00:00:00 Understanding working capital and maintaining your farm's financial position, especially when we're in an ag downturn. 00:00:07 That's the topic of this episode of Extrem Ag, cutting the Curve. Welcome to Extreme ags Cutting the Curve podcast, 00:00:14 where real farmers share real insights and real results to help you improve your farming operation. And now here's your host, Damien Mason. 00:00:24 Hey there. Welcome to another fantastic episode of Extreme Ice Cutting the curve. I'm only gonna just throw it out there right now. 00:00:28 I know that this is not as sexy as how to grow two more bushels of corn. Uh, I know that you love the agronomic stuff. 00:00:34 I know that we love big yields and we love big crops, all that stuff. But guess what? If you don't take care 00:00:38 of your financial house, there will be no legacy. There will be no generational farm. There will be no big crops you can drive by 00:00:43 and get excited about 'cause there'll be somebody else's. I say this a lot because I, I always think we have, 00:00:48 we owe it to you as an extreme ag follower to bring you business topics. That's what we're doing today. 00:00:52 I've got Kelly Garrett, one of the founders of Extreme Ag sitting next to him in his office is Jeff Jansen, 00:00:58 who is a financial services manager for JC Ag Financial Services out of Dunlap, Iowa. They are, they are here to talk to you frankly about money. 00:01:08 It's the end of 2024 when we're recording this, right? It's around Christmas time, 2024. The first ag downturn year we've had in the last 4 20 20 00:01:16 was, okay, we got a bunch of financial bailouts from the government, 2019 even. All that tarp money and MFP money and all that. 00:01:22 21, 22 and 23 record farm income years. Now you're sitting here with a different situation. You hear on the talking heads on the radio saying, you know, 00:01:31 you gotta just maximize your working capital. You gotta just, uh, you know, pre preserve your working capital. 00:01:36 What does that even mean? Financial strategies and farm talk that can help your farm survive and thrive into the next generation. 00:01:44 That's what we're here for. So, Mr. Jansen, uh, thanks for being here. You're a former banker. You now are a financial advisor. 00:01:49 Kelly calls you the CFO, the sort of consulting CFO to Garrett Land and Cattle. What is, what is working capital and why do I care? 00:01:58 Yeah, just kind of on a, on a base level, obviously the working capital on your balance sheet, that's the difference between your current 00:02:03 assets and your current liabilities. So this simplify this just to one crop year. So your current assets are gonna be at the end of the year. 00:02:10 So where we're sitting now in December, what's in your bank account? What do you have for green inventories? 00:02:15 Do you have any accounts receivable from any custom work that you've done? And have you maybe prepaid any expenses? 00:02:20 Have you paid for some anhydrous that's in the ground right now? That's your current asset, then you mark out, 00:02:25 By the way, I I wanna throw out there, we, you know, most people understand balance sheet. It's assets on one side, liabilities on the other. 00:02:32 But you used the word current assets. Um, I've got, I got $400,000 worth of machinery bought and paid 00:02:37 for. Is that a current asset? That's your intermediate asset. So there's three components of, 00:02:41 there's current, intermediate, long term. So you put your machinery and your intermediate and, and that that's more kind of that long-term growth, 00:02:48 um, of your balance sheet. But your working capital is truly kind of that measurement of this year's success. 00:02:54 So current asset is not a machinery because that's an intermediate current asset. Certainly then would not be land, uh, 00:03:01 because that's gonna be long term asset. Yep. So current asset, again, the category, you can't name them all, but a few of the categories 00:03:07 that apply would be what's in my bank account. Cash, Cash, grain, inventories. If you have livestock, livestock that's marketable, ready 00:03:16 for sale, any prepaid, um, expenses you have, you prepaid seed, have you prepaid some fertilizer that you've already booked and paid for. 00:03:24 That's now a a a current asset. Yeah. And then, uh, yeah, grain is would be the one that most people listening to this would have. 00:03:31 And so that counts. 'cause it's anything that's readily, almost, almost liquid or pretty much is liquid, right? 00:03:36 Correct. Current liabilities. Okay. My mortgage then is not a current liability because it's over 10 or 15 or 30 years. 