farmer himself,
and he runs professional networking groups are not,
professional peer groups,
I should say, within agriculture
where, maybe ten farms, five farms,
getting what it is,
then, get together
and actually share data, share
information and hold each other accountable.
So he's got a lot of really good stuff going on.
So he works with some of the brightest and
and best farming operations in North America.
(02:14):
And he helps them survive.
He helps them strategerize.
It's a George W Bush word.
Strategerize is not really a word.
He helps him strategize on how to be, successful.
You know, we talked about occupying the future.
We're talking about being here.
By passing on that legacy.
And the first thing you have to do
is treat your farming operation as a business.
(02:34):
So I've been fielding a lot of questions, Chris.
Holiday time.
Hey, Damian, you're an ag guy.
I just read that ag economy is really bad.
What's going on?
I had somebody say this because of the drought.
I said no, it's
because of overproduction of commodities.
I thought we were in a drought.
I’m like, yeah.
We're so damn good at making commodities.
Even in a drought, we can make too many of them. So.
So that's the really the big picture.
(02:54):
So strategy
smart farms to deploy to weather bad ag economies.
You've been around a couple of bad agri economies.
You're you're no spring chicken.
This isn't that bad.
Here we are wrapping up.
2024 is the first downturn year after three record
income years.
It's the concern about what might happen because
usually ag downturns last five, three, seven
(03:19):
years.
Yes.
A lot of times it's 4 to 7 years.
If you go back and look,
I've been through personally myself
economically as a producer
and also as a consultant working
with producers on financials.
I've seen this movie.
I'm going into the fourth repeat of this movie.
(03:40):
All the sequels are pretty similar.
They're not usually,
or at least have not been as deep as the very
first one I was in,
as a kid, you know, in the 80s or whatever.
You know, I was a kid then, and it's.
But I do remember that.
Well, doesn't mean you didn't go through it.
I can tell you that
(04:00):
when we say a downturn might last 4 to 7 years.
Chris, 81, literally, the shit hit the fan.
And it didn't get better until maybe late 90s.
I mean, that was essentially a 15 to 20 year bad.
Yeah,
but what it did was it created a lot of consolidation
(04:21):
and it created
some opportunities for entry level operations
that that were able
to get in and able to grow
right out of the right out of the chute.
So I kind of changed the trajectory
of some things, too,
because we have some operations that started
in 83, let's say 83, 84,
and are massively successful today
(04:43):
because they started in that difficult environment.
It's kind of like
if you go to Vegas
and you win money
the first day you're
there, you're screwed
because you're going to give it all away the
rest of the time.
And if you show up and you know you have a struggle
and I always say, you know,
to me, these difficult times
and you can quantify
it is difficult to whatever degree you want.
(05:05):
Yeah, but challenging times always make us better.
We do not get better with, you know, $8
corn and, you know,
$14 soybeans and
and high dollar wheat and cotton and all this stuff.
We don't get better with high prices.
We get better with low prices because that forces us
(05:26):
to do
what we should be doing
and be a business first, and just happened to farm.
And so I think there's a philosophical adjustment
that in every single one of these downturns,
there's a psychological adjustment
and behavioral changes that occur.
And that's why I think the industry,
each time we go through one of these troughs, handles
(05:47):
it better. Each time.
And I think that's the main reason
is because we learn and we change and we improve.
And if we don't, we're out of the picture anyway, so
we're out of it.
I think the ones that are in it now,
there's going to be people that are going to fail.
But I think the ones that are in it
now are just going to have to recalibrate
for a while, like we do in every single downturn.
(06:09):
We control the controllables, you know, manage your,
your opportunities and,
and be smart about capital expenditures.
That's the big thing.
I think a lot of times people, you know,
something that my, my dad told me one time,
if you're digging a hole and you can't get out of it,
stop freaking digging, first of all.
And, you know, and that's what I think.
(06:31):
And I get teased about this
sometimes from some clients, but it's like,
go on a capital freeze for a year.
I bet you that
if you don't buy anything for a year,
you'll still be in business next year.
And so just stop frickin spending for a year
and and fix some things, update some things,
spend some time focusing on what you can control,
and then launch back into it again.
(06:53):
And there's just some sometimes we have to reset.
And I mean sometimes
the computer does not work quite right.
Sometimes you have to do a hard reset.
And I think that's a different business.
All right.
Well first off,
I've, I've had a couple people more,
of the less business minded agricultural people.
And there are those
they don't tend to tune into this show
because we talk about business, money,
(07:13):
finance and business aspects of it.
But you and I both know
there
is this notorious group
within production agriculture in America.
It's the co-op crowd.
It's the it's the go to the coffee shop
and their bib overalls crowd.
And it's the bitch about the neighbors crowd.
It's the resentful crowd, etc.
they're the same ones when I say things
really aren't that bad, well,
you don't know because you're not a real farmer.
(07:34):
I'm like,
okay, again, we just came off of three of the,
the, the, the record, the three best years North
American agriculture has had
since there's been a thing
called North American agriculture.
One year downturn does not a crisis make
so and especially putting in context
I live through the 80s.
You know, I was out there
feeding those cows
when I was 12 years old, starting in 1981,
(07:54):
when we were obligating 18% interest.
So I can put that in perspective.
It
it AG is an industry that runs for the exits
screaming fire
quicker than any other industry, I swear to God.
Chris. I mean, is that farmer mentality?
Oh God, we're all going to die.
And and it's it becomes a little bit Chicken Little.
So I mean, I'm just gonna start off because winning
(08:16):
bad. Damn sure. Sure. Yeah.
It's going to be is a downturn. Yes.
Is it terrible?
I don't think so.
So I mean, I can
we start by putting things in perspective
and then we'll go through your strategies
because you said your first one
was capital freeze for one year.
It's striking that that's that
that's what you have to tell people because again.
If we were in if we were in year six of this,
(08:37):
a capital freeze for one year wouldn't fix it.
It wouldn't.
You know,
there's with the capital side of it
though, there's needs, wants and wishes.
And I think sometimes those categories get confused.
And, you know, the other side of
what's happening right
now, too, on the capital side of things is,
(08:57):
you know, when we can get to this in a minute.
But the lenders
are going to have more scrutiny in a downturn,
which they should have.
That same scrutiny end up
when things are going really great.
The banks get lazy too.
Just like just like farmers do.
They get lazy on the financials,
because they feel comfortable and and the regulators
don't don't pull on that stuff is the tides up?
(09:19):
Everything's good.
Yep. Why why why why crunch numbers.
Right.
And so now what
we have to do
is, you know, when I say capital freeze,
I mean, that comes with a bunch
of other things, right?
It's like
analyzing your debt service
number and saying, okay, what's
what's my cash flow requirement?
Okay. What's my.
And it can be
it doesn't have to be complicated either.
(09:40):
It can be fairly simple.
It's like,
how much revenue
can I legitimately generate this year with, with,
you know, average yields
or the production
on the, on the beef
or the, the dairy herd, whatever it is,
is my
what is my production
realistically going to give me in the upcoming year?
Okay, run those numbers.
(10:00):
But what we're seeing
that has happened in a lot of cases,
even a lot of these operations that are very solid is
when we make more money, what do we do?
We spend more.
And so that's what's happened in those those three
good years.
You're talking about,
and even to the point where, you know, I would argue,
(10:21):
you know,
we're actually
and are kind of getting into our second year
of, of what
I would call a downturn because of inflation
and increased the cost production.
We still had good
revenue, but our cost production
continued higher, even,
you know,
because we've come through
a pretty intensive inflationary time frame.
Right.
But when we do this cash flow,
(10:42):
I think it's really important
though that
that we say, okay, what is our debt service
and take those debt numbers,
whether it's on land, machinery, equipment,
you know, your short
term, intermediate and long term debts
and put those all in one category and look at that
number and say, okay, this is my debt service number.
Subtract that from your total expenses,
(11:02):
equal that out with your with your income.
And that's where we get in trouble.
Because I think a lot of times
people do the cash flow
and they don't have their debt service in there.
The other the other issue is a lot of times
growers are notorious for you talked about the co-op.
You talked about,
you know, third, I call it third party loans.
(11:23):
So it's the seed company.
It's all of these other, you know, the can
that's the,
maybe the machinery company that that will loan
you money at a quote unquote, lower interest rate.
Now all of a sudden,
you have your line of credit with the bank,
but you have these other third party loans to those
all have to be consolidated in front of your face
and not separated on separate
(11:45):
sheets of paper in the desk
or on the table or whatever.
You need to put that stuff in front of you and say,
this is
what I legitimately have on my line of credit.
Short term, this is a legit what I have
in my intermediate debt, you know, midterm.
And this is what I have long term.
But then consolidate those all together and say,
can I cover this debt service?
(12:06):
Because that's exactly what the banks are looking at.
And again, we're we're just we're business people.
We just happen to farm.
And so we have to do those things.
All right.
So run through
you know we said we're going to talk about strategies
for down the economy.
Bad ag economies.
You talked about
okay.
First off, nobody ever, say
(12:27):
that nobody's
you're not going to go out of business
by freezing cap of one year.
By the way,
is that where the machinery companies
obviously are predicting 30% less machinery
sales in 25?
It's probably already happened in 2024.
That's the kind of stuff you're talking about, right?
The, you know, big steel, or buildings or Farm Road.
(12:49):
Yeah.
And even even right now, I mean, there's really good
deals on used equipment right now
that's really cheap,
but it's like you maybe would tell your spouse,
just because everything's on sale at target
doesn't mean you buy everything either.
I mean, you,
you know, sale
doesn't necessarily correlate to a need.
And and I still think, you know,
when we do a lot of fleet
(13:10):
management with people, machinery
and equipment is the second largest line item.
Expense
if it's the second largest line item expense.
And why do we spend so much time
bugging the chemical guy
to try to save $0.03 a bushel on corn or whatever?
You know, we're we're saving $5 an acre.
Who gives a crap?
Because we're probably spending $30 an acre
by not managing the machinery
(13:30):
and equipment fleet better,
or not having conversations
with the landowners on the cash rent
and having a having a better dialog there.
And and reasons,
examples and details
as to why the rent should be where it is.
And I will pay you more when it's good
and I'm going to be transparent with you
and start working on those relationships.
But we spend so much time
(13:51):
and I'm not picking on every farmer,
and I don't want hate mail.
I get enough of that as it is.
But we spend too much time, I think, working on
on some of the little things, you know, the again,
the, the,
the chemistry and the
and the seed and some of those things.
And it ends up being not that big a deal.
The big line items are land and machinery.
(14:12):
Those are the two largest line
items that we need to spend the most time on.
I want to get into how you, do that.
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You just said something really interesting.
The average farm person doesn't look at that.
And they instead look at.
Oh, well, we need to go and beat up our suppliers.
And like you said, beat them up.
(15:37):
So you're getting a couple bucks an acre.
