00:00 Is fall the right time to buy your inputs for next spring? That's what we're delving into in this episode of extreme Ag. Cutting the curve. 00:09 Welcome to extreme ag cutting the curve more than just a podcast. It's the place for insights and information you can apply immediately to your 00:17 farming operation for increased success. This episode of Cutting the Curve is brought to you by Ag Explorer with innovative products that improve fertilizer efficiency, protect yield potential, 00:28 and reduce stress. Ag Explorer helps growers maximize field potential. Find out how Ag Explorer can help you get more out of your crop@agexplorer.com. 00:38 And now, here's your host, Damien Mason. Hey there. Welcome to another fantastic episode of extreme Ag Cutting the curve. I got a great episode for you today. We're talking about business, 00:48 the business side of farming. We're talking with Jared Creed. Jeremy Muff. He's a farmer that lives down the road from Kelly Garrett. And we go, 00:55 got Kelly Garrett on here. You get presented with all kinds of programs. Is it the right thing to do? You can save money, take 10% off buy ahead. 01:04 But here we are recording this in October, and you are being presented with options to pay and prepay for inputs that you're gonna not use until April or May of next year. 01:15 What's the right way to do this? How do you maximize your money? 'cause you know what? Farming is a business. 01:20 Commodity prices are getting squeezed, and you still have a whole bunch of bills to pay. So what's the right way to do this? That's what we're talking about right now. 01:28 Jeremy, uh, Jeremy Muff, um, welcome to the show. Uh, never met you before. Uh, you're, you're a farm guy. Tell us about you then we're gonna dig into this topic. 01:39 Uh, thank you. Nice to meet you too. Uh, so yeah, farmer farm with my brother, uh, corn, soybeans. We've got cattle, uh, 01:48 just down the road from Kelly. We do plant food too. Um, yeah, just happy to be here today. 01:55 Corn, soybeans, cattle plant food. Is it safe to say you're kinda like the junior varsity of the Kelly Garrett? Is that what we're talking about here? 02:03 If I thought about shaving my head today, but I thought that might be a little much so I love the sleeves on. I Was gonna say, because you know what, 02:10 the people that are listening to this don't, don't realize you actually have sleeves on. Uh, so, so you're, you're not going full tilt on a plaid short sleeve shirt, right? Or a sleeve. 02:18 I don't think I'm quite there yet. Jared, what's the deal, man? Um, you, you obviously advise all kinds of clients with your business, JC ag, financial, 02:27 elite, ag Insurance. Do these guys get ahold of you and say, Hey, I'm getting presented with all these opportunities to buy my inputs to prepay 02:36 for seed, to prepay, for gas, to prepay, for diesel, to prepay for nitrogen, everything. Is it the right thing to do? 02:45 Depends on the operation, Damien. But that is a very common conversation starting from, call it August 1st through the end of the year for the next crop year. Uh, 02:55 I would say in years past, that conversation really didn't start until maybe closer to the beginning of October. Mm-hmm. Uh, 03:03 but there's a lot of different considerations for each farm, what their agronomy practices are. 03:08 Are they a fall and hydrous application operation? Are they waiting until the spring? Are they using a liquid or dry mix for a fertilizer? Um, you know, 03:17 fuel obviously can be locked in year round. Uh, and a lot of the other products that we are booking for next year are predominantly to get your name in line for the availability of that 03:29 product, not necessarily to lock in a certain price. In today's environment, at least in 2023, really the big needle movers from input prices kind of are just 03:44 chemicals and fertilizer. There's, you know, fuel, yeah, it moves, but it's such a very small percentage of the overall operations, um, 03:54 exposure, especially just on the row crop side. Uh, but outside of, of, uh, fertilizer and chemical, again, 04:01 everybody's just basically getting their place in line for next year. And given the rise in interest rates over the last 04:10 24 months, a lot of these programs, uh, that they are presented with to go ahead and prepay or just book a price out until the beginning of the year. 04:22 It's more of a money management process. It's more of a practice to avoid unnecessary interest rates when somebody else is willing to provide you much, 04:35 much cheaper interest rates than you can go borrow from the bank. And second to that, um, you know, 04:42 the farmer has an uncanny ability of writing a tremendous amount of checks in the last 72 hours of their business year to 04:52 avoid uncle saying. So it's kind of a twofold situation that outside of price movements and the programs they have available to them, uh, 05:03 it's more of a money management process in the next 90 days. Okay. Well, 05:08 a lot of agriculture when you're at a certain level becomes a money management game or money management business. So I guess my thing is, uh, 05:18 these guys are presented with all manner of stuff. You said it is maybe less about the money and more about just making sure that you're in line to get the, 05:26 a availability of the stuff That's not really an issue anymore. A few years ago we had supply chain issues, we had shortages of stuff. 05:33 There's no shortage of anything. Jeremy, answer me this. You're, you're the first question you're gonna be asked here in an extreme ag uh, video. 