00:03:45 The, the principal balance of your mortgage is a long-term liability. However, the current portion of what that principal 00:03:51 and interest is due, that is a current, current liability. So should I call it like my monthly payment on all my farm 00:03:57 ground is five grand and so we'll call current liability of the land one year's worth of payment. 00:04:05 Yes, correct. Yeah. So now obviously if you have a line of credit balance at your bank, that's obviously your current liability. 00:04:11 If you have any account payables at the co-op, do you owe them for any seed, fertilizer, chemical, any fuel, any work that they've done for you? 00:04:18 So any bills that you have yet to pay to close up this year's crop? Well that's Assuming that I pay my bills within, uh, 12 months. 00:04:25 I usually don't. I let those bastards twist in the wind, Jeff. I mean, I, I figure you know what they were done 00:04:30 with the sell it to me. I sometimes go two and three years. I mean, don't you think that's a good as strategy? 00:04:35 Uh, if you can get terms like that, then, then go for it. All right. Difference then between working capital 00:04:42 and net worth is, net worth is long-term balance sheet stuff is factored into that. Yeah. So if you think about it, and again, on, on that one year 00:04:49 of, of a working capital, you get through the year you have working capital left over, well, now you're gonna make your machinery payments, 00:04:55 which your intermediate assets would be your machinery. Intermediate liabilities would be your debt on that machinery. 00:05:01 Well, now you make that payment, your principle goes down, you've increased your equity and your machinery. 00:05:05 You then make your land payment, your principle balance on your land goes down and you gain more equity in your land. 00:05:11 So now your positive working capital, your increase in equity and in intermediate and your in increase in equity long term then grows that, 00:05:19 that net worth on there, which is that measurement of the long-term viability of your operation. So the reason we hear this, 00:05:25 and by the way Kelly, have I missed anything here? I know that I I I sometimes I ask the question that I think that some of our listeners might be embarrassed to ask. 00:05:34 'cause there's no such thing as a dumb question. We're obviously an informational format and platform. That's why you guys started extreme ag. 00:05:40 We hear working capital talk more when the belt titans and ag, right? Like this, we didn't hear this so much in 21, 22, 23, 00:05:49 everybody's flying high. The tide's the tide's up. Now you've been here. Am I right? Hell you, you can't drive down the road without hearing 00:05:55 somebody in ag a talking head talk about working capital. That's absolutely true. And the reason is, is 00:06:01 because, uh, your own $4 corn, we're not, we're not replenishing that working capital like we did. You're, we're not necessarily making money. 00:06:09 You know, we talked about how many dollars per acre I lost on soybeans. That's negative working capital. 00:06:14 That there's a perfect example. Yeah. So there's a, there is a perfect example. So Jeff, before we go into this, I mean, 00:06:21 we can talk about different crops or different, you know, also whatever, why it matters to a farm operation is, is it the farm operation? 00:06:30 I think some of 'em gonna say, yeah, but my, my debt to assets, you know, I still, I'm good. I got a, I got a a that farmer, there's paid for. 00:06:37 I I don't have hardly any machinery expense. There's people that I think probably that work in this industry 00:06:42 that don't realize why it matters. Am I right? Yeah, absolutely. I mean, you, you might have equity in your land. 00:06:49 Well, unless you're generating enough income from that, from that land to, to make your payments, you're gonna, 00:06:54 you're gonna lose your working capital. So I mean, just because you are asset rich on the bottom half of your balance sheet 00:07:00 to be having successful operation, you need to be able to generate positive working capital each growing season that shows that you have a viable business plan that shows 00:07:08 that what you're doing is cont is continuing to earn money. If you have a negative working capital year 00:07:14 after year, eventually that's gonna start, just like we said, you add to your net worth that's gonna start chipping away at that net worth. 00:07:20 So eventually, you know, you're gonna be at, at a situation where you're gonna need to make 00:07:24 some pretty drastic adjustments. What, uh, when I think about this, Kelly, using your example 00:07:30 that I think in 2025 when this episode releases, there's farming operations that are going to be in that situation where they might be planting into 00:07:41 a break even scenario or even planting into a possible loss scenario. Barring any government intervention, which let's face it, 00:07:49 has happened most of the time since the late eighties, um, with, with programs and, you know, certain things 00:07:55 to prop up a little bit of farm income. So they might be looking at a situation as you were with a soybean thing. 