Hidden Costs & Losses
8 Jul 237 min 27 sec

How do you make decisions on your farm as it relates to inputs? Are you using the right set of data to make decisions? Damian talks to AgroLiquid's Galynn Beer about making decisions based on logic rather than emotions.

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00:00 Hidden costs. Hidden losses. We're talking about decision making, how you make decisions on your farming operation, 00:07 particularly as it relates to inputs. I got Galen beer here with Agri Liquid and he wrote an article about this. I say, you know what, this is a pretty cool topic. 00:15 What it comes down to is decision making. Galen, and frankly, let's face it, some people are using the wrong set of data to then use that as motivation for 00:23 making the decision. So maybe looking at the wrong thing, it's because they've been burned, they've been pained, 00:27 they've got something that sticks in their craw and are stuck with that in their decision making versus what they should use as their data for decision making. 00:34 That's kind of the gist of what your articles about. Absolutely. It's as hard to separate the emotion out of decisions at times. And so as humans, 00:43 we tend to remember the losses way more than we remember the wins. And so when we remember that we had a severe drought in a year or a bad 00:52 blizzard, those always are the years that are brought up. And you kind of remember that year that you lost 50 bushels per acre for 00:59 whatever reason. Then you start making emotional decisions to protect that 50 bushels that might have not have been the normal yield for you anyway. 01:07 And that's when it starts becoming a hidden cost. If you keep throwing inputs, shooting for that top, that isn't your man. 01:14 I, I remember an economic thing that I've never forgotten, uh, in one of my classes, 01:19 that the idea of sunk cost is sunk cost and should never be considered this point forward. Do that in relationships. Well, 01:27 I can't quit this relationship now cause I've got so much invest then, well, I can't give up on this now, 01:32 this business venture because I already got a half million dollars of invested. And the reality is, that's all bullets. 01:37 You probably should never even think about what you did a year ago, two years ago, three years ago, in terms of the investment. 01:41 And just think about the next green horizon. That's right. Every year is its own set of, uh, parameters that You shouldn't, I you shouldn't learn from mistakes. You 01:49 Always learn from mistakes. And we are getting better about growing crops. Like we do understand that PGRs have their place. We know boar on manganese, 01:57 Molly, all those have their place. But our company has a menu of roughly 50 products alone. How does a grower sort through that? Right? Yeah. You know, Kelly Garrett, 02:07 where we're standing on his farm today, he uses liberate ca and he'll invest some money in that. Is that investment the same? That should be, uh, taken on the High Plains, 02:17 you know, out near aba, Colorado, for instance, or Geiman, Oklahoma, or Geia in Oklahoma fund. 02:22 I know, I know Guy in Geiman. Yeah, there's good people in Geiman. Mm-hmm. But yes, there's a point where that liberate calcium, everything has its place. 02:29 And so Kelly has seen a lot of value in that. But when you get into 10 inches of rain, it doesn't carry that same value. We still love our liberate calcium, 02:38 but we also wanna make sure we put it where it's of value to the grower Len, about this topic of hidden costs versus hidden losses. 02:44 We talked about the emotional decision making. We talked about the the parameters or, or the data points that we use. And then if you told a, a customer this, they get pretty defensive. 02:54 They get kind of, they get kind of angry about this because they don't like to be called out on the fact that the decisions they're making are not logical. 03:03 You ever tell your wife she's being irrational, it doesn't work out very well. They don't like being told they're making illogical or non-business decisions. 03:09 They're actually making emotional decisions. And that's kind of again, what your whole point is. 03:14 It is, it's hard to take the emotion out of number one. A lot of people are still family farms and you know, there's a lot of history there. Their folks did things a certain way. 03:24 And so that emotion is deep seated. And I think a lot of times guys are making decisions that are backed by emotionally don't even realize it. And so my comment or my point would be, 03:35 is always on your farm, find ways to remove that emotional, what is your normal yield expectation? What's your normal weather? 