05:41 Did you go without anything this year? Did you go, did, did you lack any availability of supply for any input in 2023? Uh, it's, no. No. I mean, there was worries, but, 05:55 uh, when it got down to it, we, we were, had, everything was available. We, we got all fertilizer, everything like that, lots of talk, but, 06:04 but everything showed up. So it's safe to say that there's not an availability issue. So Jared's point that you're getting yourself in line for stuff that was more of 06:11 an issue a few years ago? Um, No, no. Uh, naming and seed primarily on that Seed. Okay. 06:18 These two waited until February 1st to put their seed order in. Yep. The odds are they're not gonna get anywhere near what they would like to have. 06:26 Okay. So let's start with seed. Seed companies. Uh, I've worked and spoke at their meetings. They always have their meetings in July, and as soon as I walk off stage, 06:37 they send those sales reps out and they're $65,000 Chevy Silverado pickup truck provided by the seed company and say, go sell. And so you're, 06:46 you're getting seed companies that are out here banging on your door, generally in July and August saying, order now for next year. 06:55 Is it safe to say then, based on Jerry's point, that's when you should, you should go ahead and take their deal and take their offer? I mean, 07:01 does it save you money versus waiting until later? Kelly's shaking his head? No. The 07:06 Money saving on seed is really not till the beginning of the year. Damon, if the individual seed companies willing to provide 0% financing 07:14 or a very low interest rate to the farmer, that's not payable until, you know, call it fourth quarter of the, of the growing season. 07:22 Okay. So Kelly shaking his head, what's the story on seed? Should, should I buy seed right now? I we're recording this on October 3rd. 07:29 Should we record? Should we buy seed? Right now? I have a hard time buying the seed before I kind of see what's in the field and what numbers I wanna keep and what numbers I wanna move out. 07:38 And it feels to me throughout my career that this early order seed idea has moved ahead even further. And it's because more seed companies now are, 07:46 in my opinion, are publicly traded and they're trying to make the fourth quarter numbers or third quarter numbers, really when October 1st, 07:54 when your third quarter numbers come out for the, they're trying to make Wall Street look good. That's all that is about. And I'm not ready to order the seed yet. I'd rather wait until November, 08:02 December to kind of see what's in the field. What about the money? Do you pay for it in November, December or do they give you terms and you pay for it? 08:09 Do you wanna get the money off your books? I mean, obviously it depends on how kind of year you're, you're having, when do they want money? 08:14 You can negotiate all sorts of terms. You could pay for it upfront. You could, a lot of times, like Jared said, 08:21 we'll pay for it in the last 72 hours of the year, or you can finance it. And right now there it's a lot more complex decision. 08:29 It used to be pretty easy. Interest was cheap, and there were no supply chain issues. And for you, like in 21, supply chain issues were worse. 08:38 But now there's still a shortage and you have to be more organized because it takes longer. Like Jeremy said, there was a lot of talk, everything showed up, 08:44 ended up showing up, but I think if you wait till the end of the line, you might not get everything. So it's a lot more complex decision and then, 08:53 and now all of a sudden interest is real. So you have another factor to put into the equation. Okay. So, uh, that's, that's the issue on seed. There's all kinds of things. 09:04 And you said you can negotiate. I, I didn't think that you could sit down with DeKalb and negotiate. You're telling me you can negotiate this. 09:10 Is this a real thing and Jared's not as Yeah, Yeah. When you do have the size of order that Jeremy would have or that we would have, you can, you can negotiate. 09:20 Okay. Alright. And every seed company has good numbers, so you know, they're, and they're all knocking down your door. 09:27 So just find the guy you wanna work with. I'll agree with what Kelly said around what the seed company is wanting to accomplish within their own books, 09:35 but there's a whole nother layer to it as well. It's about their own logistics and their own planning for the future that you're harvesting the seed crop today for a lot of the stuff that's gonna be 09:49 used next spring. And these seed companies at the same time are already trying to make projections for what the farmer will plant a whole nother 18 months from now. Mm-hmm. 09:59 For the 2025 crop, getting the growing season set up for the North America seed producer in a matter of six to seven months down the road, 10:08 there's a tremendous amount of hoops and hurdles that sea companies have to, um, to wade through to get the product that the farmer wants. 10:18 And in turn, consistency for sea companies is probably the most important piece that they can have consistency in their orders. 10:26 Not big swings of up 50% in units, down 30% in units. That's tough for them to manage. So there are actually situations out there that seed companies will go to 10:40 some just, I guess call 'em what they are, even larger growers in certain parts of the US that they will book product across a three year stretch 10:51 At a time. Okay. So, so basically, so it's not even an annual to, to fix their, to fix their production basically. 10:57 Correct. And tremendous amount of negotiation. It might not be on the, the price of bag of seed. It might be, it might be free toys from a, 11:09 a certain C company in your neck of the woods, Damien. And it might be, uh, situations of financing games, 11:18 all kinds of different variables come into place of what that final cost per unit to C disc. 11:23 Okay. So what you're just telling the, the listeners, uh, here is there's more wiggle, 11:28 there's more wiggle on seed than maybe even some folks realize That is, I would guess I never really thought about it. 11:34 Seed probably has the most wiggle room out of any type of input price that the farmer, uh, purchases annually. Okay. Maybe equipment might be close, 11:44 uh, but from a percentage of a per unit price, it's probably seen. Okay. Alright, let's move on then. The next thing fuel. Um, 11:53 a guy like Kelly, I asked a couple years ago when we first started this whole, uh, thing. I said, you probably go through a lot of fuel and you, 12:01 and you no till for God's sake. So imagine if you're out there running two more trips across the field unnecessarily, what, 12:08 a couple four tanker loads of fuel, 24,000 gallons. I don't know. Uh, what, what's the, what's the number? 30,000 gallon. A lot of diesel. 12:17 Do you book your diesel in October for next year? Do you book your, uh, diesel, uh, at the last minute? What do you do? 12:26 We don't, we, we've contracted fuel a few times in my 26 years and it seems like, uh, it's just like selling corn. That's why we hired Jared. 