But machinery extrapolate over
the operation is a big expense.
And as you said, yeah,
there's some deals for cheap machinery.
But, you know,
I read a lot of personal finance books.
And one of them talks a lot about that.
The person that's
perpetually broke always has this, the shiny object
they went and bought.
But it's always the same story.
(15:58):
Yeah, but I got a great deal on this
while you're broke.
I got a great deal this.
No spending more.
But saying that you got a good deal on it doesn't.
Doesn't mean you're going to get out of brokenness.
There's a lot of machinery
that's sitting on the farms in America.
And I could argue that many farms are over equipped
(16:19):
because farmers like machinery.
Let's go to Louisville, North American Farmers
Union show. I mean, they love looking at this stuff.
It seems to me
a lot of operations could pare back on machinery.
And all of a sudden that
that a couple hundred thousand dollars, you know,
that, goes from,
(16:39):
being in the red to being in the black. Am I wrong?
No.
Our most profitable operations that that we see
correlate directly
with kind of what you're saying
from the standpoint
of their machinery and equipment, the cost
on a per bushel basis, on a per ton basis,
whatever it is that they're growing per pound.
When we look at that, machinery and equipment cost
(17:01):
on a per unit of production basis,
which is how you have to do it.
I mean, a lot of people
look at per acre
because that's how we've always done it, but
it just because that's how we've always done
it doesn't mean that's how we should.
We should be looking at production, correlating
that number to production and saying,
you know, where am I at?
And so when we look at a producer,
just use corn as an example specifically,
(17:23):
you know,
if we look at a corn producer and he's spending,
he or she is
spending $0.86 a bushel for machinery and equipment
and the neighbor's
spending $0.63 a bushel for machinery and equipment,
who's going to stay in business in a downturn?
Yeah.
You know, all of a sudden
that cost production
has a direct correlation to profitability.
(17:45):
But I think what happens a lot of times is
those measurements are not being completed
or they're not being done,
because like you said, it's
it's it's more fun to be in the shop.
And I think as farmers, we're all guilty.
I would much rather do the $30 an hour
jobs than the $500 an hour jobs on the farm,
because they're more fun.
However, the money is made
(18:06):
when you're doing the $500
an hour jobs in the office.
You know, working,
working on your marketing, working on your
your relationships with landowners and,
and those types of things in your fleet management.
You've said that before, by the way, that,
you know, we we focus on the $30 an hour job,
on stuff
for,
you know, driving a piece of equipment
as opposed to sitting at your desk
(18:27):
and cranking out the spreadsheets and,
then looking at your, your, your PNL statements.
You talked about then
a strategy of, land management.
Now, I,
I host the,
Halderman Real Estate and Farm Management,
quarterly webinar.
(18:48):
I keep
very much in touch with what's going on at land
values and cash rents there due to stay,
even equal, even,
the next year.
And if I was a landowner,
if one of your strategies was,
maybe you should meet with your landowner and say,
hey, I'd like to I'd like to look at,
(19:10):
bringing my cost down.
I think you run the risk
of absolutely getting replaced as, as a tenant,
if that's the case, because there's a lot of
there's a still
a lot of pressure,
to grow acres, among these operations.
So you said maybe she's going to have a conversation
with your landlord tenant. I'm sorry, your landlord.
I don't disagree, but I think there's a
(19:31):
there's a risk of,
Well, I think you get told.
No, we're rents the same.
And you say, well, I don't want to pay it,
then I think you get replaced.
I think that's a real risk.
I don't know if I would
if I would look at that as a strategy,
because I think there's
still a lot of pressure on these acres, am I wrong?
Well, I would argue with that to a degree,
because I think it's about being transparent
(19:52):
all the time.
So I'm not talking about being transparent when the
when the shit's in the fan.
Excuse my French, but you know, I don't
I don't think that's when,
you know, when the conversation begins and ends.
I think the conversation begins
and lasts throughout the up and downs,
and I think transparency is is the key.
(20:13):
I mean,
the farmers listening to
this, the farmers
that are listening to this
and the landowners listening to this,
some, some people do not want transparency,
including some of the farmers.
Sometimes you'd rather be happy than informed,
you know.
But on the same token,
I think being informed on in the long haul
and being able to and willing
(20:34):
to, share in that in terms of,
I mean, some of the best leases we see are
still are some a lot of crop share out there.
I mean, you don't hear about the crops here,
but we still have a lot of clients
that have 50/50s, 60/40s,
you know, different types of crop share
because there's trust
the with the tenant and the and the,
you know, and the owner.
(20:55):
So I think
I think that has a lot to do with with it though
is is the relationship that you build.
And, you know, if you think about,
you know,
if you're a landowner
that has five different farmers,
the ones you like the most
or the ones you feel the most comfortable with
are the ones you talk to the most
because you have a relationship and you have trust.
(21:15):
And trust
is the
is the cornerstone
in the backbone of making that work.
And people work with people.
And then
the other thing I always tell farmers,
and I tell people who are in sales
this all the time, is
there are decision makers and there are influencers.
When you're trying to sell something or when
and which is what you're doing.
When you're renting the ground,
you're trying to sell yourself.
(21:36):
And when you do that, you have to understand who the
who the
decision maker is, first of all, but secondly,
who is in the background? Is the influencer.
Is there a spouse there that that's like, you know,
you shouldn't be doing that
or you should be doing that, you know,
and are you having conversations with the influencer
that's going to actually probably sway the sway
(21:57):
the decision one way or the other.
But I don't know.
I've seen some pretty good, pretty good luck.
And there are going to be the land owners
that really don't care. That's called market value.
They're going to say the neighbor down
the road is going to pay that.
That's a decision
that the producer has to make,
and then the producer also has to.
Then do you know, the margin contribution calculation
(22:17):
and say, okay, well,
if I did give that up now, I can't spread my six
costs out over, over as much as acres.
And then I think that's where
that margin contribution comes in.
And you decide either I keep it or I let it go.
But a lot of these,
a lot of these land deals
anymore, farmers are picking up
a thousand acres at a time.
That's not a and that an 80 or a 160.
(22:38):
It's more like,
you know, 500 here and a thousand there.
So very big decisions.
Yeah.
Hey, by the
way, I want to hear
more about the strategies to,
the smart farmers are using to weather bad
ag economies.
And, we're going to get to that before I do.
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We're talking right now about strategies
that smart farmers use to weather bad ag economies.
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(23:44):
They told me they said we've got enough ag outreach.
They said in 2025 we’re not going to sponsor you.
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You could have been right there.
All right, full disclosure,
what, what about loans?
When you talk about debt management, you know,
there was 2% money, 3% money, 4% money.
(24:07):
Now it's like 7% money.
If I if if I've got borrowed money at current rates.
Hell, I just got something from farm credit.
Tell me that
if I use a line of credit from them,
it'd be like 8% money.
I'm not sure that I can.
I'm not sure I can make 8% money work.
So am I am I hurting myself if I just,
borrow new money right now?
(24:29):
I think it depends on the rate of return.
I mean,
all those things
got to be looked at specifically, but I mean,
again, I, you know, to me,
I would say that, you know, the days of two, three,
4% interest are probably long gone for quite
a while, unless something
majorly happens in the
economic environment from a macro perspective.
(24:52):
And so I think we have to recalibrate our decision
making at 8% interest or 7% interest and say, okay,
any decision that I make,
is it feasible with that level of interest rate,
whether it's short term, long term for me.
But I also think, you know, back to short term money.
You look at lines of credit.
(25:12):
We see one of the big things, you know,
that a lot of producers could do is, is that is
we have a tendency to sit on inventory way too long.
And you always hear marketers
talk about capturing carry,
you know, or the, the, the pundits talking about,
you know, try to capture that carry when it's there.
The carry in my opinion, never gets to be enough.
(25:33):
Hardly.
If you're borrowing money
because you know, you're what you're you're betting
audience
the com you're betting on the price to go up.
And a lot of times
what happens is
you have the risk of it
because it can go either way, right.
So it can go down to and
and so there is a cost of carry.
And we have a cost calculator
that we use with our clients all the time to say,
(25:54):
hey are you justified,
justified in sitting on this inventory
when you're spending and we break it
down, the cost
per day for inventory,
you're not talking about supplies,
you're talking about grain.
I'm talking about,
yeah, grain or cotton
or I don't care whatever you got in cattle, I guess.
But yeah,
yeah, in grains the worst,
because you can hang on to it too long.
(26:15):
Yeah.
And so, you know,
and so there's a cost to sitting on that.
And, you know, I'll talk to a producer
and he'll be like, well,
I got $1 million on line of credit
and well, how much inventory do you have?
Well I got, you know, 200,000 bushel in the bin.
But I'm waiting for,
you know, $0.25 increase here yet.
Yeah. Or whatever.
Well, okay, let's do the math on that at eight.
(26:36):
Are your 8% interest on your line of credit?
You know, it's costing you $322 a day
or whatever number is,
you know,
the in when people start
thinking about
in, in cost per day
that you check out every day for that amount
or every month for $8,700 a month,
they would start thinking differently about it.
And so I feel like our role
(26:57):
a lot of times is to just to be the perspective
and say, let's
think about this in some different ways, to motivate
you to,
you know, to, to maybe not sit on that inventory.
As long as I think we do and I think,
you know, sometimes to
I've had a lot of younger producers
call me in the last year
that have, experience
(27:18):
seeing losses for the first time.
And it's shocking to them
that, you know, they've gone through, to your point,
you know, four years of really good times
of making money.
And now all of a sudden
there's a loss, what am I going to do?
Well,
we're going to average the last five years,
and we're going to look at
how much money we made in the last five years.
And hopefully you didn't
spend everything you made in the last four years
(27:40):
so that we can weather the storm
and catch it on the other side again.
And I think that's really the key is, is, you know,
don't get all depressed because we had a crappy year,
but feel blessed that we had a few good years
and manage that working capital.
It's back to, you know, and I brought up,
you know, capital freeze.
But that's just one one piece of a big equation.
(28:03):
We're going to managing working capital.
I want to wrap up on inventory management of grain.
You think that there's a lot of producers
that they know
they've got a bin out there
and it's got grain in it,
and they look at that as an asset.
But it also can be a liability
because it's it's causing something to store it
because the bin is not free.
But also if they're obligating,
like you said,
8% money or 7% operating loan on the one hand,
(28:24):
and this is over here.
Well yeah, it's going to get valuable maybe.
But also it has to go up like to your point
that grain needs to go up by $0.40 to offset
what you're paying each day over here.
Maybe you should just unload it.
So you say there's
at least be cognizant
of what it's costing you to carry it.
And then there's also opportunity costs
(28:45):
for those who aren't borrowing money.
You could turn around,
go to Vanguard and put it in a Vanguard money market,
and you can take it in
and out the same darn day for 4.6% on.
