00:00 Jared and I have been together a number of times we've been at conferences. I've spoken at conferences. He was attending we've had 00:06 a beer two together and I said come on this podcast. Let's talk about everything crop insurance decision making money and 00:14 I know you're saying right now wait a minute. I normally tune into extreme eggs. I like the agronomics and I 00:20 like the fact that Chad Harris was out there sending it. Well, that's cool. But you know, what if you don't handle the business side of Agriculture, you will have 00:26 no Farm to go out there and send it on welcome to extreme eggs cutting the curve more than just a podcast. It's 00:33 the place for insights and information. You can apply immediately to your farming operation for increased success this 00:39 episode of cutting the curve is brought to you by AG Explorer with Innovative products that improve fertilizer efficiency protect, you'll potential and reduce 00:48 stress. I explore helps Growers maximize field potential find out how AG explore can help you get more out of your crap at Ag explore.com. And now 00:58 here's your host. Damien Mason Hey there, welcome to another fantastic extreme AGS cutting the curve. We're talking today about your money about your business 01:08 about how to thrive this year. So you can go into 2024 bigger better stronger got Jared Creed on here. Jared Creed does some advice for our man 01:17 Kelly Garrett one of our Founders. So we'll talk about business. We're talking about stuff that you can do right now practices you can implement. 01:26 Business decisions. You need to be staring down to improve your farming game. Remember, it's only a lifestyle. It's only a legacy if you 01:36 make it profitable creative thinking for 2023. That's one of Jared's speech topics. He goes on the road like I do and speaks at agricultural business functions. So 01:45 he's going to tell us what he shared this winter at his agricultural meetings where he was a guest presenter creative thinking for 2023. What's the we're 01:55 going through the calendar. He's gonna tell us the first thing you let off with at each one of your conferences. 02:01 Well first off, thank you, Damian and thank you extreme AG for the invitation to come back on. I think this is actually a second time. I've been 02:07 on with you. You've been on the business of our culture my podcast and you've been on the cutting the curve at least once or twice. So I think you're right 02:14 about that on mine. We talked about does your farm need to CFO. So if you're a podcast listener and you're looking and you like the idea that we're covering business topics go on the business 02:23 of our culture. That's my podcast that I do away from extreme Ag and type in does your farm need to CFO answer? Yes, and we did that about a year ago with 02:33 Jared and he talked to Great length about Or a CFO does a CFO is not a bookkeeper a CFO looks at Big Picture finances and 02:43 we went through all that. So anyway, then we were on here and I can't be honest without remember exactly the topic so we did so crop insurance 02:49 money the stuff at the business grain marketing. Let's face it. It's not what most Farm people love to do most Farm people love to produce 02:58 crops. They like to drive tractors. They like to go out there and get their hands dirty, but the hell of it is this is a business we 03:04 talk about all the time you and I what's the first thing you told folks when you said we're going to talk about creative thinking for 2023. We need to make it through 2023 to be there in 2024 and 03:16 I think you already made mention of that. It's it's so important to recognize and acknowledge and almost 03:26 admit that we are in unprecedented times now granted there's been numerous unprecedented times. But that seems to be the new Norm change is 03:37 the only Norm that we've become accustomed to here in the last several years and to your point about, you know, successful businesses. 03:46 And operations that are growing and taking care of their business. They're seeing their business grow. 03:54 But it's creating more Financial Risk. It's creating more financial challenges that they have to be on top of their game to maximize their opportunities with all 04:03 the work that they've put in it's not Blood Sweat and Tears game anymore. It's bankruptcy. There'd be very very successful. 04:09 So maybe just a very quick background Damian for listeners who haven't you know, ever heard you and I speak before, you know, 04:19 we're in JC marketing and act Financial Services based at Hudson, Iowa by Waterloo Cedar Falls have an 04:26 office over in Western Iowa as well. We work with about 60 different Farms throughout primarily in the midwest that 04:32 footprint now does reach over to Michigan and Indiana and into Nebraska up to the Dakota, Minnesota, Iowa, Missouri Kansas 04:41 and obviously plenty of connections with at producers throughout the rest of the states, but our main job is kind of what they need an alluded to is that 04:51 we are more or less the hired CEO and CFO for the farm, you know, our friend Kelly. Garrett says it very very well that there are operations that 05:01 the CEO should never be holding a steering wheel there's more important things to tackle and ultimately most 05:08 guys Go enjoy that physical aspect of it and some of them just need to at least have an outside team member. 05:19 Looking over the financial peace making important business decisions alongside them and that's 05:26 kind of our role. You know, we're not a grain broker or obviously not agreeing buyer. We're not a banker. We run very intensive software to allow up 05:35 to date financial information for the farmer at all times, you know, we strive to have an updated projected income statement balance sheet 05:45 cash flow. You name it the farmer has access to that at all times and that obviously starts from understanding the cost production. We don't have to guess about that anymore and that 05:55 allows us to furthermore make smart business decisions from a marketing standpoint crop insurance standpoint in 06:01 the speaking of Crawford Insurance for years, you know, I've been around the crop insurance industry for a decade plus and it's 06:11 a imperative piece to the overall risk management picture for the farm and actually excited to announce that you know, 06:19 Into this year decided to get into