12:35 It always goes the wrong way. And so we have just bought it hand to mouth as we've needed it, because like Jared says, it's a small percentage right now. In the last quarter, 12:43 fuel's gone up about 80 cents. So I wish that I had, but, uh, it's, it's a small percentage of the whole pie. 12:51 A small percentage in terms of the cost of producing, uh, an acre of crops. Diesel is a small, uh, percentage. 13:00 Yes. It's a rounding error. Jeremy, you're nodding your head. Do you, do you pre-book, do you pre-book fuel? Uh, we have before 13:08 The last couple years we haven't. Um, and I've really thought that it was maybe a huge mistake, you know, with fuel prices going up. 13:16 But then I just called Jared like I do 15 times a day and he talked me through it and said it was, it was pennies. So yeah. We're, we're, 13:24 we're we're same way right now, just Jeremy, I I try to like, I'm at a point in my life where I try to make sure that things are enjoyable. 13:32 If I had to talk to Jared 15 times a day, that would be a direction that I don't want my life to go. I mean, I, I, I, frankly, I don't care for him. Uh, I mean, we, we get, 13:42 we get along professionally 'cause we have to, but I really don't care for the guy. I'm glad you said that. I mean, I was afraid to say it myself. 13:52 No, but Amy, seriously on the fuel side, just for, you know, all your listeners that we have a tremendous amount of operations and it's 13:59 probably less than 3% of their overall cost. Okay. It just does not add up. And quite frankly, um, you would like to think, albeit the last couple years, painfully speaking here, 14:13 that the disconnect between grain prices and fuel separated, uh, primarily on just money flow within the market based upon the happenings in 14:22 Ukraine and Russia and fears of oil supply. Well, generally speaking, you would like to think that fuel goes up, corn's going with it, fuel goes down, corn's going with it, not day by day, 14:35 but in gradual swings. Mm-hmm. And the, oftentimes if the corn price, if you know, if I would tell guys that I would gladly take five to $6 diesel 14:47 across the entire row crop operation, if that meant corn was 20% higher, a dollar higher. Sure. So the, 14:56 A jump in a couple bucks an acre, or excuse me a jump in, a couple dollars a gallon in diesel prices can be smoked 15:04 very quickly from just a 10, 15 cent increase in corn price. That's a very valid point. You know, we talk about, uh, and, and my, 15:12 my parents were guilty of this dropping dollars to pick up dimes. Uh, focusing on the wrong thing. What the hell difference does it make? $5 diesel, 15:21 $3 diesel six? Well, it does. The, the main point here is, as you said, there's a direct correlation, uh, 15:26 between commodity price and fuel price. And so fine absorb the higher fuel price because along with it usually comes higher commodity price. 15:37 You still wanna be as efficient as you possibly can, goes without saying, but it's, uh, I think there's a lot more important things to focus that uh, 15:46 uh, that attention on. Perfect. So we talk about seed In the environment we're in, whether it's a seed price, chemical price, fertilizer, price, fuel price. Right now, 15:56 the biggest kingpin is still interest how you pay em for it. We've talked about this before, Jared. Money is a crop input. Uh, 16:03 water is a crop input. There's a lot of things that we never really think of as a crop input. The cost of money has gone up. You told me something very smart. 16:12 'cause you're a smart guy. You said, you know what, Damien, I got my farmers out here. $80 an acre. If you're using operating money, 16:18 you're talking about 80 bucks an acre of, of interest. I'm like, damn, I never really put it across the farm like that. That's not insignificant. 16:26 They come, you know, talk about cash rent, talk about fuel, talk about all these things. Interest. 16:32 What should we be doing right now in October, in fall, going into winter? What should we doing now about money? 16:41 Oh, Try to not, try to not borrow any. Well, yes, uh, I think we've probably had this discussion numerous times and I'll go back to it and lean on it, 16:53 that we've obviously been trying to position ourselves for the better part of 12, 18 months to get through this crop year, 16:59 the rise in input or with the rise in both input and crop prices to make sure we're not borrowing near the amount of money per acre that we once were. 17:10 You have like three different segments. You've got a maybe a younger generation who's still gonna have to borrow money, just can't get themselves outta that hole and possibly didn't have the 17:19 crop production in the last couple of years that some others did. Then you got another bucket that is kind of like a pendulum swing here 17:28 that I'm still borrowing a chunk of money, but I've got the opportunity to, um, take that exposure off the table sooner than I did before and then operate 17:38 on cash for a period of the year. And then that last segment is trying to get them to the point that can we operate on cash for as long as we possibly can throughout a crop year? 17:49 And some of this too, in today's world, you gotta start talking about opportunity cost as well. First off, we've had this discussion If, 17:57 if the four of us were all farmers and we're sitting across the table from a board of directors and we show them the risks that we're putting on a table, 18:04 the interest that we're exposed to, and they're looking in the outside market of what type of interest returns they can get safely and guaranteed they're gonna laugh us out of the room, 18:14 that you're taking dumb unnecessary risks while you're doing it. So that kind of brings it back to a level playing field that we gotta understand 18:22 that we can go generate five, six, 7% on cash outside of agriculture. So it kind of means two things that not only do you have to measure what that 18:34 opportunity cost is on excessive cash that you have, that you're not borrowing. And it also needs to probably create a, 18:44 a thought process that if I can go get that five, six, 7% in the market, I probably need to be doing double that. Now on a farm, 18:52 there was years and years and years we would talk about we wanna make 10% return on investment and that was on 700 to $850 cost per 19:01 acre on corn making 80 bucks. That was our profit. Now we're spending that much in interest, possibly if an individual is not taking care of their efficiencies within 19:12 money. I mean, think about this also. Uh, let's just say the average farmer is going to the bank and borrowing 600 bucks an acre to plant a corn crop. Their cost is a lot more than 600, 19:24 but that might be where the bank starts to cap amount of what amount they're willing to borrow. 