Well, yeah, it was money.
It was to almost 5.5% at one point.
So you know.
Yeah, I mean, you know, is your grain going up?
Is your grain going up at 4.6%?
(29:06):
Who knows.
Nobody.
I mean that's that's the question you're asking.
Right? Right.
I mean, you're, you're you're
so just by by what you're saying
there is opportunity costs.
Am I talking about a $4 bushel,
right.
Yeah.
I mean, it depends on on the scenario, I guess.
Not sure the questions, but.
All right, the point is, it does need to go up.
(29:26):
It doesn't need to go up $0.20.
Compared to what you could put it in,
you know, hope to get a 5% return.
Well, that's just it.
I mean, and the problem is, is,
you know, a lot of times,
I think we have a tendency to have a price target
instead of a margin target.
Nobody knows for the price is going out.
You can be the best broker in the world,
and you don't know any more than when you can send
(29:49):
send Damian the hate mail to here.
But you know,
you can be the best broker in the world.
Or you can be the farmer that doesn't know anything.
Or a monkey for that matter,
and throw darts at a wall
and probably be just as accurate on on
where the price is going.
Because there's so many variables in today's world,
and we're in a world economy
and there's so many things
that can change it up and down instantaneously.
(30:11):
And so if producers have a margin target,
if they know their cost of production
and they feel like it's it's a, you know, it's a very
they're confident in that number, then set a margin
target and say, okay what what am I willing to take.
And there's years like possibly this next year
that you're going to take a loss.
But how much of a loss are you willing to take?
(30:32):
I mean, are you willing to sell?
And I'm not saying you sell at a loss,
but some years we have to minimize the losses
and not make money.
But we got to minimize the downside.
And there's lots of tools to use too.
I mean, that's kind of what those brokers are for.
But I still think you need to really know
your cost production first
and have it dialed in accurately.
There's difference between
knowing your cost production and having it accurate,
(30:52):
and then once that's dialed
in, then then set a target margin target,
not a price target that all right.
Managing working capital.
This is a topic that we cover a lot,
and I hear a lot in agriculture.
And you said the first thing is just stop spending.
You know,
you can probably hold off on some big spends. Okay.
That I think that most ag operators
get that, you know, that's why we see less John Deere
(31:15):
being sold and whatever.
But
managing working capital always sounds intimidating.
What's that mean? What's my working capital?
How do I manage?
Well, first of all, it's understanding
how to calculate it and what it is.
It's your
you know,
it's your current assets
minus your current liabilities.
And it's that dollar amount
(31:36):
and there's a thousand different ways to look at it
in terms of ratios and dollars per acre.
And all kinds of different ways depend on what you're
what your production is.
But I think the biggest thing is, is just a
is not to worry about what everybody else is doing.
And I struggle a lot of times
with with benchmarking in banks
have to do it a lot too.
(31:57):
Or they,
they choose to do it
rightfully so, because they want to see where
their, their clientele are at in terms of,
you know, a solid cash flow and a solid working
capital position
versus, you know, our lowest one and our highest one,
and then grading the people in between. I get that.
The problem is, is, you know,
(32:18):
we've got operations
that don't have hardly any working capital.
They're cash flowing just fine
because of how they operate
and what their business model is.
We've got some that have a ton of working capital
that are probably going to burn through
it in the next two years
because they're
not able to cash flow and
and they just start burning.
They just start borrowing against assets.
(32:40):
Well, the thing that the biggest thing that affects
it is what I brought up in earlier
in the conversation is, is not having a good handle
on that debt service number
that they have to accomplish.
And and if they
and if there's not enough revenue coming in
because cash flow is going to be king
in the next couple of years
and maybe the next five years,
I don't know who knows
how long a downturn is going to last,
(33:01):
but you better be prepared for 4 to 5 more years.
You know, as we record this at the end of 2024.
I mean, it's not a prediction,
but they seem to last a while.
Yeah, for various reasons.
And so I think if we can make sure that we don't get,
you know,
we just got to figure out a cash flow
I guess is what I'm saying,
because a negative cash flow
(33:22):
is what burns up that working capital.
Yeah.
Because I mean, obviously if you're if your expenses
are greater than your than your, revenue,
then you just start borrowing against assets,
which obviously most
farming operations are pretty asset heavy
real estate and capital improvements.
Yeah.
And that and that I think is a fallacy sometimes too,
(33:42):
where people
look at their balance sheet
and they've got a really low debt
asset ratio, but their cash flow sucks.
Well, that means that at some point
they're going to have to
they're they're going to have to reallocate that debt
and shore up and bring some liquidity back
into the business.
And you're talking about 8% interest.
Now all of a sudden
we're going backwards pretty fast.
(34:02):
So I think we got to navigate that.
And you know, you asked the question
a couple of times.
You know, what do you do about that?
I mean, one of the things that we see
some operations doing is,
is figuring out
how to bring additional revenue into the farm.
So,
you know, diversification is kind of a bad word
sometimes.
But on the same token,
you know, the operations that we see, besides
(34:24):
the ones that are really good marketers
and really good producers
are the ones that have other
revenue streams coming into the business via
a spouse or another family member,
you know,
and then telling my audiences,
and I'm going to tell your audience
when I'm
speaking to your audience in Florida, January 23rd,
that agriculture in our lifetime
(34:47):
went from diversification - production agriculture
in America
- from diversification,
diversification to specialization.
And now to survive.
When you look at diversification again,
diversification when you and I were born meant
you milk cows, you had a grain farm,
you on your rough acres,
you had some beef cows, calves and you,
maybe had a feed yard.
(35:08):
You had, chicken barn.
And if you were really diversified,
you also had a, a wife
that was either a nurse or a teacher, which,
which I always make the fact that farmers,
if the per capita farmers
married to nurses and teachers.
Great get insurance and you get diversified revenue.
Right.
But diversification
I don't expect these farmers
that I'm going to talk to it.
Your audience are going to go
(35:29):
and build a little hen house,
or put, a watermelon stand in their driveway.
And diversification in modern agriculture
for revenue purposes might be
you have a trucking company,
you own storage units, you own,
a a retail business in town.
(35:49):
I mean, because you've got to insulate yourself.
And I really think that we're going to go back
to it's
a different type of diversification
from the specialization
that got us to where we are now. Yeah.
And you know you got to look for
those that are synergistic to, to your business.
You know,
what are the core competencies that your staff has.
I mean we
we do a lot of strategic long term strategic business
(36:12):
development planning
where we'll look at that and we'll say,
okay, we're short on revenue, but we have this,
you know, the staff that's in your shop.
Just use an example for one
that we're working with now,
who has this phenomenal ability
to do repairs and maintenance.
And now all of a sudden, you know,
your fleet is newer, needs less of that stuff.
(36:34):
But there are operations in the area
that you can bring 2 or 3 combines
through your shop right
at lower than what the equipment dealer can do it at.
Yeah, yeah, good deal for the neighbor.
And all of a sudden they're,
they've got a,
you know,
they've got a repair and maintenance facility.
Now they're employing their staff
and they got those things going on.
We got another one that has lawn care business.
(36:54):
We have another one, you know.
So they
are they
synergistic with your core competencies in your team.
Because I think sometimes
what people will do is they're like, well,
we're just going to not have help anymore,
you know, or whatever.
And I'm a firm believer of you,
if if you find somebody that has passion and loves
what they do and they want to be there,
you hire them
because you will find something for them to do.
(37:17):
And that's where that diversification comes in.
All of a sudden,
there are ways,
whether it's, like you said, the trucks or whatever,
different.
There's all kinds of different things
that we see people getting pretty creative on,
and those are the ones that,
you know, they're their
balance sheet,
that they're they're earning equity
every single year.
Even on these downturns.
I've got your strategies.
(37:39):
Capital freeze for one year, debt service.
Understand all your numbers.
And you also even broke that out is
what's a short term
loan like, operating what's, intermediate?
What's a long term like land loan?
Machinery management on the expense side,
we agreed that there's probably still more.
(37:59):
More machinery per
unit of output than there
needs to be on a lot of farms.
And that's somewhere
that they could really ratchet things down.
Landlord relationships and, having conversations
about cash rent, inventory management of grain.
What is it, managing your working capital?
It really means you better make sure you're.
It's really managing.
Working capital should be returned.
(38:20):
Make sure you're cash flowing positively.
Because if you're not,
if your expenses are greater than your revenue,
you're going to just continue
to eat into held assets and borrow against it until
your assets are leveraged to to the hilt.
Diversification of revenue.
Next one.
So another one that I think superior -
If you’re listening to this,
by the way, Chris, out of that period.
(38:40):
But you're watching it.
He just kind of looks over.
He just kind of he almost looks like he's been tired.
And I want you to watch this because I'm on YouTube
and you really need to subscribe
to my YouTube channel.
I'm also on Acres TV
and I want to grow my following on YouTube.
So please subscribe there.
Just go to YouTube and type in Damian Mason channel.
But if it's purely you say
I look tired, I don't feel tired, but well, you.
I don't know man.
(39:00):
You're calling
these talking about numbers too much, I suppose.
Yeah, well, could be,
but I guess, you know, you're up.
The other one thing, though,
that I think
is really key that we haven't mentioned yet,
and I was kind of holding off on it is,
is the the lender relationship and the lender
the lender relationship is directly correlated to,
(39:24):
how you communicate,
how often you communicate and what you communicate.
So it's it's the data that you have
and it's and it's having a conversation
from the lender and asking the lender,
what is it that you need to see?
In other words,
instead of you going to the lender with the stuff
you think they're going to need, which, by the way,
when you get into a downturn,
(39:45):
the scrutiny goes up
and the requirements of how much you have to bring
and what you need to bring increases.
But it's having that conversation
well in advance and saying, what is it that you need?
And then you do the work, not the lender.
It's not the lender's job to do your cash flow.
It's not your lender's job
to do your trends, analysis, all that kind of stuff.
You should be doing that trend.
Those trends analysis
(40:06):
and all those things or something.
If you don't know how to do it, your lender's
doing it.
Talk to your lender
and start learning from the lender.
The lender wants you to be educated,
and the lender will help you
be careful with lender advice.
With all due respect to lenders,
because, you know,
I think
you have to be the executive of your business.
The lender isn't the lenders just loaning you money?
But you need to make sure that the data
(40:30):
that you provide is accurate
and that you communicate often too, in that,
you know, when I talked about the capital freeze,
if you're going to buy something
in these sorts of environments,
make sure you have a conversation
with the lender, regardless of what it is.
It's good just to pick up the phone and talk to them
and have that relationship.
And then the last thing with that,
the people that we see that have the data in place,
(40:52):
it doesn't matter what their debt to asset
ratio looks like unless it was horrible.
But almost everybody we work with
has a pretty solid balance sheet.
But if you look at that,
the ones that have really good information, really
good data to their lenders
on average are running about
three quarters to a point
lower in interest rates
because they're a better loan.