the crop insurance face, but we will not be an active Insurance Agency until 2024 but 06:29 we are very excited about that. We've provided service to agents to the producers that we work with for years and decided that we wanted to go down that path 06:39 on her own as it is you are going to be you are going to be a crop insurance agency one year from now. 06:47 Yes, we'll be active here this summer with the intent that we will have, you know, a significant a significant amount 06:57 of producers. We work with have actually been in my ear to go ahead and get in the space because like I said, we're you know respect to all the agents 100% respect 07:06 to them, but we've been providing the guidance to both the producer and insurance agent on a decision is to be made on the farm and decided from 07:15 a business standpoint for us kind of operating in the premise of less is more we don't have the desire to go out there and 07:21 work with a hundred plus produce throughout the Midwest. We don't average. We don't cold call that the closest thing to advertising that 07:28 we would do I suppose is talking to you on this. Right? So you're going to operate on referrals you were some 07:34 of the 60 Farm clients that you have doing their basically. Like I said, it's cool to say for the 60 Farm clients you have you act 07:41 in a roll between CEO Chief Operating Officer or CFO Chief Financial Officer most Farmers, certainly. 07:47 In size would or even of any size would bristle at Chief Operating Officer. I'm like operations. That's what I love to do. I like being out here doing operations, but you 07:56 It doesn't mean that you're telling them how to plow how to spray how to plant. Whatever you're more 08:03 operations. You mean the business structure that's more of a coined term from numerous of our clients of how they see our role on the farm. So 08:12 again, that one turns into some advertised exception. No, but that's what we do. Right you're heavily 08:19 focused on long-term profitability heavily focused on leveraging things when it makes sense playing defense when it makes sense and you 08:29 know, it's a very unique timing for when we're talking about this that 08:33 specific to like the landmarket opportunities are starting to present themselves left and right and I think part of that is because the world that we live in 08:43 today specific to interest rates and money flow a lot of the investors that have found themselves in the agspace in the last couple years or stepping away looking 08:52 for other opportunities that perhaps a not necessarily a better return but a safer returns because you sit across 09:02 the table from most business savvy individuals that are not AG related. They will look at the risk that the producer takes and the margin that is Created from 09:11 that risk, and they will laugh It that's the unfortunate piece about agriculture. It takes a lot of work. It does take you know, being lucky here 09:19 there and being around to maximize your opportunities when the opportunity presents itself whether you just said right there though is something you and I and Todd Thurman have 09:29 just been on the same topic multiple different times. the margins for the capital deployed our poultry in general 09:39 in general you you have a lot of you know, a lot of Capital At Risk. You have a lot of capital in play. 09:45 And you don't have that bigger returns in agriculture. I mean, it's that's that's not a secret. It's just that somehow we think it's 09:51 that way everywhere else and to the outside investor the same things you just point out. They're like 09:57 like Todd Thurman always points out wait, I'm gonna put five million dollars into this Hog operation and I'm gonna probably 10:03 be able to generate between four and seven percent returns. Why in the hell would I put in the money market and 10:09 and not have the environmental not have my neighbor complaining, you know, whatever. So it's it's really remarkable to me. And so the same thing so 10:18 the point you're making is if you're gonna have low returns, let's make sure there's at least positive return. 10:24 Yeah, there can be great returns. Don't give me wrong. But you have to be in a position to maximize those opportunities and I think the last couple years is a great 10:34 example 2014-15 ish through 2019. It just sucks. It sucks to be an agriculture. 10:42 But the individuals who found a way to continue to be cash flow positive whether that was price or yield or a combination of both. 10:52 They really had an opportunity to build a working capital position first and foremost that allowed them to take on additional growth. 11:03 Right when things were getting very very, you know, kind of 2019-ish and then things started to change call it a cycle and AG call it what you want from a 11:12 production standpoint globally from coming out of a trade War coming out of covid coming into an inflation environment, Ukraine and Russia bowling 11:22 up. It created a situation that if you took care of your business to five years prior you had growth on your farm. You might not have sold your 11:33 corn or soybeans at the highs. You might might have left some, you know in hindsight money on a table, 11:39 but you were definitely making money on a larger size operation and that's kind of the Ebbs and flows. And right now the idea is to maintain the money that 11:49 has been made the last couple years to make sure that at 2024 throws us some very very ugly 11:55 curveballs. We're gonna be sitting there in a in a good position to Jump on the opportunities that I really do feel are going to 12:05 come around in 2025 and maybe not even maybe a little bit earlier. All right, let's talk about the times. We're because again extreme AG people are not the way that AG 12:14 people in general are nobody in that in general the AG the general AG producer wants to pretend they're just barely getting by plays the poor little 12:23 farmer game and all that stuff that you and I have been around our entire careers, you know, I was around since the time I was a kid and God knows the 1980s. 12:30 There were a lot of farmers that didn't make any money. But the people that listen to this they get it's a business and we 12:37 can admit 2022 record farm income 2021 amazingly good farm income 2020 and 2019. A lot of federal money was thrown at the federal money 12:46 is worth throwing at this. We