00:08:03 It's not just saying, oh yeah, I'm losing money. It's one of things. Oh, I lost $10 on that. You deployed a lot of money to lose money. 00:08:10 And I think that's where the double drawdown on the whole thing kinda explain that if you will. 00:08:15 Yeah. You, you know, you, you deploy a lot of money and then you're looking at, uh, the interest has come down a little bit, 00:08:20 but you're looking at seven, 8% interest. So, um, a break even, it really could be argued as a seven or 8% profit because you gotta pay that line of credit back. 00:08:30 Think about the 8% of work, think about the 8% interest that the working capital is gonna get eaten up with. I mean, there's an example right there. 00:08:38 So it is it a if it's a break even, you really are, there's a bit of a profit there before the interest is figured in, if that makes sense. 00:08:44 That's a odd way to say that, but uh, it, it's, it's, it's easy in this economy in this time to eat up that working capital. 00:08:53 Jeff, answer to that. In other words, you know, Kelly, I think in a, about a year ago when these interest rates climbed 00:09:00 and we were sitting around historically low interest rates, and all of a sudden we go to 8% operating loan, seven 00:09:09 or 8% operating loan. And I remember hearing somebody at an ag session saying, well, we went up 4% on interest rates. 00:09:15 I'm like, no, we went up a hundred percent. We went from four to eight. That's a doubling. If the price of seed went from $200 a bag 00:09:23 to 400, it didn't go up. You know, it, it's, it went up double. And I think that that really changed the whole discussion 00:09:29 around working capital because now you're obligating 70 bucks an acre just of interest payment. So kind of speak to that. 00:09:37 Yeah, so exactly. Um, so if you think about what we do every year is, is we put together a business plan. 00:09:44 So if you're gonna have positive working capital at the beginning of the year, you have to have a plan to generate that positive working capital. 00:09:50 So as you mentioned in an operating interest, we want to look at what we can do to reduce a cost of production. One of those items is, hey, how do we tie up, uh, 00:09:59 maybe cash sales, grain sales to coincide with large payments, so rent payments that are due so we can minimize the interest that, that 00:10:06 that producer is gonna, is going to in, in incur on their farm. So marketing then becomes not so much just a pie in the sky, 00:10:14 let's go for good prices. Marketing then is then tied right along to the cash flow of each operation to maximize, 00:10:20 you know, interest reduction on there. Like you said, we had a couple of examples of some guys over the last couple 00:10:25 of years when we started working with them, they were working in, you know, borrowing, you know, probably 20 to $30 an acre on interest expense, 00:10:33 operating interest expense. We kind of got them, Hey, our plan is to eliminate that operating interest. 00:10:39 Let's get you on a track where we can do that. Well now they're working in a cash plus where they're receiving cash income. 00:10:44 So just by kind of finding better ways, better timing of, of, um, sales 00:10:50 and better timing of their cost of production analysis, we now have, you know, saved them that $30 an acre in interest. 00:10:57 There's, there's a thing where farmers like to hold grain and to your point right there, thinking that it's an asset 00:11:07 as opposed to realizing that on the other side of the ledger there's, they're paying for an operating loan. And that's where, you know, 00:11:14 you talk about being a CFO for a farm. So have you had to have, even with Kelly, who's a pretty business oriented farmer, say, Hey, you need 00:11:21 to be selling more stuff. Why? Well 'cause you're obligating interest over here. And so that crop that's in that bin needs to go up 00:11:29 11% to justify the trade off. Yeah, we, we show them the numbers right there. And it's kind of funny, once in a while you hear a farmers 00:11:36 say, well, I've got, I got two guys on staff, I need to keep them busy, so I don't wanna sell it all now. I need something for them to do, 00:11:41 you know, later in the year. I'm like, well, you know, at that rate and you show them, if once you lose that interest on there, 00:11:48 you better be selling at 10, 15, 20, 20 cents higher per bushel to offset that. So it's kind of a matter 00:11:55 of you make the money when you can get the interest, uh, reduced. I'm all about selling it in December 00:12:00 and January when the basis is good and things like that. And, you know, creed sells it tells us when