(41:13):
You know,
they're a class A loan instead of a C or even a B.
So they can, you know, and people think, well,
I can't negotiate interest rates. Yes you can.
You absolutely can.
And the key thing to do
is, as you said, to keep doing
that is communicating with the the lender
and saying,
here's my numbers, here's how things look.
And being very forthright about what
(41:35):
the numbers are and a position
and being professional.
And then all of a sudden
you said your 0.75 lower on interest rates
than the guy down the road.
And over $1 million.
That's big money.
It's huge money.
And, and and then compound that over multiple years.
You know, you're buying a farm
that the neighbor can't buy.
So I mean it's it's it just pretty common sense.
(41:57):
I mean, a lot of this stuff that just common sense,
but a lot of it's discipline to a lot of it's,
you know, it's
not as much fun to sit down at the desk
and do a strategic plan.
It's not as much fun to sit down
and do a spreadsheet as,
you know, as some of the other things we can do.
But but those are the $500,000 an hour tasks
that need to be done. Yeah.
(42:18):
All right, I got eight things. Is that the.
Is that a list of strategic,
strategies for the smart farms used to weather
bad economies?
I think that's all of them.
I had a bunch of stuff jotted down,
and I think that's that's the majority of them.
How many farming operations
do you work in consult with, three dozen, two dozen?
More than that.
(42:38):
I mean, we have a lot of operations
that we've worked with
over the years that we sort of graduate,
and then they come back
if all the things are going on.
So over the years,
we've
I know for a fact we've worked
with over a thousand operations,
but we have four of us that are working
with operations now,
and we each work with about, 25 each.
So about 100, about 100 right now in a given time.
(43:01):
And you've obviously got a breadth of experience.
You've been doing this a long time
and you farm yourself and you have your,
you know Ag View Solutions.
And so you've got a lot of things going on.
So, we call this the business of agriculture.
And I started this eight years ago
and I said, we're going to
this is not going to be bumpkin talk.
This is going to be intelligent,
business minded stuff.
So even if the person listening this is not a farmer,
there's a very good chance they're an ag professional
and they are
(43:22):
still tied to the family operation
in Illinois or whatever.
So I want you to give a couple of thoughts here.
When the thousand operations
you've worked with in your career,
the how do you work with right now?
Give me a couple of golden threads that run
between the successful ones.
Is it?
I mean, I know
we talked about these strategies right here.
Is it a mindset?
(43:42):
Is there a management?
I'll give you mine.
One thing that I think is always very powerful
when I look at successful farming operations,
they don't let the kids come back into it,
like the day they walk through the commencement
at their high school.
They make them go away for a while
and make some mistakes, but also learn and see
and then bring them back.
(44:03):
I'll give you another one.
They treat it like a business.
They absolutely don't just treat that.
Oh yeah.
Well, you know granddad not as great legacy is cool.
But they run the farm out of business.
So I'd say management of the kids
coming back into operation
number one,
meaning you don't always do it
without having gone away.
Number two,
they absolutely look at the business, all the time.
(44:23):
And number three, I think that
what I like about the successful farming operation
I see is a worldview versus
what's the neighbor doing?
What's the neighbor?
I swear, we know that this happens.
You and I have been around these people.
If you're focused on the neighbor,
if you just or you wake up
worrying that they're driving to the field,
oh, God, they're in the field. And I'm not.
(44:43):
If it's all about judging the neighbor
and chasing the neighbor and competing the neighbor,
you're screwed.
The farming operations
man is the kid coming back to operation
number 2 or 3 is business number three.
Worldview versus neighbor gossip view.
I'll give you a couple more.
Those are all excellent.
A couple more that we see that that are threads
(45:04):
to your point that really lend themselves to
very successful
operations are operations that that are families
farming together
that can differentiate
the governance of family versus business.
So they have governance.
So when they get together for Thanksgiving,
they're talking about the farm
because they do that in a professional environment
(45:26):
and they separate the two.
And so then the family legacy
has an opportunity to go on
because they're not bitchin at each other
at Thanksgiving.
About something that they should have talked about.
That was an issue four months earlier.
So separation of that. That's one.
The next one is ... by the way.
Excellent, considering we're
recording this at the holiday time.
And a lot of people listen,
(45:46):
this just came through the holiday time
and there was awkward moments.
Again, there's farm
and there’s professional
and there’s personal
and if you're in a farming family operation,
learn to separate the two.
I love it, yeah.
And we've been talking
about financial this whole time.
The majority of what I'm doing anymore
is legacy planning and, you know, and and transition
(46:07):
and collaboration.
But the next one is communication.
They have crystal clear roles and responsibilities
identified for everybody.
That's that's on the team.
They have clearly defined expectations
and clearly defined decision rights.
So again, it's a communication dynamic
that that sets themselves
up for the business to be successful.
(46:29):
Because you can get all the math right.
You can get
you can have
all the money in the world and people
screw it up over and over again.
If you don't,
if you don't structure things correctly for the
for the team health and for the team management.
So that's that's one, two other ones,
having a clear vision.
So that carries on with the communication.
(46:50):
But what is this business
going to look like in ten years?
And having everybody pulling the rope to that target,
you don't go out to a gun gun range and shoot
just in the air.
You have a target
and you shoot for a specific place
on that target, too.
So it even gets more granular than that.
And so that's that's that one.
And then the last one is, is clean data.
(47:14):
The data they have is accurate.
It's not fudged.
It's not you know,
and the only thing I would say there,
the one caveat there is
sometimes those operations
that have really clear and clean data
have information overload.
So you got to be real careful.
There's a balance there between information overload
and having really clean data.
(47:34):
So it's again it's like asking
what is it that you need to know.
Spend the time getting that information.
Because if it doesn't correlate
to a return to the business,
why are you building the spreadsheet?
I'm guilty of that myself.
Sometimes I'll sit down
and I'll build something out
and I'm like, okay, how am I?
How is this going to make me more money?
So you got to be real careful
because there's a balance there.
But those are kind of the four things
(47:55):
that we see
that sort of correlate to,
to very successful operations.
I love them all.
I data, I get it, but, that becomes,
that would be my, my least favorite thing
to break into there,
because that's sort of,
the accounting minded person, vision.
Love that.
A successful farming operation.
(48:16):
When we talk about
whether the bad economy is to have a legacy,
to be here, to occupy tomorrow,
what does that look like?
Well, yeah.
Go do it.
I mean, no, it's so it's not just.
We've got to milk the cows again tomorrow. No.
What's it, what's what's what's a year look like.
What's five years from now look like I love that one.
Communication rolls expectation.
And the decision makers.
(48:36):
I came from a farming operation
that absolutely had none of those things,
so I can clearly appreciate that.
And then obviously,
the separation of farm and family.
That's fantastic.
So your four are better than my three.
But you said my three were okay.
Yeah. They were excellent.
And and I think it's a combination of all the above
I think you know, you go back and listen to this.
I bet that's what I would recommend to people.
(48:57):
You go back
and listen to your three and these four,
if you do three at three out of the out of the seven
things next year you'll be successful.
And then you just keep chipping away at that stuff
because we can't fix everything else on either.
So you kind of got to pick that.
What area, you know, is going to, you know,
give us the most return
for our time for our investment.
Because time is one of those things too, that
(49:19):
that a lot of people don't measure.
And last time I checked,
they're not making any more of that.
You can make more money,
but you can’t make more time.
And I think that's the other thing
too, is people that are successful
know how to manage their time really well.
And as you said, look, view, view time, like
you said it three times already.
Are you viewing your
are you using your
are you applying your time for a $30 return
because you love going out and driving a tractor
(49:41):
or because you're avoiding the office
where your hour is worth
$1,000 of managing the things
we've just talked about. So I like that.
His name is Chris Barron.
A company called Ag View Solutions
got a podcast called Ag View Pitch.
I've been a guest on it, it's great, good stuff.
It talks a lot about numbers.
He’s a consultant to successful farming operations.
He also has an executive conference
I'll be speaking at on January 23rd,
(50:03):
down in Florida
at the Hollywood
Beach, Margarita beach, Margaritaville.
Margaritaville in Hollywood,
Margaritaville in Hollywood, Florida.
Yep. Yeah, I've been there before.
It's going to be a good time.
Anyway. So much. Thanks so much for being here.
By the way,
my new show, The Granary in conjunction
with the, guys at XtremeAg is out.
If you like my show the Business of Agriculture,
you're going to like it.
(50:23):
If you like listening to guys like me and Chris talk,
you really should check out the Granary.
It's a show that is shot from my Granary.
My on farm hang out,
the 1800s era building that I converted
my man room with.
You know, a table sitting there.
It might be some adult beverages
being served in the background.
And we talk about real, issues
impacting agriculture.
It's real talk.
It’s authentic,
(50:43):
you can find it on the Xtreme Ag YouTube channel.
Or you can find it
at XtremeAg.farm, that’s
XtremeAg.farm without an “E” on the front of it.
So check it out.
It's mine.
It's my new creation I'm really excited about.
It's called the Granary.
Eventually,
maybe we'll get Chris Barron to join us
in the Granary for some of this kind of talk.
Sounds good.
What kind of an Iowa guy can lower himself
to go into Northeast Indiana.
I mean, we've only got like eight inches the top,
(51:04):
though, not eight feet.
Like, you and I spend a lot of time in Indiana too.
So yeah, I'll I'll swing in,
especially if the beer's cold.
It always is.
All right, till’ next time, thanks for being here.
He's Chris Barron, I'm Damian Mason.
If you want to find out
more about your company that they go to,
where do they find you? AgViewSolutions.com.
AgViewSolutions.com. Till’ next time.
Thanks for being here.
I'm Damian Mason
and this is the Business of Agriculture.
(51:24):
Hey, thanks for being here.
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Strategies that smart
farms use to weather bad ag economies.
That's the subject of this episode
of the Business of Agriculture.
Hey, Damian Mason here with a question
before we hop into this episode
of The Business of Agriculture.
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Hey there!
Welcome to another fantastic
episode of The Business of Agriculture.
I've got a great one for you today
(01:31):
because I got a great guest,
name is Chris Barron with Ag View Solutions.
He has a podcast called Ag View Pitch.
I've been on it. He's been on my show multiple times.
He's been a client.
In fact, I'm gonna be speaking at his, Executive
Summit that he has for business
minded farming operations.
It's going to be in Florida.
January 23rd is when I'm going to be on stage.
It’s a great event.
And also, Mr.
(01:52):
Barron is a farmer himself,
and he runs professional networking groups are not,
professional peer groups,
I should say, within agriculture
where, maybe ten farms, five farms,
getting what it is,
then, get together
and actually share data, share
information and hold each other accountable.
So he's got a lot of really good stuff going on.
So he works with some of the brightest and
and best farming operations in North America.