had 51 billion dollars of federal money. I think in 2020 might have been 2019. I can't remember now. So the 12:53 point is 19 20, 21 22, they're four years for sure. Maybe even 18 with some of the programs. So 19 20 21 22, there's 13:02 Years of really good the last two being amazingly good when people try to pretend they haven't made money in the last couple years. Okay, 13:08 then maybe you should be out of this business. I mean that's not be mean here. But if you didn't make money and you're in Crop Production the last two 13:14 years you it's time to sell the farm rented somebody else. I hate to say that but it's been amazing. There's a lot of Truth to that that last comment about if 13:24 you didn't make money the last couple years, maybe it's not your fit, but I do think you have to 13:30 realize that there are still there's still a segment and agriculture out there that maybe Mother Nature Kingdom right or 13:36 some unforeseen circumstances that there are still some very tight books out there. Well, I mean, we also know that specialty crop got hammered more 13:46 but you know cornflakes and we generally in 2020 22 was remarkable. Yeah, and we're not being sensitive. We're just talking about the money 13:55 in the business if you're if you're If everybody else is making really good money in those years and you're not it's time to do a little self analysis is kind of 14:05 the answer here because it may not ever be as good. For the next decade or two. It may not ever be as good as 2020 a one twenty twenty two. Were is that 14:15 a fair assessment? Yes, and A lot of the winter meetings that I spoke at this year was geographically around a 14:24 Kansas City chief fanbase and I happen to be a huge Kansas City Chiefs fan so I couldn't help but use the analogy that if you didn't have 14:34 Patrick Mahomes going into the fourth quarter, we will be in trouble all the time because our defense is terrible, right all these days it'll be better. So I think about that. It's 14:44 a four quarter game and if we can get into the fourth quarter with the lead, what do you do on defense? It may be try to play a little bit of prevent defense you try 14:54 to keep all in front of you. Try to keep your eye on a prize which is the win and that's kind of the mindset that 15:01 we're taking going in a 2024 of what defensive situations can we jump on to create to to 15:11 more or less remove the bad risk that the farm is exposed to all the time and put ourselves in a position to jump on the good risk opportunities that 15:20 can still come around. So there's a lot a meat on a bone that goes into that and the decision-making from crop insurance from grain marketing from managing your 15:30 interest rate exposure and keep in cash flow and satisfactory ways, but that's the 15:36 general from eyes that we want to make sure that no matter what comes our way in the next 12 to 18 months that we're staying in the black. 15:46 And I don't think that that's going to be a common theme. Especially if this inflation World settles down 15:54 and North America returns to producing the potential risk of back-to-back bumper crops. Nobody throw their hands in the air on that comment, right? 16:04 We got a long ways to go and a growing season this year. We're not even talking about 2024 this point but American agriculture is very good at doing one 16:13 thing. The best thing they're good at doing is growing too much. They react to the market in a way that ultimately 16:20 creates too much pressure long-term and if cost don't adjust with your Revenue, that's where the issue lies. 16:29 So I want to oh, I am hopeful day in that the the potential collapse that everybody wants to talk about in the commodity space. It hasn't happened. Maybe it ain't 16:41 gonna happen. Maybe we've created a new. Shelf a new plateau of higher commodity prices, but what we obviously have to be careful of is 16:50 that relationship from costs coming out of the inflation World road to the revenues that we can generate they still have to marry up. I don't care if 17:00 it's four dollar corn or eight dollar corn. $18 soybeans or $10 soybeans. I know that the risk on the lower end of that is that our input 17:10 costs are land costs equipment costs things along those lines are never going to drop at the same speed that 17:20 we always have the risk of the raw commodity that we produce that we have the risk of that dropping. All right. So what you just said is interesting generally what happens 17:29 is come out of the prices start dropping and then because we have a supply Plenty of supply and then on the 17:38 global market and then the input prices don't come down land prices. Don't come down. Well, there's some people think they never come down something that are 17:47 some people that are young think they never come down. But some of us that have been around know that they land prices do come down and then there's 17:53 the input stuff. So what's your message when you've got done talking about your Kansas City Chiefs analysis? I figured you're analogy. I thought you're gonna tell me. 18:04 if it wasn't for an amazing quarterback, that's like almost unmatchable and his style of game you'd be screwed because you're not playing defense. I thought 18:14 you were going to tell me that as a farmer unless you unless you think your parents were homes. You better play defense. I thought that's the analogy room go 18:20 with that close enough. you know look our our Mmm, thought process in trying to make sure that we navigate here in 18:33 the next 12 months and is efficient way as possible. It's it's critical to understand that revenue is just math. 18:42 Input and expenses is just math. It's a simple middle school algebra equation. And that means Mary and up. 18:53 What Revenue you can accomplish worst case from your crop insurance how your grain marketing decisions play a role in conjunction with your 19:02 crop insurance understanding that once you get the crop in the ground and the planner has went through the field you are now guaranteed bushels and the 19:12 farmers buying, you know, no no ill feelings here. But the farmers buying a subsidized insurance policy that often times 19:22 provides the capability of locking in a worst case five to ten percent return and again subsidized by the government now 19:31 find me another business in all of America that has that type of tool. Now I get it