03:44 And start making your decisions that will fit into that bucket. You know, Chad and Kelly and a lot of the extreme ag guys, 03:50 they're great at talking about everything that's successful and they're farming in a good year, Kelly Garris gonna probably grow 350 bushel a acre corn here. 03:58 That's not gonna happen. A lot of areas, right? So you have to be able to sort through that information. So Tell somebody, 04:04 I'm gonna go with your recommendations now so we can get out of this because the big point is, uh, hidden costs versus hidden losses and making good decisions. 04:11 That good financial decisions with your crop inputs. You said take the emotion out of it. Well, that's a little generic. Uh, gimme a little more in depth. What else can I do? Because it's hard, you know, 04:20 and farm people a lot of times kind of an island out here, that's why they tune into extreme mag to see what other people are doing. 04:26 Yeah, it is. And the biggest thing they can do is kind of revisit their historical yields. Okay. Uh, number one, because, uh, you, you know, you're gonna remember the, 04:35 the, the extremes. So visit your history and find out what that Is, and then that's where you set your cost. Say, okay, uh, 04:41 historically in the last seven years, my yields have been this. I know what that money looks like. 04:45 Now here I can make decisions based on that and that's what my inputs should cost. 04:49 Absolutely. The other thing I always think guys should do a little bit, considering as hard as a grower is what are opportunity costs? 04:54 Farmers can get pulled in a million different directions. I can go tissue test every day of the week if I want to and send 'em off. 05:01 Is that the best use of my time? Maybe, maybe if I'm in that high yield environment, but maybe not. That's another thing that you have to consider. 05:08 Okay. I got two more things. I love talking about money with you. You know, he's a University of Oklahoma guy. Uh, after all, he's a business guy. 05:14 All right. Answer me this, uh, the old saying, throwing good money after bad, you know, it's hard. I wanna salvage that crop. I want to, 05:21 I I wanna ring the bell. I I maybe if I just been eat more dollars per acre, maybe I can do this. How do eat, what's your counsel to those guys? 05:28 Yeah, I, I mean, again, look at your individual situation, but there is diminishing returns. And so you, 05:34 you don't wanna spend $8 to make $6, and I'm the person too, Damien, that won't even spend $8 to get that same $8 back at the end of the year because 05:43 there's A cost of money. There's A cost of money, and that $8 won't buy me the same thing in November that it did in March. So why would I do that? You should expect a return on that money. 05:53 Okay. And then a lot of times, uh, we have farmers that love to be producers. They aren't always as good at the business or the money side of it. They're, 06:01 they're born and bred to go out and grow corn and soybeans. So your advice to them is maybe get some counsel. How do they do that? You know, 06:06 this, this money thing starts to be like, I don't wanna do that. I wanna go out and grow corn. 06:09 Yeah. I mean, there's a lot of people that can help you step through those decisions. Uh, I think the hard part though is, is, you know, 06:16 people think of more revenue means more profit and profit's, what keeps you on the farm the next year. 06:21 And so anyone that can help you sort through those decisions, you know, we try to train our agronomists and sales account reps at agro liquid to kind of 06:28 know where those parameters are. Will that, should Kelly Garrett use a gallon of liberate calcium? Probably not. His sweet spot's. Probably a quarter or two quartz. 06:37 Yeah. I, you guys have talked yourselves outta some sail. Arisal just told me over on a soybean field under tremendous stress. 06:42 He said If it gets to August, there's no rain. Stop spending money. I don't know, you might have talked yourself outta the sail there. 06:47 We might have, but we we're in for the long haul. Damian, we don't wanna, we don't wanna win today to lose in the future. 06:53 It's a business. It's all about return on investment. More importantly, it's about making the money so you can have, you know, 06:57 there's no such thing as Sustainable Farm if the business isn't still here tomorrow. Cuz sustainability means you're here tomorrow. That's, 07:02 we're talking about business decisions, talking about hidden costs versus hidden losses. Financials on your farming operations. These ga beer, earth Agri Liquid. 07:09 I'm Damien Mason. We've done a number of topics on the business for your farm. Go to, uh, uh, extreme ag.farm. There's an entire library, videos, 07:16 podcasts that can help you up your farming game, especially on the business side of it. Till next time.