(02:14):
And he helps them survive.
He helps them strategerize.
It's a George W Bush word.
Strategerize is not really a word.
He helps him strategize on how to be, successful.
You know, we talked about occupying the future.
We're talking about being here.
By passing on that legacy.
And the first thing you have to do
is treat your farming operation as a business.
(02:34):
So I've been fielding a lot of questions, Chris.
Holiday time.
Hey, Damian, you're an ag guy.
I just read that ag economy is really bad.
What's going on?
I had somebody say this because of the drought.
I said no, it's
because of overproduction of commodities.
I thought we were in a drought.
I’m like, yeah.
We're so damn good at making commodities.
Even in a drought, we can make too many of them. So.
So that's the really the big picture.
(02:54):
So strategy
smart farms to deploy to weather bad ag economies.
You've been around a couple of bad agri economies.
You're you're no spring chicken.
This isn't that bad.
Here we are wrapping up.
2024 is the first downturn year after three record
income years.
It's the concern about what might happen because
usually ag downturns last five, three, seven
(03:19):
years.
Yes.
A lot of times it's 4 to 7 years.
If you go back and look,
I've been through personally myself
economically as a producer
and also as a consultant working
with producers on financials.
I've seen this movie.
I'm going into the fourth repeat of this movie.
(03:40):
All the sequels are pretty similar.
They're not usually,
or at least have not been as deep as the very
first one I was in,
as a kid, you know, in the 80s or whatever.
You know, I was a kid then, and it's.
But I do remember that.
Well, doesn't mean you didn't go through it.
I can tell you that
(04:00):
when we say a downturn might last 4 to 7 years.
Chris, 81, literally, the shit hit the fan.
And it didn't get better until maybe late 90s.
I mean, that was essentially a 15 to 20 year bad.
Yeah,
but what it did was it created a lot of consolidation
(04:21):
and it created
some opportunities for entry level operations
that that were able
to get in and able to grow
right out of the right out of the chute.
So I kind of changed the trajectory
of some things, too,
because we have some operations that started
in 83, let's say 83, 84,
and are massively successful today
(04:43):
because they started in that difficult environment.
It's kind of like
if you go to Vegas
and you win money
the first day you're
there, you're screwed
because you're going to give it all away the
rest of the time.
And if you show up and you know you have a struggle
and I always say, you know,
to me, these difficult times
and you can quantify
it is difficult to whatever degree you want.
(05:05):
Yeah, but challenging times always make us better.
We do not get better with, you know, $8
corn and, you know,
$14 soybeans and
and high dollar wheat and cotton and all this stuff.
We don't get better with high prices.
We get better with low prices because that forces us
(05:26):
to do
what we should be doing
and be a business first, and just happened to farm.
And so I think there's a philosophical adjustment
that in every single one of these downturns,
there's a psychological adjustment
and behavioral changes that occur.
And that's why I think the industry,
each time we go through one of these troughs, handles
(05:47):
it better. Each time.
And I think that's the main reason
is because we learn and we change and we improve.
And if we don't, we're out of the picture anyway, so
we're out of it.
I think the ones that are in it now,
there's going to be people that are going to fail.
But I think the ones that are in it
now are just going to have to recalibrate
for a while, like we do in every single downturn.
(06:09):
We control the controllables, you know, manage your,
your opportunities and,
and be smart about capital expenditures.
That's the big thing.
I think a lot of times people, you know,
something that my, my dad told me one time,
if you're digging a hole and you can't get out of it,
stop freaking digging, first of all.
And, you know, and that's what I think.
(06:31):
And I get teased about this
sometimes from some clients, but it's like,
go on a capital freeze for a year.
I bet you that
if you don't buy anything for a year,
you'll still be in business next year.
And so just stop frickin spending for a year
and and fix some things, update some things,
spend some time focusing on what you can control,
and then launch back into it again.
(06:53):
And there's just some sometimes we have to reset.
And I mean sometimes
the computer does not work quite right.
Sometimes you have to do a hard reset.
And I think that's a different business.
All right.
Well first off,
I've, I've had a couple people more,
of the less business minded agricultural people.
And there are those
they don't tend to tune into this show
because we talk about business, money,
(07:13):
finance and business aspects of it.
But you and I both know
there
is this notorious group
within production agriculture in America.
It's the co-op crowd.
It's the it's the go to the coffee shop
and their bib overalls crowd.
And it's the bitch about the neighbors crowd.
It's the resentful crowd, etc.
they're the same ones when I say things
really aren't that bad, well,
you don't know because you're not a real farmer.
(07:34):
I'm like,
okay, again, we just came off of three of the,
the, the, the record, the three best years North
American agriculture has had
since there's been a thing
called North American agriculture.
One year downturn does not a crisis make
so and especially putting in context
I live through the 80s.
You know, I was out there
feeding those cows
when I was 12 years old, starting in 1981,
(07:54):
when we were obligating 18% interest.
So I can put that in perspective.
It
it AG is an industry that runs for the exits
screaming fire
quicker than any other industry, I swear to God.
Chris. I mean, is that farmer mentality?
Oh God, we're all going to die.
And and it's it becomes a little bit Chicken Little.
So I mean, I'm just gonna start off because winning
(08:16):
bad. Damn sure. Sure. Yeah.
It's going to be is a downturn. Yes.
Is it terrible?
I don't think so.
So I mean, I can
we start by putting things in perspective
and then we'll go through your strategies
because you said your first one
was capital freeze for one year.
It's striking that that's that
that's what you have to tell people because again.
If we were in if we were in year six of this,
(08:37):
a capital freeze for one year wouldn't fix it.
It wouldn't.
You know,
there's with the capital side of it
though, there's needs, wants and wishes.
And I think sometimes those categories get confused.
And, you know, the other side of
what's happening right
now, too, on the capital side of things is,
(08:57):
you know, when we can get to this in a minute.
But the lenders
are going to have more scrutiny in a downturn,
which they should have.
That same scrutiny end up
when things are going really great.
The banks get lazy too.
Just like just like farmers do.
They get lazy on the financials,
because they feel comfortable and and the regulators
don't don't pull on that stuff is the tides up?
(09:19):
Everything's good.
Yep. Why why why why crunch numbers.
Right.
And so now what
we have to do
is, you know, when I say capital freeze,
I mean, that comes with a bunch
of other things, right?
It's like
analyzing your debt service
number and saying, okay, what's
what's my cash flow requirement?
Okay. What's my.
And it can be
it doesn't have to be complicated either.
(09:40):
It can be fairly simple.
It's like,
how much revenue
can I legitimately generate this year with, with,
you know, average yields
or the production
on the, on the beef
or the, the dairy herd, whatever it is,
is my
what is my production
realistically going to give me in the upcoming year?
Okay, run those numbers.
(10:00):
But what we're seeing
that has happened in a lot of cases,
even a lot of these operations that are very solid is
when we make more money, what do we do?
We spend more.
And so that's what's happened in those those three
good years.
You're talking about,
and even to the point where, you know, I would argue,
(10:21):
you know,
we're actually
and are kind of getting into our second year
of, of what
I would call a downturn because of inflation
and increased the cost production.
We still had good
revenue, but our cost production
continued higher, even,
you know,
because we've come through
a pretty intensive inflationary time frame.
Right.
But when we do this cash flow,
(10:42):
I think it's really important
though that
that we say, okay, what is our debt service
and take those debt numbers,
whether it's on land, machinery, equipment,
you know, your short
term, intermediate and long term debts
and put those all in one category and look at that
number and say, okay, this is my debt service number.
Subtract that from your total expenses,
(11:02):
equal that out with your with your income.
And that's where we get in trouble.
Because I think a lot of times
people do the cash flow
and they don't have their debt service in there.
The other the other issue is a lot of times
growers are notorious for you talked about the co-op.
You talked about,
you know, third, I call it third party loans.
(11:23):
So it's the seed company.
It's all of these other, you know, the can
that's the,
maybe the machinery company that that will loan
you money at a quote unquote, lower interest rate.
Now all of a sudden,
you have your line of credit with the bank,
but you have these other third party loans to those
all have to be consolidated in front of your face
and not separated on separate
(11:45):
sheets of paper in the desk
or on the table or whatever.
You need to put that stuff in front of you and say,
this is
what I legitimately have on my line of credit.
Short term, this is a legit what I have
in my intermediate debt, you know, midterm.
And this is what I have long term.
But then consolidate those all together and say,
can I cover this debt service?
(12:06):
Because that's exactly what the banks are looking at.
And again, we're we're just we're business people.
We just happen to farm.
And so we have to do those things.
All right.
So run through
you know we said we're going to talk about strategies
for down the economy.
Bad ag economies.
You talked about
okay.
First off, nobody ever, say
(12:27):
that nobody's
you're not going to go out of business
by freezing cap of one year.
By the way,
is that where the machinery companies
obviously are predicting 30% less machinery
sales in 25?
It's probably already happened in 2024.
That's the kind of stuff you're talking about, right?
The, you know, big steel, or buildings or Farm Road.
(12:49):
Yeah.
And even even right now, I mean, there's really good
deals on used equipment right now
that's really cheap,
but it's like you maybe would tell your spouse,
just because everything's on sale at target
doesn't mean you buy everything either.
I mean, you,
you know, sale
doesn't necessarily correlate to a need.
And and I still think, you know,
when we do a lot of fleet
(13:10):
management with people, machinery
and equipment is the second largest line item.
Expense
if it's the second largest line item expense.
And why do we spend so much time
bugging the chemical guy
to try to save $0.03 a bushel on corn or whatever?
You know, we're we're saving $5 an acre.
Who gives a crap?
Because we're probably spending $30 an acre
by not managing the machinery
(13:30):
and equipment fleet better,
or not having conversations
with the landowners on the cash rent
and having a having a better dialog there.
And and reasons,
examples and details
as to why the rent should be where it is.
And I will pay you more when it's good
and I'm going to be transparent with you
and start working on those relationships.
But we spend so much time
(13:51):
and I'm not picking on every farmer,
and I don't want hate mail.
I get enough of that as it is.
But we spend too much time, I think, working on
on some of the little things, you know, the again,
the, the,
the chemistry and the
and the seed and some of those things.
And it ends up being not that big a deal.
The big line items are land and machinery.
(14:12):
Those are the two largest line
items that we need to spend the most time on.
I want to get into how you, do that.
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You just said something really interesting.
The average farm person doesn't look at that.
And they instead look at.
Oh, well, we need to go and beat up our suppliers.
And like you said, beat them up.
(15:37):
So you're getting a couple bucks an acre.
But machinery extrapolate over
the operation is a big expense.
And as you said, yeah,
there's some deals for cheap machinery.
But, you know,
I read a lot of personal finance books.
And one of them talks a lot about that.
The person that's
perpetually broke always has this, the shiny object
they went and bought.
But it's always the same story.