jokingly decide, you know, there's banks that 19:41 get that you build out another organizations get bailed out, but it's critical to understand that I I kind of 19:51 gotten tired and despised the idea of know your cost know your costs. No, it's more so stay on top of your costs because in last year if 20:00 it's not a good example, I don't know what is We do an intensive analysis of years worth of input transactions, you know, if if Mama went 20:10 and bought a new pair of shoes for the kid to play soccer we see that transaction. It's a family of an expense if they 20:16 go fill up the the tractor to go plan. We see that fuel we see their C. We see their chemical their land so on and so on we're constantly staying on top of not only 20:26 what money we have spent in the past to create an accurate budget, but then track those actual expenses versus 20:32 that budget so as cost adjust and as it growing season progresses and yield prospects go up and down in relation to 20:42 your crop insurance and as markets go up and down you're constantly afforded the opportunity to look at your farm the same way you 20:52 and I would look at a bank account who would do business with the bank account that you log into your phone to see your 20:58 account balance and the bank says you have approximately 5,000 and 10,000 hours you 21:03 in your account What was it a new business with a bank in that way? Yeah, why don't you mean that you mean you mean that it's not exact enough. The 21:11 point is you should actually know the real numbers you there's obviously some some wiggle room in there as the 21:17 growing season progresses, but being able to track a Farm's revenue on what we consider in the AG industry, especially in a merchandising world on a 21:27 mark to Market basis. We're marking the books daily. The markets open every day the week basically. Yeah marking the book based upon what is sold what isn't sold what 21:39 type of revenues are potentially associated with outside money coming in whether it be government programs or crop insurance 21:45 and constantly stacking up that Revenue versus that cost and then you know where the you know per se where the magic happens if a 21:55 producer 5,000 Acre Farm views that real analysis any given day the market to move they've changed your yield projections. They know their costs also in 22:07 that 5,000 Acre Farm is looking at a million dollar profit projection. Okay. 22:13 What did I spend to get to a million bucks? Yeah, I'm probably talking about 15 to 20% return if I'm clear in that 22:19 amount of money where else are we going to go do that and not to say that the farmer ever goes down this 22:26 path, but I bring it up oftentimes that what do we deserve versus? What the market can bear? 22:34 Do we deserve to go make 50% on our money? If we did deserve it, everybody would be doing. So a lot of times our goals are somewhat focused 22:45 on just a simple flat cash return on investment and putting 1100 dollars on a tape on the table this year to grow a corn crop in Iowa. Can I 22:56 go generate 1300 dollars or Revenue back? 1100 costs 13 or Revenue. What's my return? It's not quite 20% Yeah, but it's 23:05 certainly better than burning through cash and burning through equity and losing money. By the way, when you do this analysis, there's a whole 23:12 bunch of folks that don't know whether they're gonna spend 1100 dollars and then let's just say that let's go with that number that includes cost of 23:18 land return right? That's everything. Yeah, so 1100 bucks. And so you're saying all right. Once we're at that cost 1100 bucks. 23:27 Than the issue is how much more how much do I want to make off of that? So if you were an investor you're trying to create the amount mindset of the investor if I gave you 1100 dollars 23:37 across all every you know acre. I had I would want this much back come fall. So what you're saying by November, I yeah more or less. 23:47 Yeah positive cash flow. If you have good working capital things you're gonna take care of themselves. Are you gonna look back in 20 years to say? 23:54 Oh I could have made $300 acre but I made $200 acre. No you're gonna care about what the balance she says, so it is kind of leading a horse to water to at least be 24:05 educated on a very precise fashion that when you're making actual marketing decisions you're making cropping decisions. 24:15 You're looking at real numbers, right you're doing due diligence, right due diligence is not a strength of Agriculture. At least on a 24:24 business side agronomically an extreme egg. It's a huge Trend, right all kinds of due diligence is done. But from a due diligence on their business side is because people 24:34 want to grow more and more crop they enjoy that aspect. And oftentimes, you know, there's no phrase that's always stuck in my mind and I hope I don't jack this 24:45 up, but I think it pertains to agriculture really well. Spend as much time researching an investment. 24:56 Spend as much time researching investment as the time it took you to earn the money. You're putting into that investment. 25:04 Think about that in agriculture. Yeah, good. Most most people don't they don't do that. So yes, so as much 25:10 time on where you're gonna deploy the investment as you took to earn the money for the investment. That's also we've 25:16 had it huge implosion of good money. Come to us in the last couple years. Are we spending and allocated and right amount of time 25:25 to determine what we need to accomplish in the next year do creative thinking for 2023. So I want 25:31 you now to tell me the one thing I wrote down here was and I don't know if this isn't Any Given order all right, first off first rule of all business, it should 25:42 be to live to find another day to survive and I know that when things are up as they have been AG the last several years, but you know, you run your own business. I run my 25:51 own business for three decades. I can tell you that I know the ups and I know the downs I know that there's been you know quarters where there 25:57 was Zero revenue and you're just, you know against the wall so Survival of the fine other day. So the first rule is always what is 26:07 it going to take and you don't want to have a Survivor mindset because that keeps you from being creative and flourishing but 26:13 it is still always in the back of your mind. You want to be here next year or the year after that year after that. So you don't want to play defense all the time, but you got to play defense to 26:23 actually be there. Right as in in the current environment that we are in what we experience last three months what I expect 26:32 to experience the next 60 days getting into the growing season. There's high probability that the farmer has had 26:40 the opportunity or will have the opportunity to pull just enough letters. To do just what you talked about of lit, you 26:51 know survived to find another day. but by doing that you're pulling the bad risks off the table as in it's as simple as 27:01 I want to make this amount. I want to make this amount of money. What is it take for me to do that and now you're starting to 27:07 talk about situational awareness. Scenario a b c. If I do this, what's the result if I don't do this? What's the result? 