to go, 00:12:04 but he knows I wanna sell it. So we don't have any trouble like that. The problem we have is I'm not the guy 00:12:09 with the cash plus in the checking account. I'm not the O guy with the, with the, uh, low interest payment per acre 00:12:17 because it seems like we're in a constant state of, uh, expansion, Dane. So I want you to know he is not talking about me 00:12:23 with money in the bank account because we're always buying something. Also, he's not talking about you with somebody that says, 00:12:28 well, gosh, I gotta keep these two employees, uh, busy all year round. I've been to Garrett land 00:12:33 and Ken, there's no shortage of work for the the workers to do. Uh, so I mean, I can look in any direction 00:12:39 and get overwhelmed about all the work that needs done. So I I don't think that's an issue. It's not, it's truly not. 00:12:46 You're a former banker. Give me a banker's perspective. Um, I, I heard, uh, David Cole, I see him a lot, uh, on the speaking circuit. 00:12:54 I heard other ag lenders and consultants, and so I sit through a lot of these sessions and, uh, one of the points was at a ag lenders summit. 00:13:02 He said, I'm getting, and this was during the, the last runup between 2005 and 2013 when we had a AG supercycle. 00:13:09 And he said, I'm getting a little concerned about some of the, the ledgers, some of the book of business among some of you ag banks. 00:13:17 When I hear these 33-year-old, uh, ag lenders say, if you got the dirt, you can't get hurt. Meaning they thought that a loan was good as long 00:13:25 as it was pledged against real estate. And of course the dialogue went, Jeff. Yeah, that's not always true, 00:13:31 because again, we could see vast declines in real estate, which we haven't since the eighties. 00:13:37 But then there's also the reality of, there's other things other than just pledged dirt. So I want you to just give me a banker's perspective 00:13:43 from the dirt. You can't get hurt thing to the working capital. Gimme everything in between. Yeah. 00:13:48 Having a business plan that selling your dirt at the end of the year is gonna take care 00:13:52 of things is a pretty shortsighted, uh, business plan. So I guess the, the plan that we like to implement the guys is that long-term growth. 00:13:58 You know, so we take a look at our customers and say, you know what, where do we need the very first thing 00:14:03 that we do is we evaluate their cost of production. And I think Kelly can attest to this. We start working with somebody 00:14:09 before we even sell a bushel of grain, we need to know what your cost of production is. How many dollars per acre does it take 00:14:15 to grow your crop? So we Go, hang, hang on, hang on, I'm writing, I'm done. Right? Banker's perspective. And I wanna point out, 00:14:20 all right, I have been around a lot of ag people that I wonder if they know their cost of production. Am I wrong? 00:14:27 You're not wrong. They don't know. They don't know. I thought I was the best set it, I thought I knew Jared and Jeff both told me. 00:14:33 Most farmers don't know. And I said, I'm not that guy. I was that guy. I didn't know I was wrong. You, you, You underestimated the cost of production on soybeans. 00:14:41 We've, we've talked about that in a webinar and all that. And by the way, was the bulk of it on interest 00:14:47 that you weren't, uh, properly or machinery not properly attributing? Where were you off on your cost of production calculus? I 00:14:54 Think where most people get off, if, if you go to town and you say to somebody, what's your cost of production? Well, they're gonna take a look at their inputs. 00:15:01 They're gonna look at their rent, their land payments, their machinery, maybe a crop insurance. But you know it like 00:15:06 where you're in town, you're getting a cup of coffee. Well, how'd you pay for that? That needs to go against your cost of production. 00:15:11 You know, you take a family vacation, where's that go? That goes against your cost of production. So I think So you're saying lifestyle, you, 00:15:17 you calculate lifestyle into cost of production. Yep. Yep. Temple says that he can't buy a roll of toilet paper without Jeff marketing it down somewhere. 00:15:25 Do you? Um, I do you, have you ever been to the lunch room at Garrett Land and Cattle at lunchtime when 00:15:33 there's gambling, uh, going on? Is gambling count as cost of production? Yes. Yeah, we, we track that as well. But again, 00:15:42 When they play, when they play cards and they're putting, they're putting their dollars down, you count that as cost of production. 00:15:47 Yeah, I keep an eye on it. All right, so cost of production. If, if you, if you go into it into a year 00:15:54 and you don't know what your cost of production is, you don't know what that hurdle is. I mean, you're, you're basically living on a hope 00:16:00 and prayer that what you do during the year is successful. But you know, we, you need to know that cost of production. 