(15:58):
Yeah, but I got a great deal on this
while you're broke.
I got a great deal this.
No spending more.
But saying that you got a good deal on it doesn't.
Doesn't mean you're going to get out of brokenness.
There's a lot of machinery
that's sitting on the farms in America.
And I could argue that many farms are over equipped
(16:19):
because farmers like machinery.
Let's go to Louisville, North American Farmers
Union show. I mean, they love looking at this stuff.
It seems to me
a lot of operations could pare back on machinery.
And all of a sudden that
that a couple hundred thousand dollars, you know,
that, goes from,
(16:39):
being in the red to being in the black. Am I wrong?
No.
Our most profitable operations that that we see
correlate directly
with kind of what you're saying
from the standpoint
of their machinery and equipment, the cost
on a per bushel basis, on a per ton basis,
whatever it is that they're growing per pound.
When we look at that, machinery and equipment cost
(17:01):
on a per unit of production basis,
which is how you have to do it.
I mean, a lot of people
look at per acre
because that's how we've always done it, but
it just because that's how we've always done
it doesn't mean that's how we should.
We should be looking at production, correlating
that number to production and saying,
you know, where am I at?
And so when we look at a producer,
just use corn as an example specifically,
(17:23):
you know,
if we look at a corn producer and he's spending,
he or she is
spending $0.86 a bushel for machinery and equipment
and the neighbor's
spending $0.63 a bushel for machinery and equipment,
who's going to stay in business in a downturn?
Yeah.
You know, all of a sudden
that cost production
has a direct correlation to profitability.
(17:45):
But I think what happens a lot of times is
those measurements are not being completed
or they're not being done,
because like you said, it's
it's it's more fun to be in the shop.
And I think as farmers, we're all guilty.
I would much rather do the $30 an hour
jobs than the $500 an hour jobs on the farm,
because they're more fun.
However, the money is made
(18:06):
when you're doing the $500
an hour jobs in the office.
You know, working,
working on your marketing, working on your
your relationships with landowners and,
and those types of things in your fleet management.
You've said that before, by the way, that,
you know, we we focus on the $30 an hour job,
on stuff
for,
you know, driving a piece of equipment
as opposed to sitting at your desk
(18:27):
and cranking out the spreadsheets and,
then looking at your, your, your PNL statements.
You talked about then
a strategy of, land management.
Now, I,
I host the,
Halderman Real Estate and Farm Management,
quarterly webinar.
(18:48):
I keep
very much in touch with what's going on at land
values and cash rents there due to stay,
even equal, even,
the next year.
And if I was a landowner,
if one of your strategies was,
maybe you should meet with your landowner and say,
hey, I'd like to I'd like to look at,
(19:10):
bringing my cost down.
I think you run the risk
of absolutely getting replaced as, as a tenant,
if that's the case, because there's a lot of
there's a still
a lot of pressure,
to grow acres, among these operations.
So you said maybe she's going to have a conversation
with your landlord tenant. I'm sorry, your landlord.
I don't disagree, but I think there's a
(19:31):
there's a risk of,
Well, I think you get told.
No, we're rents the same.
And you say, well, I don't want to pay it,
then I think you get replaced.
I think that's a real risk.
I don't know if I would
if I would look at that as a strategy,
because I think there's
still a lot of pressure on these acres, am I wrong?
Well, I would argue with that to a degree,
because I think it's about being transparent
(19:52):
all the time.
So I'm not talking about being transparent when the
when the shit's in the fan.
Excuse my French, but you know, I don't
I don't think that's when,
you know, when the conversation begins and ends.
I think the conversation begins
and lasts throughout the up and downs,
and I think transparency is is the key.
(20:13):
I mean,
the farmers listening to
this, the farmers
that are listening to this
and the landowners listening to this,
some, some people do not want transparency,
including some of the farmers.
Sometimes you'd rather be happy than informed,
you know.
But on the same token,
I think being informed on in the long haul
and being able to and willing
(20:34):
to, share in that in terms of,
I mean, some of the best leases we see are
still are some a lot of crop share out there.
I mean, you don't hear about the crops here,
but we still have a lot of clients
that have 50/50s, 60/40s,
you know, different types of crop share
because there's trust
the with the tenant and the and the,
you know, and the owner.
(20:55):
So I think
I think that has a lot to do with with it though
is is the relationship that you build.
And, you know, if you think about,
you know,
if you're a landowner
that has five different farmers,
the ones you like the most
or the ones you feel the most comfortable with
are the ones you talk to the most
because you have a relationship and you have trust.
(21:15):
And trust
is the
is the cornerstone
in the backbone of making that work.
And people work with people.
And then
the other thing I always tell farmers,
and I tell people who are in sales
this all the time, is
there are decision makers and there are influencers.
When you're trying to sell something or when
and which is what you're doing.
When you're renting the ground,
you're trying to sell yourself.
(21:36):
And when you do that, you have to understand who the
who the
decision maker is, first of all, but secondly,
who is in the background? Is the influencer.
Is there a spouse there that that's like, you know,
you shouldn't be doing that
or you should be doing that, you know,
and are you having conversations with the influencer
that's going to actually probably sway the sway
(21:57):
the decision one way or the other.
But I don't know.
I've seen some pretty good, pretty good luck.
And there are going to be the land owners
that really don't care. That's called market value.
They're going to say the neighbor down
the road is going to pay that.
That's a decision
that the producer has to make,
and then the producer also has to.
Then do you know, the margin contribution calculation
(22:17):
and say, okay, well,
if I did give that up now, I can't spread my six
costs out over, over as much as acres.
And then I think that's where
that margin contribution comes in.
And you decide either I keep it or I let it go.
But a lot of these,
a lot of these land deals
anymore, farmers are picking up
a thousand acres at a time.
That's not a and that an 80 or a 160.
(22:38):
It's more like,
you know, 500 here and a thousand there.
So very big decisions.
Yeah.
Hey, by the
way, I want to hear
more about the strategies to,
the smart farmers are using to weather bad
ag economies.
And, we're going to get to that before I do.
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We're talking right now about strategies
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One of them would be, in my opinion,
looking at a sustainability program.
What if you can get paid 30 bucks an acre
to, implement some changes, strip to, cover crops,
(23:23):
some things that are actually going
to improve your farming operation anyhow,
and you get paid for it.
When you have down economies, you should always
look at diversification of revenue
Truterra can help go to TruterraAg.com/enroll.
TruterraAg.com/enroll.
and I get as I said
I'm not against whoring it out here.
That's the last spot for Truterra
because they don't need ag outreach anymore.
(23:44):
They told me they said we've got enough ag outreach.
They said in 2025 we’re not going to sponsor you.
So if you have a company,
it wants to be a sponsor
of the Business of Agriculture.
You could have been right there.
All right, full disclosure,
what, what about loans?
When you talk about debt management, you know,
there was 2% money, 3% money, 4% money.
(24:07):
Now it's like 7% money.
If I if if I've got borrowed money at current rates.
Hell, I just got something from farm credit.
Tell me that
if I use a line of credit from them,
it'd be like 8% money.
I'm not sure that I can.
I'm not sure I can make 8% money work.
So am I am I hurting myself if I just,
borrow new money right now?
(24:29):
I think it depends on the rate of return.
I mean,
all those things
got to be looked at specifically, but I mean,
again, I, you know, to me,
I would say that, you know, the days of two, three,
4% interest are probably long gone for quite
a while, unless something
majorly happens in the
economic environment from a macro perspective.
(24:52):
And so I think we have to recalibrate our decision
making at 8% interest or 7% interest and say, okay,
any decision that I make,
is it feasible with that level of interest rate,
whether it's short term, long term for me.
But I also think, you know, back to short term money.
You look at lines of credit.
(25:12):
We see one of the big things, you know,
that a lot of producers could do is, is that is
we have a tendency to sit on inventory way too long.
And you always hear marketers
talk about capturing carry,
you know, or the, the, the pundits talking about,
you know, try to capture that carry when it's there.
The carry in my opinion, never gets to be enough.
(25:33):
Hardly.
If you're borrowing money
because you know, you're what you're you're betting
audience
the com you're betting on the price to go up.
And a lot of times
what happens is
you have the risk of it
because it can go either way, right.
So it can go down to and
and so there is a cost of carry.
And we have a cost calculator
that we use with our clients all the time to say,
(25:54):
hey are you justified,
justified in sitting on this inventory
when you're spending and we break it
down, the cost
per day for inventory,
you're not talking about supplies,
you're talking about grain.
I'm talking about,
yeah, grain or cotton
or I don't care whatever you got in cattle, I guess.
But yeah,
yeah, in grains the worst,
because you can hang on to it too long.
(26:15):
Yeah.
And so, you know,
and so there's a cost to sitting on that.
And, you know, I'll talk to a producer
and he'll be like, well,
I got $1 million on line of credit
and well, how much inventory do you have?
Well I got, you know, 200,000 bushel in the bin.
But I'm waiting for,
you know, $0.25 increase here yet.
Yeah. Or whatever.
Well, okay, let's do the math on that at eight.
(26:36):
Are your 8% interest on your line of credit?
You know, it's costing you $322 a day
or whatever number is,
you know,
the in when people start
thinking about
in, in cost per day
that you check out every day for that amount
or every month for $8,700 a month,
they would start thinking differently about it.
And so I feel like our role
(26:57):
a lot of times is to just to be the perspective
and say, let's
think about this in some different ways, to motivate
you to,
you know, to, to maybe not sit on that inventory.
As long as I think we do and I think,
you know, sometimes to
I've had a lot of younger producers
call me in the last year
that have, experience
(27:18):
seeing losses for the first time.
And it's shocking to them
that, you know, they've gone through, to your point,
you know, four years of really good times
of making money.
And now all of a sudden
there's a loss, what am I going to do?
Well,
we're going to average the last five years,
and we're going to look at
how much money we made in the last five years.
And hopefully you didn't
spend everything you made in the last four years
(27:40):
so that we can weather the storm
and catch it on the other side again.
And I think that's really the key is, is, you know,
don't get all depressed because we had a crappy year,
but feel blessed that we had a few good years
and manage that working capital.
It's back to, you know, and I brought up,
you know, capital freeze.
But that's just one one piece of a big equation.
(28:03):
We're going to managing working capital.
I want to wrap up on inventory management of grain.
You think that there's a lot of producers
that they know
they've got a bin out there
and it's got grain in it,
and they look at that as an asset.
But it also can be a liability
because it's it's causing something to store it
because the bin is not free.
But also if they're obligating,
like you said,
8% money or 7% operating loan on the one hand,
(28:24):
and this is over here.
Well yeah, it's going to get valuable maybe.
But also it has to go up like to your point
that grain needs to go up by $0.40 to offset
what you're paying each day over here.
Maybe you should just unload it.
So you say there's
at least be cognizant
of what it's costing you to carry it.