27:17 Here's the here's my but punchline to that. I suppose in today's world's pertinent to at least the corn Market the average producer can 27:27 probably four Market give or take 30 to 40 percent of their crop of their anticipated production in conjunction with the good insurance policy. And 27:37 I don't care what happens price drops yield is devastating. I don't care they're gonna be okay because the entire revenue 27:46 is now good enough and here's one example is takes a little bit of thought maybe guys are gonna have to rewind and listen to this again, but there's a lot 27:56 of opportunities that in embedded with your crop insurance. You are able to form Market enough grain at 28:04 a certain price that it drives the price needed on the balance of your crop down below where your crop insurance 28:14 will protect you. Your bulletproof. All right. You just said that you just sit right there. Essentially I can fix I can make it I 28:24 can guarantee myself that the worst I do is break even Or better I don't break it because we want to talk about a positive return and then identifying what prices doing 28:34 need to accomplish that and then creating a game plan from there rather than saying oh corns up three today. It's like your joke about someone another 28:44 conversations. We don't need to talk about daily movements. We need to identify what our price targets need to 28:51 be based upon what our business demands by the way Jay Z marketing and AG Financial Services. Are you you're not you're not a broker. You're not the one that actually 29:00 you just tell them you should you should be setting it up setting it up and selling at this. Yeah, and ultimately we're having those communication with the 29:10 producer throughout the year and there's oftentimes we find ourselves acting upon the conversations that we've had and reporting to 29:19 the producer that we followed up on what we talked about. So we carry for a lot of producers a little bit of a limited power 29:26 of attorney within our contract with. Them that am I going to call you when you're in the middle of the field and you're busy fixing to hydraulic line and 29:35 saying hey. I want you to call the elevator and sell 10,000 bushel of corn right now. And here's why. 29:41 Now we're having that conversation. Well ahead of time oftentimes there's offers that are working based upon a discussions that we've had Market gets there it executes 29:51 Greater and other times the markets are very verb all and we don't actually have offers working. We act kind of on behalf of 30:00 the producer to a certain degree based upon the business goals that have been set forth. 30:06 But again, no, we're not a broker. We're not a commodity broker in any way shape or fell and you're and you're gonna be now moving into an insurance 30:12 situation and that was because clients actually wanted you to do this because you were already pretty well advising on this on on 30:18 how to use the insurance packet programs to guarantee break even or or 30:25 A minimal amount of acceptable profit you already were already doing that the Unique Piece about craft insurance. I think it's 30:31 probably common knowledge, but it's the same price everywhere you buy it. It comes down to service and I I think we 30:37 have A unique approach. It's not patent orsells on a back foot unique approach to the risk management space in agriculture that we're combining three-legged stool, you know 30:49 or eliminating the need of dozens of individuals that walk through the farm door year or helping the farmer bring it all together and ultimately those decisions are 30:59 made in tandem. Yeah, your your situation is that you already know what the numbers look like, you're already basically a financial advisor and an 31:06 operational advisor and now you can say and we want to we think you should integrate with this crop insurance how much variation 31:12 you know, I've always wanted this I speak to kind of crop Insurance Groups. I know a little bit about it. 31:18 They talk about you can guarantee this much this much or this much why the hell wouldn't you just go ahead and buy the policy that guarantees you the 31:25 most is it really that big of a difference on premium price? It depends where you're at. But yes, there are times where 31:32 it becomes actually cost prohibitive. You know, that's that's probably from just a perception of the expense that gets put on table. But that's when it also creates the 31:42 the need of linking it with marketing to find. What are my other Alternatives Beyond just crop insurance to achieve the same thing that 31:52 crop insurance might do for me. I mean you get Damian you're listeners are obviously from the Delta to Canada. Assuming 31:59 right into parts of Nebraska South Dakota North Dakota and Alabama, Mississippi, Texas and such. It's not hard for a 32:09 guy to rack up a crop insurance bill over a hundred dollar an acre. And then you get into the Bread Basket like Minnesota is the 32:16 cheapest crop insurance. There is from a corn and soybean perspective by a mile. I mean a guy in in Minnesota is probably spending 32:25 15% that of their neighbors to the west and all the way down into far south. They really not have crop failures in Minnesota. Is that why? 32:38 Not as much I mean you take away a lot of hail risk a lot of wind risk drought risk. I mean similar to Iowa. Yeah, sir parts of 32:48 Iowa, I should say right but you know, Nebraska has it all Halo right drought bugs. You name it? I got 32:59 hung up. I got hung up. I think it was in one of those days in Nebraska. I think it was may have been South Dakota and it was hail and 33:05 I mean honest to God it was Nebraska and I had like pull over and I'm like, we're just come from it's like almost like a plane drove over and just dropped ice cubes on me. It was something hey 33:14 about the money stuff this so the creative thinking for 2023. Yeah, it told me it's all that creative. You just told me okay have your defense and 33:24 have your insurance, etc, etc. And you you know, every meeting we've been to start with your cross to production start your cross production, you know, and and let's say more backward 33:33 Farm types never really know their cost of production if you're listening to cutting the curve you probably are right there. 