00:16:05 We track it daily. So Kelly goes to town today and, and makes a purchase, a buys another big pickup or something. 00:16:11 We see that transaction come through. We're like, Hey, you know, we thought your cost of production was 1100. 00:16:16 We're seeing some more expenses coming in higher than what we had been budgeting. Your cost of production now is, you know, 1120. 00:16:23 So now we have a bigger hurdle on the revenue side that we need to overcome as well. Alright. I I, I stand corrected, uh, as you know, the man 00:16:31 that just returned from the chiropractor, I stand corrected. Anyway, I I, of all things I figured 00:16:35 that most folks are missing out on either insurance, uh, you know, um, uh, taxes, uh, 00:16:42 you know, depreciation. I figured that's where most of the mistakes mistaken or, uh, being off on your cost of production work. 00:16:51 But you're actually saying you putting lifestyle in there as well. Well, it is one of them, you know, just a lot, you know, 00:16:56 obviously interest, you know, interest is eye opening for a lot of people to say, oh, you spent $48 an acre last year on operating interest. 00:17:02 They don't understand that. So Yeah, so interest, obviously. So when we're sticking with the banker's perspective, uh, 00:17:10 are these, are these, are we gonna see loans getting pulled because working capital gets degraded 00:17:16 on some of these farming operations? Um, absolutely. I mean, if, if true in the truest sense, if your working capital has been depleting more than one 00:17:23 year, you have a business plan that's not working. So if that business, if that working capital continues to deplete, that impacts your ability to repay any, 00:17:32 any obligations you have with that bank. So they're not gonna let you get down to the point where, you know, we've gotta sell the dirt to do this. 00:17:38 They're gonna take an action plan to say, either you need to come up with a new plan, uh, a new course 00:17:44 of action to rectify this. Or if you're not, you know, I'm sorry, we're no longer gonna be able to do business with you. 00:17:50 You're kind of a hard ass, aren't you, Jeff? Try not to be. But yeah, I mean it, the financial parts of it, it's pretty cut and dried. 00:17:59 I mean, either if you're not making money, you're going behind. That's a very viable game plan. 00:18:04 I was joking. Of course you took it as such, but it's, it does come down to it's, it's numbers and that's the tough part. 00:18:09 All right, I want, I got a lot more questions about this, including I want you to gimme a couple of, uh, 00:18:13 real life scenarios from your current work or even back when you were at Ag Lender. Uh, before I do that, nature's one 00:18:19 of our business partners here at Extreme Ag, uh, awesome company. We're so happy to be working with them. 00:18:24 Nature's was focused on providing sustainable farming solutions and helping maintain crop your crop's potential for today and for future generations. 00:18:31 The nature's high quality liquid fertilizers that are powered by Nature's Bio K, that's a cool thing. Tying in with here and extreme ag, 00:18:37 nature's bio K technology, target specific periods of influence throughout the growing season via precision placement techniques as a means to mitigate plant stress, 00:18:45 enhance crop yield, and boost your farm's return on investment. We're talking about money right here, 00:18:49 talking about stress, uh, reduction. It was a big objective of Kelly Garrett into year 2022. And now we're also talking about making sure 00:18:56 that you can peel back a little bit on your expense. Maybe you can actually just go out there and target periods of influence with your fertility program, 00:19:01 rather than fling it all out there at once. Back it up a little bit, put it out there when the plants can use it. 00:19:06 You can save money and make more. ROI also, nature's is, uh, the sponsor for our first several episodes of the grainery, a new show 00:19:14 that you should check out if you like. What we do here at Extreme Ag, and I know you do the Grainery, a show 00:19:18 that is shot at my grainery, my man room that is, uh, an old 18 hundreds era grain storage building in Huntington, Indiana on my farm. 00:19:25 The guys have joined me there. We're sitting down, it's real talk with real farmers about everything from generational changes 00:19:31 to family, to running a business, to uh, how big is your farm, uh, and how big it should it be, and all these kinds of questions. 00:19:36 It's like the view except that it's actually entertaining, intelligent, and you'd actually wanna tune into it. 00:19:40 Other than that, it's a lot like the view, alright, back to this farm scenarios. 