19:30 So it only takes about 1600 acres of corn to wrap up a million bucks of operating money. Now imagine you're doing that back-to-back crop years. 19:40 That money is never just completely wiped out to zero because the exact conversation that we're having right now, 19:47 we're harvesting the crop that we planted six months ago and we're booking inputs for next year and we haven't paid off all the debt from last year while 19:55 we're increasing our debt for next year. So that workload is actually, or that, uh, that borrowing load is higher main point. 20:04 That 1600 acre farm is paying roughly 10,000 bucks a month in just interest right now a month. Mm-hmm. 20:13 It's incredible that that's what, what our profits were a mere five years ago. Okay, so let me ask, lemme ask the farm guy. Lemme ask the farm guys here. 20:23 What's your choice? Okay, your choice is either have a whole bunch of, uh, inherited, uh, assets and work on cash, 20:31 which I some operations presumably do. What's your choice, Amy? 20:36 I'm gonna answer that for them for a second because I'm not gonna give 'em a choice. They have to move the grain and avoid the bank. 20:42 They have to what? They have to move the grain and avoid the bank, get as positive of a cash position as we possibly can. Uh, 20:50 there's just dumb emotional attachments to all this crop that I raised that, oh, it's mine, it's in the bin. Mm-hmm. 20:57 And I don't have that emotional attachment to the bank. Well, how about we just reverse your gears. 21:01 How about the bank comes out at January and say, Hey, I want you to write me a check for 50,000 bucks for the interest that you're gonna owe me in the next five months. The farmer's not gonna do that. 21:12 They're not gonna like that, but that's an inherent cost that's there. So it's, it's almost like a money management comment that we want to move the pendulum 21:21 from paying that eight to 10% to actually earning three, four, 5% on the excessive cash that we can generate. 21:29 And that is a tremendous amount of cents per bushel in today's environment on both corn and beans. That's over 20 cents a bushel a month in just beans. 21:40 By the way. I like the, uh, I, I like the way you take it and say, alright, imagine if you're, uh, striking a check for this because nobody, again, 21:48 I always say money is an input just the same as glyphosate, fertilizer and fuel, whatever. And nobody ever thinks that way. Alright, let's go with the money, 21:55 the money discussion with the farm. By the way, Jeremy, I just met you. Most farm people, uh, avoid discussing money. They, they, they, 22:03 they really don't like it. Uh, they, they don't like their neighbors thinking they have any money. And so that, that's a big thing here. 22:10 Are you okay discussing money with us on this call right now? I think we'll get by today, but Kelly told me this was gonna be about aliens, 22:17 so I'm not prepared at all, but I guess whatever. Let's, let's, let's do it. 22:24 So anyway, so you, you always have to pretend that you don't have any money. Remember? Uh, I, I once, uh, 22:29 I once rode in a 1987 Ford Ranger that I thought should go to the scrap yard when I came to see Kelly because he wants to make sure that nobody 22:37 thinks he actually has any money. That's why he drives this old jalopy of a pickup truck. Anyway, when it comes down to looking at this interest rate, 22:45 how does Jared help you and how can you help the listeners right now manage their interest payment? 22:52 Well, uh, first thing I would say is get some, if you can't get Jared, get somebody like Jared, you, you gotta have somebody. 22:58 He's got like the 10,000 foot view. You know, we're, we get focused, we're in the cab, you get tunnel vision and, uh, and it, 23:06 and it feels good putting grain in the bin, that's like your little safety net or your little blankie. It feels, it feels good having a, a bin full of grain. And, um, 23:16 you gotta have that guy from 10,000 foot to say, Hey, turn that into cash. Stop the interest. And, and, uh, yeah, 23:23 that's what I would encourage everybody to do. And, and, uh, avoid interest that way by turning your, your grain now into cash. 23:30 Jared, it wasn't even an issue. It wasn't even an issue a few years ago. Now you're talking about we've, 23:34 we like two and a half times our interest rates in the last 24 months, right? Um, let me give an example of these guys. 23:44 Both have heard me talk about this for years. Let's just rewind the calendar a full 10 years. There was a stretch of very, very poor years in the farm there. 23:53 But our job at that in at that time was just to continue to make money while others suffer. 24:02 I don't mean that in unprofessionally or disrespectfully. The farm struggled. A lot of bankruptcies happened from 2015 18. 24:11 Well, what happened from 2019 forward? We really farm, Farm, farm income's improved, right? And in that time, prior to that income boost, 24:23 what did the farms do from an accumulation of land, new rental opportunities, new purchase opportunities, and then all of a sudden you're expanding your profitability across 24:36 20% more land mass. And all of a sudden we're getting right back into that situation again here today. 24:42 We wanna make sure we make money the next 1224 months because I'm a big believer that there are going to be, um, 24:52 a tremendous amount of more land opportunities come around in the next coming couple years. 24:59 And it is going to be a little bit tougher to manage when you're talking about borrowing eight to 10% money to make this happen. 