And then there's also opportunity costs
(28:45):
for those who aren't borrowing money.
You could turn around,
go to Vanguard and put it in a Vanguard money market,
and you can take it in
and out the same darn day for 4.6% on.
Well, yeah, it was money.
It was to almost 5.5% at one point.
So you know.
Yeah, I mean, you know, is your grain going up?
Is your grain going up at 4.6%?
(29:06):
Who knows.
Nobody.
I mean that's that's the question you're asking.
Right? Right.
I mean, you're, you're you're
so just by by what you're saying
there is opportunity costs.
Am I talking about a $4 bushel,
right.
Yeah.
I mean, it depends on on the scenario, I guess.
Not sure the questions, but.
All right, the point is, it does need to go up.
(29:26):
It doesn't need to go up $0.20.
Compared to what you could put it in,
you know, hope to get a 5% return.
Well, that's just it.
I mean, and the problem is, is,
you know, a lot of times,
I think we have a tendency to have a price target
instead of a margin target.
Nobody knows for the price is going out.
You can be the best broker in the world,
and you don't know any more than when you can send
(29:49):
send Damian the hate mail to here.
But you know,
you can be the best broker in the world.
Or you can be the farmer that doesn't know anything.
Or a monkey for that matter,
and throw darts at a wall
and probably be just as accurate on on
where the price is going.
Because there's so many variables in today's world,
and we're in a world economy
and there's so many things
that can change it up and down instantaneously.
(30:11):
And so if producers have a margin target,
if they know their cost of production
and they feel like it's it's a, you know, it's a very
they're confident in that number, then set a margin
target and say, okay what what am I willing to take.
And there's years like possibly this next year
that you're going to take a loss.
But how much of a loss are you willing to take?
(30:32):
I mean, are you willing to sell?
And I'm not saying you sell at a loss,
but some years we have to minimize the losses
and not make money.
But we got to minimize the downside.
And there's lots of tools to use too.
I mean, that's kind of what those brokers are for.
But I still think you need to really know
your cost production first
and have it dialed in accurately.
There's difference between
knowing your cost production and having it accurate,
(30:52):
and then once that's dialed
in, then then set a target margin target,
not a price target that all right.
Managing working capital.
This is a topic that we cover a lot,
and I hear a lot in agriculture.
And you said the first thing is just stop spending.
You know,
you can probably hold off on some big spends. Okay.
That I think that most ag operators
get that, you know, that's why we see less John Deere
(31:15):
being sold and whatever.
But
managing working capital always sounds intimidating.
What's that mean? What's my working capital?
How do I manage?
Well, first of all, it's understanding
how to calculate it and what it is.
It's your
you know,
it's your current assets
minus your current liabilities.
And it's that dollar amount
(31:36):
and there's a thousand different ways to look at it
in terms of ratios and dollars per acre.
And all kinds of different ways depend on what you're
what your production is.
But I think the biggest thing is, is just a
is not to worry about what everybody else is doing.
And I struggle a lot of times
with with benchmarking in banks
have to do it a lot too.
(31:57):
Or they,
they choose to do it
rightfully so, because they want to see where
their, their clientele are at in terms of,
you know, a solid cash flow and a solid working
capital position
versus, you know, our lowest one and our highest one,
and then grading the people in between. I get that.
The problem is, is, you know,
(32:18):
we've got operations
that don't have hardly any working capital.
They're cash flowing just fine
because of how they operate
and what their business model is.
We've got some that have a ton of working capital
that are probably going to burn through
it in the next two years
because they're
not able to cash flow and
and they just start burning.
They just start borrowing against assets.
(32:40):
Well, the thing that the biggest thing that affects
it is what I brought up in earlier
in the conversation is, is not having a good handle
on that debt service number
that they have to accomplish.
And and if they
and if there's not enough revenue coming in
because cash flow is going to be king
in the next couple of years
and maybe the next five years,
I don't know who knows
how long a downturn is going to last,
(33:01):
but you better be prepared for 4 to 5 more years.
You know, as we record this at the end of 2024.
I mean, it's not a prediction,
but they seem to last a while.
Yeah, for various reasons.
And so I think if we can make sure that we don't get,
you know,
we just got to figure out a cash flow
I guess is what I'm saying,
because a negative cash flow
(33:22):
is what burns up that working capital.
Yeah.
Because I mean, obviously if you're if your expenses
are greater than your than your, revenue,
then you just start borrowing against assets,
which obviously most
farming operations are pretty asset heavy
real estate and capital improvements.
Yeah.
And that and that I think is a fallacy sometimes too,
(33:42):
where people
look at their balance sheet
and they've got a really low debt
asset ratio, but their cash flow sucks.
Well, that means that at some point
they're going to have to
they're they're going to have to reallocate that debt
and shore up and bring some liquidity back
into the business.
And you're talking about 8% interest.
Now all of a sudden
we're going backwards pretty fast.
(34:02):
So I think we got to navigate that.
And you know, you asked the question
a couple of times.
You know, what do you do about that?
I mean, one of the things that we see
some operations doing is,
is figuring out
how to bring additional revenue into the farm.
So,
you know, diversification is kind of a bad word
sometimes.
But on the same token,
you know, the operations that we see, besides
(34:24):
the ones that are really good marketers
and really good producers
are the ones that have other
revenue streams coming into the business via
a spouse or another family member,
you know,
and then telling my audiences,
and I'm going to tell your audience
when I'm
speaking to your audience in Florida, January 23rd,
that agriculture in our lifetime
(34:47):
went from diversification - production agriculture
in America
- from diversification,
diversification to specialization.
And now to survive.
When you look at diversification again,
diversification when you and I were born meant
you milk cows, you had a grain farm,
you on your rough acres,
you had some beef cows, calves and you,
maybe had a feed yard.
(35:08):
You had, chicken barn.
And if you were really diversified,
you also had a, a wife
that was either a nurse or a teacher, which,
which I always make the fact that farmers,
if the per capita farmers
married to nurses and teachers.
Great get insurance and you get diversified revenue.
Right.
But diversification
I don't expect these farmers
that I'm going to talk to it.
Your audience are going to go
(35:29):
and build a little hen house,
or put, a watermelon stand in their driveway.
And diversification in modern agriculture
for revenue purposes might be
you have a trucking company,
you own storage units, you own,
a a retail business in town.
(35:49):
I mean, because you've got to insulate yourself.
And I really think that we're going to go back
to it's
a different type of diversification
from the specialization
that got us to where we are now. Yeah.
And you know you got to look for
those that are synergistic to, to your business.
You know,
what are the core competencies that your staff has.
I mean we
we do a lot of strategic long term strategic business
(36:12):
development planning
where we'll look at that and we'll say,
okay, we're short on revenue, but we have this,
you know, the staff that's in your shop.
Just use an example for one
that we're working with now,
who has this phenomenal ability
to do repairs and maintenance.
And now all of a sudden, you know,
your fleet is newer, needs less of that stuff.
(36:34):
But there are operations in the area
that you can bring 2 or 3 combines
through your shop right
at lower than what the equipment dealer can do it at.
Yeah, yeah, good deal for the neighbor.
And all of a sudden they're,
they've got a,
you know,
they've got a repair and maintenance facility.
Now they're employing their staff
and they got those things going on.
We got another one that has lawn care business.
(36:54):
We have another one, you know.
So they
are they
synergistic with your core competencies in your team.
Because I think sometimes
what people will do is they're like, well,
we're just going to not have help anymore,
you know, or whatever.
And I'm a firm believer of you,
if if you find somebody that has passion and loves
what they do and they want to be there,
you hire them
because you will find something for them to do.
(37:17):
And that's where that diversification comes in.
All of a sudden,
there are ways,
whether it's, like you said, the trucks or whatever,
different.
There's all kinds of different things
that we see people getting pretty creative on,
and those are the ones that,
you know, they're their
balance sheet,
that they're they're earning equity
every single year.
Even on these downturns.
I've got your strategies.
(37:39):
Capital freeze for one year, debt service.
Understand all your numbers.
And you also even broke that out is
what's a short term
loan like, operating what's, intermediate?
What's a long term like land loan?
Machinery management on the expense side,
we agreed that there's probably still more.
(37:59):
More machinery per
unit of output than there
needs to be on a lot of farms.
And that's somewhere
that they could really ratchet things down.
Landlord relationships and, having conversations
about cash rent, inventory management of grain.
What is it, managing your working capital?
It really means you better make sure you're.
It's really managing.
Working capital should be returned.
(38:20):
Make sure you're cash flowing positively.
Because if you're not,
if your expenses are greater than your revenue,
you're going to just continue
to eat into held assets and borrow against it until
your assets are leveraged to to the hilt.
Diversification of revenue.
Next one.
So another one that I think superior -
If you’re listening to this,
by the way, Chris, out of that period.
(38:40):
But you're watching it.
He just kind of looks over.
He just kind of he almost looks like he's been tired.
And I want you to watch this because I'm on YouTube
and you really need to subscribe
to my YouTube channel.
I'm also on Acres TV
and I want to grow my following on YouTube.
So please subscribe there.
Just go to YouTube and type in Damian Mason channel.
But if it's purely you say
I look tired, I don't feel tired, but well, you.
I don't know man.
(39:00):
You're calling
these talking about numbers too much, I suppose.
Yeah, well, could be,
but I guess, you know, you're up.
The other one thing, though,
that I think
is really key that we haven't mentioned yet,
and I was kind of holding off on it is,
is the the lender relationship and the lender
the lender relationship is directly correlated to,
(39:24):
how you communicate,
how often you communicate and what you communicate.
So it's it's the data that you have
and it's and it's having a conversation
from the lender and asking the lender,
what is it that you need to see?
In other words,
instead of you going to the lender with the stuff
you think they're going to need, which, by the way,
when you get into a downturn,
(39:45):
the scrutiny goes up
and the requirements of how much you have to bring
and what you need to bring increases.
But it's having that conversation
well in advance and saying, what is it that you need?
And then you do the work, not the lender.
It's not the lender's job to do your cash flow.
It's not your lender's job
to do your trends, analysis, all that kind of stuff.
You should be doing that trend.
Those trends analysis
(40:06):
and all those things or something.
If you don't know how to do it, your lender's
doing it.
Talk to your lender
and start learning from the lender.
The lender wants you to be educated,
and the lender will help you
be careful with lender advice.
With all due respect to lenders,
because, you know,
I think
you have to be the executive of your business.
The lender isn't the lenders just loaning you money?
But you need to make sure that the data
(40:30):
that you provide is accurate
and that you communicate often too, in that,
you know, when I talked about the capital freeze,
if you're going to buy something
in these sorts of environments,
make sure you have a conversation
with the lender, regardless of what it is.
It's good just to pick up the phone and talk to them
and have that relationship.