00:19:45 Gimme some farm scenarios as we, we have somebody, Jeff that's listening that's saying, Hmm, I don't know, things been pretty good. 00:19:53 And you're like, lemme take you back six or eight years. Lemme take you back 20 years. 00:19:56 Lemme show you where I saw some farms get over their skis. Gimme some examples. Yeah, 00:20:00 I, I think that the biggest thing that can happen is a, a farmer does not understand the, the actual position that they're in, and maybe they're at that, you know, Hey, 00:20:09 I, I see my accountant once a year. I go see my banker once a year, so I take the other 363 days off 00:20:15 and I'm out working, I'm out. You know what I think taking care of business, what they're not understanding is, hey, 00:20:21 if your business plan is not, is not set correctly, you're losing money every day. And, and the, the worst time to find out about 00:20:29 that is at the end of the year before you've been able to make any corrections. So I say probably the biggest examples 00:20:34 that we have when we start working with customers is getting that transparency to what their cost of production is. 00:20:41 And then the, the bigger piece then is coming up with some additional, uh, revenue generation, um, streams that we can do as well. 00:20:49 Kelly picks on me about my dairy farm background, so I try to reference it as often as possible in front of him 00:20:54 to let him know that I'm, I'm prideful about my dairy farm background that I ate Holstein steaks growing up, 00:21:00 but I can remember, uh, an old dairy farmer, uh, sitting down kinda like you're talking about at the kitchen table with his wife. 00:21:05 And I happened to be visiting him and I had to do some other work, and I said, what's going on? 00:21:09 He said, we're just sitting here putting pen to paper, trying to figure out how, how we we're going broke, making milk. 00:21:15 And it's kind of that thing you talk about. It'd be nice to know that before you're there. And I think that's what you're just talking about. 00:21:21 I, I think that's the biggest mistake that growers make, Damien, is they see the banker once a year. 00:21:27 They see the CPA once a year. I'm not trying to pick on bankers, but bankers are overworked. 00:21:35 They don't have enough time to analyze your balance sheet. They, uh, the bank is trying, 00:21:41 the banker is trying to get you approved. This is the experience that I've had. I, and I didn't understand it when I was younger 00:21:47 until I started to work with Jeff and Jared that the, the banker, um, wants you to get approved. 00:21:54 He's, he's not working against you, but he does not have time to put in the financial analysis to study that. 00:22:02 And then when you go through a whole year and, and you haven't seen him since last December, all of a sudden you're being reactive. 00:22:08 We need to be proactive. And as a farmer, as a grower, investing this much money, you know, you're talking about people having $1,100 an acre 00:22:16 invested in their corn crop or more, you know, you that a thousand acre farmers over a million dollars invested, and you only look at the financial analysis 00:22:25 of it once a year, and then you're reactive to the situation, to many things that are outta your control with the corn market, the weather, things like that. 00:22:33 We, we have got to take control and we've got to be more educated as growers, and we've got to be proactive and not reactive. 00:22:40 And you cannot rely on that banker conversation once a year to be the only financial analysis that you have. 00:22:46 And, and to be honest, uh, you know, Kelly, Jeff says not to pick on bankers and you were one is that they look at, 00:22:53 they want you to be viable so that they get paid, but their, their set of their objective and your objective aren't necessarily the same objective. 00:23:01 That's exactly what I'm trying to say. That's exactly what I'm trying to say. And it's not, it's not, it's not wrong. 00:23:07 It's just that, uh, they, they've got a different objective. Mr. Jansen, um, strategies farmers can deploy 00:23:12 to improve their financial position, aside from just growing more crops or cutting back on expenses. 