25:07 And that probably reemphasizes the importance of a great working capital position and always being, um, 25:16 it's almost like a opposite thought that the farmer traditionally is cash poor equity rich, well would probably want to be cash, 25:26 not maybe rich, but have plenty of cash to go around for the next 24 months. Interesting. And that, and that, again, 25:34 that takes the dependency away from being able to make the smart business decisions that need to be made and worrying about the bank. When you got the cash to do it, you get to do it. 25:48 Alright, I think we should move on to the next management of money and inputs thing. So we've talked about seed fuel money, 25:59 uh, where else are we talking about? Let's talk about fertility. Don't, don't you have a, 26:05 and I remember two years ago we thought there's gonna be a supply issue. Kelly went out and bought a whole bunch of polypropylene tanks and everything 26:11 else to make sure you had, that's not an issue anymore. Should we be pre-buying? Should we be going to the, 26:18 the ag retailer and paying for stuff right now to line that up in terms of the other crop inputs? 26:26 Not every ag retailer will give you that choice statement. Okay, Kelly, if 26:30 You are a producer that's using primarily spring application on products, not every gonna give today, 26:39 and you know, I probably shouldn't do this, but I will. The cooperative system of what has become, has become a train wreck, especially in a fertility space that I don't give two 26:53 s***s if you think that it's time to buy fertilizer or not. When I want to buy it as the farmer, 26:59 because I can offset it with the grain price that has a great conservative or a great conversion margin, it's time to go. We're all in it together. 27:09 Now, that is the, um, that is the massive, um, island that the farmer sits on today. That the retailer doesn't operate in that function. 27:21 They're looking at what the farmer's needs are going to be to grow the historical crop that they have traditionally done, and that's all they focus on. 27:30 And then they have their own price opinions. So it is a trouble for the farmer that is not a fall applicator of fertilizer and having to wait until the spring 27:42 to hope two things, that fertilizer price doesn't go higher and that the grain price can stay where it's at or get better because what good is it 27:52 talking about what the price of fertilizer today is in October, if I can't do anything until February, march in the first place. 28:01 Okay, Kelly. Uh, we, we can't, we can't buy and line up our fertility products in October for next year. 28:11 I could buy some of the liquid foliar products, things like that, but you know, we have our anhydrous price booked for fall. 28:18 But if you wanted to look at an anhydrous for spring or some things like that, Jared's absolutely right. They won't give you a price. Mm-hmm. In June or July, 28:25 we were wanting to sell corn and buy anhydrous for fall. And they stalled both of us, you know, and, 28:30 and Jeremy and I were both working on it with Jared and, and our anhydrous retailer stalled us for a while until they were ready to come 28:37 with a price. And, uh, Jared was irritated about it with them. That's why he's responding that way. And, and we were irritated too. 28:45 We wanted to get it done because we're worried about it going up and it, it, it kind of feels like, um, you're being manipulated. Absolutely. 28:52 Okay. So of all the things you talked about where there's wiggle Jared and, and everybody's kind of, and it's apparently in agreement on this. 29:00 I got wiggle on a bunch of things. I can't, I sure to God somewhere out here fertilizer is a, you know, it's, it's everywhere. Surely somebody will wiggle on this. No, 29:10 Uh, no. Nope. It is, uh, primarily, you know, your gas products are produced by just a handful of companies in North America and then your liquid and dry products. Uh, you know, 29:23 maybe coming to a theater near us here soon, uh, with the issues in the Mississippi River right now, it's not gonna be easy to get a lot of those products up the river this winter, 29:32 uh, or late this fall. So logistics in itself can create, uh, big price swings on a fertility products for this next spring. 29:42 And I do think that that's probably more of a, a realistic situation than what we wanna give credit to the wiggle room and, and fertilizer prices is a lot more tied to boarded trade 29:55 inputs than you would think. Okay. There's obviously margin through the channel to get it to the farmer's hands. Uh, but you know, again, natural gas, for an example, natural gas, 30:05 what did it do last year during the Ukrainian Russian invasion? I mean, it went from two to eight in essence, if not higher than that. I don't know, 30:12 we might've even traded 10. I can't remember now. Now it's much, much more modest price. 30:17 But that type of movement obviously has a tremendous impact on the fertilizer producer's bottom line. 30:26 So the farmer's still subject to what markets are doing to create the final price for that product. Um, and that, 30:35 that eliminates the ability to talk about, um, squeezing price down from the retailer on fertilizer. But the difference stack up fertilizer and seed. 30:47 You can talk till you're blue in the face about, oh, this seed's going to get you an extra six, seven bushel acre, whatever. Mm-hmm. Uh, there is no conversion margin to talk about on seed and corn price. 30:59 There is a conversion margin to talk about how many bushel per acre does it take to pay for my nitrogen need for an example. 31:08 And that's what happened here two months ago. We got to a 10 year low. Mm-hmm. We got to a 10 year low, 31:14 which is already a little intriguing for what acres look like in North America next year. Uh, 31:20 it provided one of the best situations I've ever seen in my career, uh, to just flat out lock up some corn and buy the nitrogen and move on. 31:28 But you can't, No, we, we were able to get done after plenty of gnashing of teeth, but uh, was able to get it done for any fall applicators. 31:37 Okay. Just for fall. And your listeners know about that. I mean, a lot of your listeners are gonna understand that they're kind of at the mercy 31:43 of the retailer if they can't buy it today because they're not using a product until spring or they can't take delivery of the product today. 