And then the last thing with that,
the people that we see that have the data in place,
(40:52):
it doesn't matter what their debt to asset
ratio looks like unless it was horrible.
But almost everybody we work with
has a pretty solid balance sheet.
But if you look at that,
the ones that have really good information, really
good data to their lenders
on average are running about
three quarters to a point
lower in interest rates
because they're a better loan.
(41:13):
You know,
they're a class A loan instead of a C or even a B.
So they can, you know, and people think, well,
I can't negotiate interest rates. Yes you can.
You absolutely can.
And the key thing to do
is, as you said, to keep doing
that is communicating with the the lender
and saying,
here's my numbers, here's how things look.
And being very forthright about what
(41:35):
the numbers are and a position
and being professional.
And then all of a sudden
you said your 0.75 lower on interest rates
than the guy down the road.
And over $1 million.
That's big money.
It's huge money.
And, and and then compound that over multiple years.
You know, you're buying a farm
that the neighbor can't buy.
So I mean it's it's it just pretty common sense.
(41:57):
I mean, a lot of this stuff that just common sense,
but a lot of it's discipline to a lot of it's,
you know, it's
not as much fun to sit down at the desk
and do a strategic plan.
It's not as much fun to sit down
and do a spreadsheet as,
you know, as some of the other things we can do.
But but those are the $500,000 an hour tasks
that need to be done. Yeah.
(42:18):
All right, I got eight things. Is that the.
Is that a list of strategic,
strategies for the smart farms used to weather
bad economies?
I think that's all of them.
I had a bunch of stuff jotted down,
and I think that's that's the majority of them.
How many farming operations
do you work in consult with, three dozen, two dozen?
More than that.
(42:38):
I mean, we have a lot of operations
that we've worked with
over the years that we sort of graduate,
and then they come back
if all the things are going on.
So over the years,
we've
I know for a fact we've worked
with over a thousand operations,
but we have four of us that are working
with operations now,
and we each work with about, 25 each.
So about 100, about 100 right now in a given time.
(43:01):
And you've obviously got a breadth of experience.
You've been doing this a long time
and you farm yourself and you have your,
you know Ag View Solutions.
And so you've got a lot of things going on.
So, we call this the business of agriculture.
And I started this eight years ago
and I said, we're going to
this is not going to be bumpkin talk.
This is going to be intelligent,
business minded stuff.
So even if the person listening this is not a farmer,
there's a very good chance they're an ag professional
and they are
(43:22):
still tied to the family operation
in Illinois or whatever.
So I want you to give a couple of thoughts here.
When the thousand operations
you've worked with in your career,
the how do you work with right now?
Give me a couple of golden threads that run
between the successful ones.
Is it?
I mean, I know
we talked about these strategies right here.
Is it a mindset?
(43:42):
Is there a management?
I'll give you mine.
One thing that I think is always very powerful
when I look at successful farming operations,
they don't let the kids come back into it,
like the day they walk through the commencement
at their high school.
They make them go away for a while
and make some mistakes, but also learn and see
and then bring them back.
(44:03):
I'll give you another one.
They treat it like a business.
They absolutely don't just treat that.
Oh yeah.
Well, you know granddad not as great legacy is cool.
But they run the farm out of business.
So I'd say management of the kids
coming back into operation
number one,
meaning you don't always do it
without having gone away.
Number two,
they absolutely look at the business, all the time.
(44:23):
And number three, I think that
what I like about the successful farming operation
I see is a worldview versus
what's the neighbor doing?
What's the neighbor?
I swear, we know that this happens.
You and I have been around these people.
If you're focused on the neighbor,
if you just or you wake up
worrying that they're driving to the field,
oh, God, they're in the field. And I'm not.
(44:43):
If it's all about judging the neighbor
and chasing the neighbor and competing the neighbor,
you're screwed.
The farming operations
man is the kid coming back to operation
number 2 or 3 is business number three.
Worldview versus neighbor gossip view.
I'll give you a couple more.
Those are all excellent.
A couple more that we see that that are threads
(45:04):
to your point that really lend themselves to
very successful
operations are operations that that are families
farming together
that can differentiate
the governance of family versus business.
So they have governance.
So when they get together for Thanksgiving,
they're talking about the farm
because they do that in a professional environment
(45:26):
and they separate the two.
And so then the family legacy
has an opportunity to go on
because they're not bitchin at each other
at Thanksgiving.
About something that they should have talked about.
That was an issue four months earlier.
So separation of that. That's one.
The next one is ... by the way.
Excellent, considering we're
recording this at the holiday time.
And a lot of people listen,
(45:46):
this just came through the holiday time
and there was awkward moments.
Again, there's farm
and there’s professional
and there’s personal
and if you're in a farming family operation,
learn to separate the two.
I love it, yeah.
And we've been talking
about financial this whole time.
The majority of what I'm doing anymore
is legacy planning and, you know, and and transition
(46:07):
and collaboration.
But the next one is communication.
They have crystal clear roles and responsibilities
identified for everybody.
That's that's on the team.
They have clearly defined expectations
and clearly defined decision rights.
So again, it's a communication dynamic
that that sets themselves
up for the business to be successful.
(46:29):
Because you can get all the math right.
You can get
you can have
all the money in the world and people
screw it up over and over again.
If you don't,
if you don't structure things correctly for the
for the team health and for the team management.
So that's that's one, two other ones,
having a clear vision.
So that carries on with the communication.
(46:50):
But what is this business
going to look like in ten years?
And having everybody pulling the rope to that target,
you don't go out to a gun gun range and shoot
just in the air.
You have a target
and you shoot for a specific place
on that target, too.
So it even gets more granular than that.
And so that's that's that one.
And then the last one is, is clean data.
(47:14):
The data they have is accurate.
It's not fudged.
It's not you know,
and the only thing I would say there,
the one caveat there is
sometimes those operations
that have really clear and clean data
have information overload.
So you got to be real careful.
There's a balance there between information overload
and having really clean data.
(47:34):
So it's again it's like asking
what is it that you need to know.
Spend the time getting that information.
Because if it doesn't correlate
to a return to the business,
why are you building the spreadsheet?
I'm guilty of that myself.
Sometimes I'll sit down
and I'll build something out
and I'm like, okay, how am I?
How is this going to make me more money?
So you got to be real careful
because there's a balance there.
But those are kind of the four things
(47:55):
that we see
that sort of correlate to,
to very successful operations.
I love them all.
I data, I get it, but, that becomes,
that would be my, my least favorite thing
to break into there,
because that's sort of,
the accounting minded person, vision.
Love that.
A successful farming operation.
(48:16):
When we talk about
whether the bad economy is to have a legacy,
to be here, to occupy tomorrow,
what does that look like?
Well, yeah.
Go do it.
I mean, no, it's so it's not just.
We've got to milk the cows again tomorrow. No.
What's it, what's what's what's a year look like.
What's five years from now look like I love that one.
Communication rolls expectation.
And the decision makers.
(48:36):
I came from a farming operation
that absolutely had none of those things,
so I can clearly appreciate that.
And then obviously,
the separation of farm and family.
That's fantastic.
So your four are better than my three.
But you said my three were okay.
Yeah. They were excellent.
And and I think it's a combination of all the above
I think you know, you go back and listen to this.
I bet that's what I would recommend to people.
(48:57):
You go back
and listen to your three and these four,
if you do three at three out of the out of the seven
things next year you'll be successful.
And then you just keep chipping away at that stuff
because we can't fix everything else on either.
So you kind of got to pick that.
What area, you know, is going to, you know,
give us the most return
for our time for our investment.
Because time is one of those things too, that
(49:19):
that a lot of people don't measure.
And last time I checked,
they're not making any more of that.
You can make more money,
but you can’t make more time.
And I think that's the other thing
too, is people that are successful
know how to manage their time really well.
And as you said, look, view, view time, like
you said it three times already.
Are you viewing your
are you using your
are you applying your time for a $30 return
because you love going out and driving a tractor
(49:41):
or because you're avoiding the office
where your hour is worth
$1,000 of managing the things
we've just talked about. So I like that.
His name is Chris Barron.
A company called Ag View Solutions
got a podcast called Ag View Pitch.
I've been a guest on it, it's great, good stuff.
It talks a lot about numbers.
He’s a consultant to successful farming operations.
He also has an executive conference
I'll be speaking at on January 23rd,
(50:03):
down in Florida
at the Hollywood
Beach, Margarita beach, Margaritaville.
Margaritaville in Hollywood,
Margaritaville in Hollywood, Florida.
Yep. Yeah, I've been there before.
It's going to be a good time.
Anyway. So much. Thanks so much for being here.
By the way,
my new show, The Granary in conjunction
with the, guys at XtremeAg is out.
If you like my show the Business of Agriculture,
you're going to like it.
(50:23):
If you like listening to guys like me and Chris talk,
you really should check out the Granary.
It's a show that is shot from my Granary.
My on farm hang out,
the 1800s era building that I converted
my man room with.
You know, a table sitting there.
It might be some adult beverages
being served in the background.
And we talk about real, issues
impacting agriculture.
It's real talk.
It’s authentic,
(50:43):
you can find it on the Xtreme Ag YouTube channel.
Or you can find it
at XtremeAg.farm, that’s
XtremeAg.farm without an “E” on the front of it.
So check it out.
It's mine.
It's my new creation I'm really excited about.
It's called the Granary.
Eventually,
maybe we'll get Chris Barron to join us
in the Granary for some of this kind of talk.
Sounds good.
What kind of an Iowa guy can lower himself
to go into Northeast Indiana.
I mean, we've only got like eight inches the top,
(51:04):
though, not eight feet.
Like, you and I spend a lot of time in Indiana too.
So yeah, I'll I'll swing in,
especially if the beer's cold.
It always is.
All right, till’ next time, thanks for being here.
He's Chris Barron, I'm Damian Mason.
If you want to find out
more about your company that they go to,
where do they find you? AgViewSolutions.com.
AgViewSolutions.com. Till’ next time.
Thanks for being here.
I'm Damian Mason
and this is the Business of Agriculture.
(51:24):
Hey, thanks for being here.
This episode
of The Business of Agriculture
was brought to you by Pattern Ag.
You've heard me talk about Pattern
Ag because I think it's a pretty cool concept,
new technology
that allows you to predict the problems
you're going to have
and therefore treat them
before those problems cost you money.
What kind of problems am I talking about?
Pests and disease.
(51:45):
Things
like corn
rootworm, sudden death syndrome, cyst nematode,
and a whole bunch of other bad
things that happen out there in the field
that can cost you money.
Guess what?
Pattern AG will let you find out ahead of time
if the disease or the pest pressure is there,
and therefore you're treating it
before costing any money.
What a great concept. Go to pattern.ag. That's
(52:08):
pattern.ag to learn more
about their product, their technology,
how it can make you money, save you yield, and also
where you can find a rep
that can come out there and do the work for you.
Pattern.ag.
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