33:38 Know what you're paying per acre to get something produced Etc. So you're forwarding your head of that game. What's the next thing that the creative 33:45 thinking needs to come into play to guarantee a prosperous 2023 gaming creative thinking is ultimately tied to having situational awareness 33:55 and being able to measure different scenarios and outcomes that that doesn't happen on the average Farm they make a sale. All right, or they 34:05 decide not to make a sale. It stops right there. There's not another step one two three and what has to happen now to achieve 34:14 the goal. It's ultimately looking at the finish line versus getting to the finish line and going and meeting with your banker and accountant to find 34:24 out how you did pet peeve of mine 100% right there spend millions of dollars to go deal with the accountant and 34:30 Banker one time. Perhaps at the very end of the year to say well, Here's all the work. I put in. 34:36 bloody and pain before how did I do? A despise that I created thinking is constantly staying engaged and understanding the marketing with your crop 34:45 insurance and making sure that you know a piece little maybe not necessarily all that creative but avoid interest as much as it possibly can this year if you're 34:55 listeners are still sitting on Old crop supplies. They better have a damn good reason why 35:01 At that point that might just be gambling. We have tried and tried and tried as fast as we possibly can to liquidate last year's crop so we can 35:10 operate on as much cash as possible. Through the 2023 year. Okay. So there's there's another way there's there's an interesting thing right there. This is going to talk about that one. 35:19 So there's people that you know, love the idea of held grain. It's like cash in the bank. Okay, then I've heard people attached. 35:27 And there's also that's a maybe an older farmer mentality because of reality is right. Now if you're using if 35:34 you're using a levered money, you know, I get notices from Farm Credit. I think we're at 8.85 or some crazy thing 35:40 eight and a half to nine percent on operating money. So you've got to sometimes convince these people that that held 35:46 grain. Is it bare minimum if you're using operating money costing you about eight and a half percent. Am I right? Yeah. I mean just do 35:52 simple math here for second. Let's just say you're carrying on average a million dollars of operating money and at today like 35:59 seven and a half percent million bucks is in essence pain a little over $200 a day of Interest. 36:06 So a million dollar a million dollars of operating at what percent was that seven and a half seven and a half to eight. Yeah is 36:12 200 bucks a day. So give or take so $73,000 bucks how Many acres do I have to have to carry a million dollar operating note. It's not that much. 36:24 And so I'll sudden let's just say it's two thousand acres that right there. I mean, there's 36 bucks. They're just operating interest. Mmm. We 36:31 had producers last year this spent as much as 60 to 70 dollar an acre in interest. There will be more operating not mortgage. I just operating oh total 36:41 interest. Total interest but there will be producers in 2023 that will likely incur closer to 36:50 the complete cycle from it first day. I buy an input to the last day. I walked the grain off the farm though. They might spend as much as $80 36:59 an acre on just interest that's tremendous amount of money. Yeah, and that can be the difference between making money and not making money tools that hmm. Yeah. 37:09 So that's one of the pieces that there are times to leverage cash and there are times not to so maybe a little creative piece 37:19 is that Long-term debt, that's paid. That's at a lower interest rate guys are kind of gung-ho to pay that debt off. 37:27 Maybe this is a personal opinion. No, I don't. I don't think that's a time to be doing that. It may be pay ahead a little bit here there to keep your interest down but generally 37:36 speaking now is it time to be stockpiling the cash? Yeah, see given it to the bank right another piece of this that I'm going off on a little bit of a ramp here 37:45 Damian, but a lot of transition is happening within Farms right now. and the Elder generation 37:54 has still not came to a conclusion with the younger generation on what that transition actually looks like. 38:01 How everybody wants to do it and instead what you have happening is that there's money that the Elder generation 38:07 has that should be leveraged and instead the younger generation is going to the bank and borrow money and that money's gone. 38:16 It's not staying within a family. It's a family operation, right you missing money away to somebody else when you 38:22 had a capability of doing it all in-house. So either doing that because the older Generations defensive and saying man, I don't 38:28 know. I'm not taking sides. They're necessary. Right? Right. You're just say you're exactly here get together. 38:34 They're afraid to have that tough conversation. Yeah. Yeah blind tell people says I don't care what to think about it. You got to sit down and have that conversation. You 38:43 want me to help facilitate it I'm all about doing and it didn't matter maybe at 1% or 2% operating money 38:50 or 3% operating money or wherever that whatever our low was but when we're at eight and eight plus percent operating money the this is a tighter thing. You just 39:00 told me about some interest loads. That's something that I think goes back to situational awareness situational awareness is 39:07 being aware, you know, every meeting you and I've been to you know, what your production causes which cost to production 39:14 This old fossil of a professor from Purdue screaming and yelling that at a meeting five or six years ago. And anyway, I 39:20 thought good God. Are we still 1977 where people don't really know that and maybe we are do you think that most operators put interest in as a cost of production? 