31:51 Uh, they're a little bit of, uh, at the mercy of the market between now and then. What decisions are you making right now, 31:59 Jeremy Muff that I have not asked about when it comes to fall finances? Um, and again, uh, we've covered fuel, 32:10 fertility, seed interest equipment. Is there, is there something on equipment or is there a decision that's being made right now that you think is a smart decision, uh, to, to, 32:20 to move some money to make a financial decision right now that's gonna make you money come next year? 32:25 Well, that was gonna be the only thing that I could really think of was, would be equipment. Um, that maybe is, 32:32 there's still some, uh, delay in the supply chain there. So we have, uh, we have updated equipment, 32:40 but it's not coming in till next year. Um, and I guess the one bonus of that is you get to run your current equipment at no, at no real extra cost as it's already traded. But, um, 32:53 yeah, not, I don't know that, uh, I think you're missing one thing, Jeremy. A lot of guys in September already know from their accountant what type of 33:03 income they can and can't take in before the end of the year. Yep. Taxes, when's 33:08 Your, when's your average farmer know how much money they can take in and not take in right about Thanksgiving time? 33:15 Yeah. So by the way, we, we've always made the joke for years and years, you know. Okay. Uh, it was a, things got fat out here in the countryside. So, 33:23 uh, all these farm guys are at the implement dealership, uh, with a open checkbook trying to get some equipment bought. 33:29 Generally that's a bad decision. I mean, I get it, you don't wanna pay taxes, but that's usually, uh, it's kind of, uh, asked backwards. 33:37 It's a little bit behind the, it's, it is a little bit behind where you should really be thinking, but there is some reality to it. A as Jared just said, you don't know, 33:45 you don't really know where things are gonna fall until Thanksgiving. It gives you a month. What should people be doing on equipment? What are, 33:53 what are you guys doing on equipment on, on the money side of management, uh, on the equipment? 34:00 We've updated our combines. Uh, and they, you know, one new one just came yesterday because the one we had traded broke down. So we got it. 34:07 We went and got it yesterday then because it even wasn't quite ready at the dealership, but they let us take it thankfully. Um, 34:14 there's other things that we have traded or we're adding, you know, we've expanded a little bit. We've added a tractor to things like that. 34:21 But that isn't a tax-based decision. That is a need-based decision going forward. And like you say, you know, there's a lot of money that gets spent to avoid taxes and that's generally a bad 34:32 decision. I think that's a worst decision this year because people are going to do that section, you know, the, the early pay or the, 34:39 the tax write off the depreciation and then they're not gonna pay for it. And then used to be that was 3% interest to make that payment in the coming 34:47 years, well now all of a sudden it's eight to 10% interest. So that that avoiding taxes decision is an even worse decision. Now, 34:54 in my opinion, Dam, think about it this way real quick. Back to that operator that might have a million dollars borrowed, let's just say that they only have half a million borrowed October one. 35:04 They brought some grain income, but they can't bring any more income in the rest of the year. They can't bring in any more income for the rest of the year, per se, 35:16 their accountant. What you definitely want to have is whatever that accountant is saying that okay, no more income, 35:25 you certainly hope that whatever income you're bringing it in is going to wipe out the balance of your operating interest exposure between now and the end of 35:33 the year. And I think that there's probably a real issue there in the countryside for the next 90 days. 35:43 And an exorbitant amount of interest expense is going to be incurred just to avoid uncle same. Mm-hmm. I can't take any more grain income. 35:52 I might not go spend any more money necessarily, but I still am not gonna clear out all my operating debt. So by the way, doesn't that seem foolish? So I'm gonna avoid, 36:03 I'm gonna avoid bringing in more income, but I'm still obligating a half million dollars of, of, uh, note. Right? That's where you need that. Like Jeremy said, 36:15 you need to hire somebody like Jared. You know, like for us, Jared is a C F O. Yeah. And your banker has a perspective, 36:23 your accountant has a perspective, but you maybe don't have anybody in your operation that has that C F O perspective that's looking at all the angles. 36:30 And that's a lot of the value that Jared brings to us besides marketing is looking at all of that. Yeah. 36:35 Because it's pretty easy for the average farmer to sit here and say, well, the accountant says don't take any money 'cause I don't wanna pay taxes. Mm-hmm. 36:42 And that's a trigger for everybody. 'cause none of us wanna pay taxes. Right. But you don't necessarily want to go, 36:47 you don't necessarily listen to the banker when he says, don't pay interest. And the banker maybe doesn't even say that because that's of course how he makes 36:53 his living. Yeah. You need in these kind of times with these, this kind of economy, you need that C f O position on your farm. Hundred 37:01 Percent. No, I don't disagree. All right. What, what have we missed? Uh, we're talking about the fall. The fall finance, uh, 37:07 and there's a lot of decisions and, and you know what? We say this all the time. Farm people love production. 37:13 How many pounds per day they're putting on those deers, how many gallons of milk they're putting in the bulk tank, how many bushels of soybeans are getting outta that field? 37:21 They don't normally like this discussion, but it's pretty damn important because if you wanna live to be here again tomorrow, we always talk about, oh, the legacy. Oh, the, the lifestyle. 37:32 None of that exists without the money. So it is a business They don't like, generally, you're right. 37:39 Generally they don't like this kind of conversation. And it's a lot of fun to put the corn in the bin and to grow big yields. It's a lot of fun to have a pen of steers that gains really well with the, 37:48 you know, your rate to gain all that is great, but if you don't pay attention to this, you're doing all that stuff for free. Right. I've got enough experience, Damien, I'd like to do it for the money. 