39:33 Less than 25% It'll they don't think of it because they know diesel because they see the bill come in for the diesel or they know because they went and whittled 39:42 the co-op down on the shuttle of glyphosate. They know that they don't think about interest as something that's a cost of production. But it absolutely it's a return to management 39:53 property value and Freight is still a big issue, especially in today's world a little diesel costs are there's a there's a 40:02 long list of expenses that happen on a farm that are oftentimes overlooked and a lot of those expenses Damian come from that shoebox at the end of 40:11 the year. Here's all these expenses that had to keep money away from all the same. Yeah the money it's still 40:18 expense right impact somewhere along the lines. It's fine that you're spending the money. You just have to be able to and you have to be aware of what it is. You can offset 40:27 that apparently from a revenue standpoint. And what what comment I want to make that I missed out on earlier 40:34 The average farmer they're long agriculture. And they always will be long agriculture. The farmer is never ever short agriculture. 40:44 Hmm. Farmer's job is to take a long position and get to even not go short but to get to even that oh, I 40:54 might be a hundred percent sold on this year's crop. I'm short the market. No, you're not. 40:58 You have all these hard assets on your farm that are directly exposed and influenced by the direction of the commodity markets that you live in breathe. 41:08 Yeah, so by the way, we've heard that forever and ever but then take me to 2024 and we're gonna get out of this 2023. What's the 41:18 when you had your meetings and you're using your Kansas City Chiefs? 41:23 I don't have my Pittsburgh Steelers cup here. Otherwise, I'd take a step up. But anyway, what are you thinking when you look at? 41:30 Moving in 2024. What are we and we're recording this in April of 23, dear listener. What do we gotta know or what do we not know or what do you what 41:40 are you advising thinking when you talk about situational awareness? We're not in the situation yet. But what do we don't need to be aware of 41:46 come six months from now? The first piece that I think is important is sitting in opinion aside. 41:56 Now the opinion myself included you got lots of opinions, but you know what you always you use those for me mostly when we're arguing but you know what you do a really 42:05 good job of sticking it with the numbers and and the reality in your situation and you keep opinions out of your advice, I think. 42:15 We'll leverage an opinion but you still got to take care of business first and foremost. 42:20 Going from 2023 to 2024. Just the greatest risk is that the revenue achievable for the farm is not adequate to meet a sticky overhead 42:29 expense that is not going to go away anytime soon. So just you know, I hate to use corn as an example again. 42:38 But or in this world a six to seven dollar corn and who's to say that all sudden 450 to 5, let's just use five as an example a joke. 42:50 On a national scale or national average is 175 bushel an acre. So a dollar lower 175 dollar an acre dropping in Revenue. Find me what 42:59 expenses are going to drop by 175 bucks collectively. It's a legitimate question equipment God. No. Insurance yeah, maybe a little bit see no chemical may 43:11 be a little bit fertilizer. Not not in the first year. It's not Jared not in the first year. It isn't but you're saying even going down a year or two, then it comes down to you're digging 43:21 in your pocket. It comes down you're digging into your working capital. You're digging. You're gonna not spend money on yourself. You're going to that's 43:27 what you're talking about. Right? Like I mentioned here at the beginning that I think that we maybe have established a little bit of a new 43:37 Plateau on green prices. Yeah, at least for a period of time but I'm still not confident enough that the bottom end of that Plateau is 43:46 enough to absorb. Today's high price expense. Yeah. So in other words, I'm I talk to my farm operator a couple years ago and I looked at these prices on milk. 43:55 I said you're doing okay. He says yeah we're doing okay. So I'm just trading bigger numbers. Remember everything I buy is up, you know from calf medicine 44:02 to when the inflation thing started from calf from cafet vaccination to my diesel Bill to whatever. 44:08 I'm just trading bigger numbers my margins probably still you know, not that great. And that's become. So the reality you're saying 44:14 is we don't like to talk about $5 corn going from 650 or 7, but we're probably gonna be there. We're most likely not gonna be in that 44:24 too or 250 see take corn or five bucks and drop cost by 200 bucks an acre told me we're having okay margins on a farmer. 44:33 Okay. So the same yes as the calendar progresses and the farmer being long agriculture for Farm Ministry. They're probably farming in 2024. What do 44:43 they need to be thinking about over the next several months often times at least again? Sorry 44:49 folks and on p*** here, but you're looking at a seven Dollar Cash market now a 550 new product market and potentially a $5 Market on 2024. 