38:00 My, my hobby. Kelly's got a point there 20 years ago you could do that. You could, it was, it wasn't impossible to lose money, 38:09 but the gain was so much different now, and it's just continuing to get the, the volatility continues to stick around the, 38:18 the price of doing business going higher and higher and higher. Who's to say that 10 years down the road we're having the same discussion and it 38:26 doesn't cost a heart of the corn belt producer closer to $2,000 an acre to grow a corn crop? 38:32 Correct. Are yields supposed to go up? Right? Right. Are are we, are we supposed to raise 300 bushel corn in 10 years? Probably should. 38:41 What's the price gonna be? I mean, it's, it's not all that crazy of a concept to think about the farmer still being faced with tighter margins. Uh, 38:49 but you just gotta make sure that you're around to do that. And I think that's the, the biggest trick in the next couple months or couple 38:55 Years. Right. So, so what, so, so get me outta here. I get, I get it that, uh, the cost, the costs, 39:00 obviously the cost structure is greater than it was incidentally, Jared, you're, you're almost getting to be like these old farm guys, uh, 39:08 how it's different now than it was. It's always been about the business. It's always been about the money. I mean, let's face it. No, you know what, go, 39:14 go tell No Farmer was able to live off the land 20, 30, 40 years ago. Farmer lives off a debt now, 39:22 and I can prove that time and time again. We'll have another recording about this. Okay. So give me, give me out of this episode. Uh, by the way, Jeremy, as you're, 39:32 if it's not apparent already, Jared delights in provoking me and it's, it's just, it's what he does. Uh, 39:41 it's his nature and I like that we disagree because that means we both think from separate channels. 39:48 The thing that he has not figured out yet is that I'm generally right, we'll get there anyway, 39:54 Generally is a loose term, What Generally is a very loose term. Yes, it is. All 40:02 That. Jeremy, get me outta here. What, right, what are you doing right now? Here is, we're recording this on October 3rd. You've got, you know, 40:08 couple more three months. What are you doing right now? What financial decision, what money decision, what input decision, what looking ahead are you doing that you think is a smart thing that you can 40:22 benefit a listener, uh, right now? Say, hey, one thing you should keep your eye on, one thing you should be doing, Doing, uh, one thing. So, um, I think, uh, 40:34 what is the average age of a farmer right now? 60. 67. Seven. So, um, one thing we are, 40:43 we are updating our equipment, looking for opportunities for expansion. I I think the landscape in farming is gonna change big in the next five to 10 40:53 years. And those that are willing and able to, uh, take on extra ground are, are gonna be rewarded. So I think look to the future and, uh, yeah, that's, 41:06 So you're looking to expansion because there's gonna be some more consolidation based on you, you think it's based on age, it's gonna be based on that and, 41:14 and probably among a couple other things, right. Uh, the, the, the numbers then to Jared's point become even more intensified. 41:23 So I mean, presuming you can do it, then you can do it, right? Yeah. By the way, Jeremy, the listener can't hear you nod. You're gonna have to, 41:35 you're gonna to acknowledge me with an an actual a verbal response. Yes. 41:42 Kelly, what one thing, what one thing are you thinking heading into fall and in terms of next year? We are turning grain into money to stop the interest. 41:53 And we have updated the equipment, we've expanded the equipment a little bit with the eye on expansion. Jeremy and I are both working on that together. Uh, you know, 42:01 along with Jared because with the age of the farmer and the financial situation that is, that we are in and coming, 42:07 we believe there will be an opportunity for expansion. Okay. So the, the farm grass are both talking expansion and they think it's based on age. 42:15 I mean, historically aging, Age and interest. Yeah, I was gonna say historic. We've, we've been in a consolidation mode in American agriculture since the 18 42:25 hundreds. I mean, uh, we, we, we had peak farm in like 1934, uh, right before the dust bowl condition set in. 42:33 We had like 8 million farm operations. Now we're down to 2 million. And the truth is about 150 or 200,000 farms of actual 42:41 consequence, meaning that actually produce you, You're right, generally, but that, but that consolidation, the, uh, the, the transformation of it kind of ebbs and flows. And when farm income is good, 42:54 it slows down because it's easy. Yeah. Because why get out? Why get out, why, you know what exactly. You know, me and me and me and Lester are over here. We've been farming Yes. You know, 43:02 for, for 60 years, we've never seen this kind of money. Things are good then things get a little tight. Like, my God, I said we should've gotten out of this five years ago. 43:10 That's what you're talking about. And then the Rate and Yes. And then the rate of consolidation increases when times get tough because it 43:15 isn't as much fun anymore. Right, right. So your, your big thing is not just here the next three months, your big thing is next three years, next, next 30 years. 43:27 And you're saying be in a position cash wise and financial wise to expand. 43:34 Yes. Okay. Absolutely. Goal, Jared, uh, that's, that's a little longer term. Are you, are your clients coming to you saying this is the year to, 43:46 to be expanding? I mean, is that really, because it seems that seems like a 10 and 20 and 30 year sort of, uh, outlook versus a next three months outlook. 43:57 What, uh, what Kelly and Jeremy are referring to, and you as well, the opportunity to expand has always been there. 44:05 It just hasn't been financially rewarding to do it. And I would add that it's not just the age of the producer that might not have as much fun when times are good. Yeah. It's easy for everybody, 44:18 but when times are bad, the older group is not having as much fun and it's also pushing some others, even younger out. It's a business. Right. Not our businesses succeed. 44:29 You know, think about it. A I I I use this example the other day. Think about a Netflix and a blockbuster. Why did Blockbuster not survive? 