44:58 There's a road blocked at the farmer gets caught up in this I five dollar corn 24, that doesn't sound good. 45:08 All on okay. What if it all sudden is five to five and a quarter maybe even 550 with what fertilizer prices have done and then all of a sudden now you get into 45:17 that math equation again of what can I Market? How can I control the potential Destiny of my own crop insurance Price what margin protection programs can 45:27 I sign up for here and only three four month period and maybe even walk up to price for that early and all said it's as simple as a pound my desk. Oh easy button 45:37 it's done. We're going to be profitable until 24 no matter what happens. And so it's being prepared to understand what you have to 45:46 do to do that. And I still think that that's the biggest risk for the farmer. I'm focused on a little bit of old crop. I'm focused on getting my crop plant and I'm not even thinking about selling new 45:55 crop. I've sure as heck ain't paying attention 2024, but you know, what doesn't stop in 2024. The interest 46:02 bill is not going to stop going out there. The land costs are going to just oh sorry prices are down. So they're probably do for a little correction, but they usually 46:11 lag so it's gonna take a couple of years. There's a lag there and that lag can be so substantial without the 46:18 right steps in place. I shouldn't say, right but a few steps in place to mitigate that overall risk that's good statement right there. You just made by the way. 46:28 I don't think that things are going to be bad for 2024. Am I wrong? 46:32 No, I'm optimistic that they won't be but I do know that the first step is we have to make good money in 2023 to 46:38 be in position. 24 and you yeah, you can't let it. What's the word I'm looking for their game and you can't let it just build on you faster family. Whatever 46:52 you want to call it build up snowball snowball Avalanche. We want those game shows. We have one of those game 46:59 shows sounds like sounds like what's a synonym for Avalanche snowball? Okay. Because if you lose money in 23, it might be in the position now that 47:08 in 2024, you're carrying an extra debt load from the prior year and interest rates are still high and now you're trying to dig out 47:15 of a hole. Last question Banker friend of mine was out here a couple of weeks ago. We were doing a hike and he says I think there's a little bit more distress in you know, 47:27 in in rural route America, by the way, it's an old term rural route your male used to come to Aurora. So I think there's a little more a little more financial distress 47:37 and Rural America. It's not about the agricultural then maybe the media and he's talking about the AG media understands. Is that your perception. 47:49 I think there is more risk out there. Yes. But that risk builds over time as some of this transfer of wealth takes place good you're 47:59 not concerned about District, you know, you're not concerned about pure financial distress that somehow is being masked by 48:07 this six dollar corn that you're talking about. Yes. Yes. I should really phrase my interest I suppose Daniel or 48:18 The financial stress is building if there's not something being done to offset that increase in financial exposure. But if things are being done, no, there's 48:28 the the idea about Farmers building a debt. There's good debt and there's bad debt. There's still your standard hoping that 48:38 offending anybody on this but still your Knuckleheads out there going and chasing new paint just to avoid Uncle Sam and be 48:44 in over equipped for something that they're probably never going to reasonably grow to to 48:50 make up for that and that happens. Unfortunately that happens in years like the last couple where it's let's go ahead and spend all this money 48:59 to avoid any sort of tax taxable situation. And then it's sometimes that turnaround can be quite quick Jared where within a year or two. It's like 49:09 how do I get called like this? Well, it was only two years ago. You were spending money to avoid taxes and here you are completely in 49:15 a low capital or what's right. We're working capital position so I can see that I don't I don't think that things are that bad. I just thought that there's a 49:25 little bit more distress. It's a good time to be an AR. It's a very good time to be an area potion. It's all right. So you're gonna get next time we talk to you is going to be when we have to interpret all 49:35 the insurance programs. And that might be if we have some weather problems this summer or fall when we've got to actually 49:42 use them and by then you'll be you're gonna be a full-blown Insurance Agency by Summer Ball. Yes, one comment. 49:49 I'm gonna make people remember 2019 2019 or spring Insurance price was four bucks before we even got on a planner. It was 360 but dropped 49:59 10% Hmm by the middle of June. It was 470 because planting was so slow American Producers chasing the carrot plant 50:08 plant plant. And that all sudden they got done planting the spray in the corners back below four bucks important piece. There's Insurance price for bucks. 50:17 I plan to cross. I'm now guaranteed bushels and I have the capability every capability to reprice those guarantee bushels at a higher 50:27 level on my own instead of waiting on federal crop insurance do it. For me I say your but your point is if prices 50:35 will continue to move during the sea depending on what the season looks like and you can take advantage of that. You can move 50:41 your own price to a more favorable position by what's going on seasonality. You can improve your worst case situation dramatically. There's 50:48 ways of going about it. Next time you come on next time you come over I'll talk about insurance and we'll be probably somewhere in the late summer fall when we actually see these scenarios playing 50:58 out if somebody wants to learn more about this. Obviously, we we don't cover these things all that much here 51:04 cutting the curb we're gonna do more of it because I really believe that we we do our listeners a service by making sure we talk 51:11 about the financial and the business side of this again. Farming's a lifestyle on a legacy but if the if the 51:17 place if the place gets put up for foreclosure auction, there's no lifestyle and there's certainly held no Legacy. So somebody else 51:24 to find you. Where do they find you? I've following is obviously the easiest four zero two six eight zero one seven four four and obviously since 51:32 this is an extreme AG. Um, we're I am on that member page on Facebook so can find me there or just 51:41 ask around ask you ask Kelly. Whoever perfect. We know how to find you his name is Jared Creed until next time. I'm David Mason and this is Extreme Ice cutting 51:50 the curve. Thanks for listening to another edition of cutting the curve for more insights and information that you can apply to your farming 51:57 operation. Visit extreme act dot Farm are your craft stressed out Explorer has you covered with a full line of products designed to reduce crop stress 52:06 and improve yield check out explore.com and start protecting your yields and profits.