44:39 They didn't adapt. You know, they didn't, they didn't take care of what they probably could have done. Yeah. They thought they, they arguably, 44:46 they thought they were in the business of renting V h Ss tapes as opposed to Yes. Providing entertainment. Netflix, now you stack 44:52 Up providing entertainment now stack blockbuster, you've stacked up the blockbuster farm and the Netflix farm who's gonna survive. Yeah. Right. 44:59 It's the same type of concept that when things get tight, it's hard to dig outta that hole. And I, 45:04 I think that the biggest needle mover for expansion, uh, that guys just have to be ready for not saying it's just gonna happen in the 45:13 flip of a switch, is that there's gonna be banks saying You're done to farms. They say, no, we're not gonna loan any more money. Okay. 45:21 It, okay, we, we, we got a little law course considering this is supposed to be about fall inputs, but since this is obviously about money and it's a very important discussion 45:28 that more farm and farm operations need to have, is that happening right now in, in, in Crawford County, Iowa and Jeremy and Kelly? Are we, 45:37 are we really getting to that point where the bank is making a decision instead of the operator is making a decision? 45:44 I think with some of the depressed yields that people are seeing here, plus the interest expense? 45:50 I bet there'll be some difficult conversations this fall. Yes. This winter, you know, people go in to renew their operating lines December, January, 45:56 I could see there being a few or, or, or several difficult conversations. Is that true, Jeremy? 46:04 Yeah, I think it's just the reality. Um, we're, we're staring at not the best crop ever. Interest is high, you know, um, so I think yeah, 46:15 there definitely will be some difficult conversations. Got it. And the Farmers dramatically undersold Damien 46:22 Or undersold. Yeah. Industry estimates would still suggest that the farmers, 3 billion bushel of corn undersold where they typically are at this time of 46:32 year. Okay. So there, And that's where, that's where I would go, just go back to getting like, like what Kelly said, a C f O, somebody like Jared, 46:40 because it's, it's easy for us to, to, uh, you know, we don't maybe have the biggest crop out there, so all of a sudden the nation doesn't have the biggest crop. So it's gonna, 46:51 it's go this price is going to the roof and, and that's not the, that's not always the case. 46:55 Hope is a bad marketing plant. That's, that's a, that's a great's a that's a great point. Okay. So Jared, uh, wrap me up. Yeah. I'm putting the job on you. 47:07 I'm putting the job on you For your extreme Ag listeners, if I had to put a top three on priority is, 47:16 it's in conjunction discussing what you need to do into year end with your banker and your accountant, not separately in conjunction, 47:26 so you understand what your opportunities or possible expenses are into the end of the year, primarily from interest and taxes. 47:35 And then incorporate step two, what type of prepay programs you are going to be doing into your end. And by God, step three, 47:43 make sure you are valuing the cost of carry. That's cost of carry, just putting grain in a bin that's not priced. And if you're paying interest on it in your storage expense, 47:57 what does it take for you to actually come out ahead and create a little bit of a, a realistic situation to unfold there? Um, 48:06 I, I think that, that they all work in tandem there, Daniel, because we're, you know, not to get too deep, 48:13 we're in the October averaging period for the farmer. If I'm a 94 million acre farmer based upon current yield estimates for the national crop and with, for a price is, 48:24 and with what the average percent policy that the farmer carries, there's hardly squat for any type of insurance indemnities today. 48:32 Meaning if you fast forward another two or three weeks price, flat lines, and then we go lower, 48:39 the real paying train kicks in a farmer is still undersold false sense of security on insurance, protecting them in today's market. 48:48 And then we tag corn for another 30 or 50 cents lower. It's, it's gonna be some, like Kelly said, 48:55 I would love to be a fly on the wall in a lot of banker offices this, this summer, or excuse me this winter. Yeah. 49:03 And I'd love to be a fly on the wall too from those banker review committees thinking like, oh, well now what do we do? 49:09 So, all right. So things, things are gonna tighten up. And also I heard cash, I heard, I heard, I heard carry carrying cash or whatever cost of carry, 49:17 cost of carry. Um, I, I, I think that that's something that we haven't had to think about for a long time because we went from two point a half to 3% interest to 8% to 9% interest. 49:26 And the, the farm operator needs to realize that, uh, it's, it's, it is really cute to say, I've got all these assets and, and whatnot, 49:34 but also you're, you're paying a bunch of interest. So I think the interest one is the big one that, that, that's my biggest takeaway from this entire discussion. Absolutely. 49:43 Everybody's nodding their head, including Jeremy again. That's right. We're, we're, we're, we're an audio, we're an audio based format. Um, 49:52 so, uh, I mean, you would've been really good in the era of silent movies. Uh, you know, you have a love of expression, but since we're in audio based format, 50:02 next time you come back, just remember to talk. Alright, I'll work on that. Yeah, he's nodding his head right now. All right. So next time. 50:10 His name's Jeremy Muff. He's a neighbor farmer, uh, up there in Iowa with Kelly Garrett. And then I got Jared Creed, c Ag Financial and Elite Ag Insurance. Thanks a lot for being here. 50:21 Till next time, remember, there are hundreds of videos just like this@extremeag.farm, I mean videos, these guys shoot out there in the field, agronomics, fertility, 50:32 crop inputs, uh, equipment, and then of course, the business side of farming, which is what we talked about here today. Till next time, thanks for being here. 50:38 This is extreme ag cutting the curve. Share this with somebody who can benefit from it. Thanks for listening to another edition of Cutting the Curve. 50:47 For more insights and information that you can apply to your farming operation, visit Extreme ag.farm. Are your crops stressed out? 50:55 Ag Explorer has you covered with a full line of products designed to reduce crop stress and improve yields. 51:00 Check out ag explorer.com and start protecting your yields and topics.