00:23:16 I mean, the, the usual thing I get is commodity production, make more with less, make more with less, make more 00:23:21 with less that eventually that you can only make so much and you can only cut expenses so much. 00:23:26 I mean, I'm not being, uh, uh, mean, but that's, there's some truth to that. I mean, at some point, what else can I do? 00:23:32 Yeah, I mean, I, you know, first of all, I mean, I, I always say you gotta know the cost of production. We, we've been over that. But I also think the piece 00:23:39 that a lot of people that we've worked with, we've talked a lot about the expenses, but a lot of people have had misses on the revenue side. 00:23:45 A lot of guys maybe weren't incorporating a full marketing plan, you know, having hedging accounts, looking for gains 00:23:51 that they can get in their hedging account. A lot of guys didn't have the, the correct crop insurance aligned 00:23:56 with, you know, where they were. You know, the right crop insurance plan can support your marketing plan. 00:24:00 It can even be a revenue generator, you know, some margin protection policies. So there's other ways within that farm that a lot 00:24:07 of guys were just missing. They weren't aware that they could be generating additional revenue, you know, for their farm. 00:24:13 Kelly, one thing, you know, we've had discussion about crop insurance. It's not just crop insurance, like, oh, I totaled my car. 00:24:19 You say it's gotta be an integrated plan. And you do that with JC and Jared Creed and Jeff, it's gotta be part of the revenue. 00:24:26 It's, it's more than just catastrophic. It's part of the revenue plan because otherwise, like you said, 00:24:31 you got $1,100 invested than an acre, and that's just input cost. That's not, that's not everything else. 00:24:36 You got, you've, you've gotta have a bigger picture view. You gotta have a bigger picture view. 00:24:41 And crop insurance is part of your marketing plan. You're insuring revenue, you're not insuring bushels, you're insuring revenue. 00:24:49 And it is a federal plan no matter what my other extreme AG partners have said at times. It is a federal plan. 00:24:55 It is the same around the nation, and you're insuring revenue. And we are lucky, we are lucky 00:25:04 that the federal government subsidizes it and we should take advantage of it. You cannot go and implement a marketing plan that if you go, 00:25:12 if you go implement a marketing plan, then you're securing price, okay? But you're still not securing 00:25:17 revenue, you're securing price. We still haven't taken the weather out of the equation. There is no better marketing plan 00:25:22 or basis to a marketing plan than crop insurance. And it needs to be part of your financial analysis and it needs to be utilized by your farm. 00:25:31 Mr. Jansen, I'm a farmer. I'm doing okay. Oh, by the way, when I said, uh, strategies other than just cut back on expenses 00:25:38 and growing more crops, see the banker, what's your other advice? Uh, I'm a bank, I'm a farm guy. 00:25:42 I'm, I'm trying to weather the storm. What do I need to know? What what's your, Yeah. And I, I also 00:25:46 say, you know, don't, and I've talked to Kelly about this as well, is, you know, there's times, you know, downtime on your farm. 00:25:53 Well, don't sit around and, and, you know, well, me, I'm in, if things aren't good, you know, looking around the, the Garrett land 00:25:59 and cattle, there's people moving everywhere. Garrett Kelly isn't just producing corn and soybeans. We have guys, they go out, Hey, you got a sprayer? 00:26:06 Go find some makers to spray. You got some equipment, go find some ways to bring in some additional money to that farm. 00:26:12 You've got the equipment, you've got some time, you know, you bring in 25, 30 grand just on 00:26:17 helping a guy do a project. You know, that drives that margin down. You know, that is, that helps you. 00:26:22 So, you know, I know it's kind of out of the, you know, norm. No, I should just be sitting here waiting 00:26:26 for the crop to grow. You know, you, you need to get a hustle. You need to get out there and, and find a way 00:26:30 to get some money coming in. Intentional congruence. I'm telling you what I, if, if this guy was my banker, he is kind of a hard ass. 00:26:38 'cause I'd probably go under and say, yeah, things are a little tight. He'd say, get off your ass and do something. 00:26:43 I mean, I, this guy is kind of a whip cracker That, you know, uh, there's a, a local family here that, uh, the, you know, the dad and I are about the same age and, 00:26:51 and the boys are about the same age as my boys, and he's wanting to pass the farm down to him. And he knows that we're working on succession 00:26:58 and we have a lot of conversations. And he is like, we don't farm as many acres as you. What can we do? And I'm like, 00:27:03 you've got those two grain trucks. Those boys need to get in those trucks. Yeah, those boys need to get in those trucks 00:27:08 because their living expenses for the year could be made very easily with those trucks. Yeah. Those trucks aren't there 00:27:14 just to be used during harvest. Those trucks could be used two or three days a week and, and provided income for the house, the household income, 00:27:22 which of course he's gonna track. That's the congruence. Use that. And also, as you pointed out, I mean, 00:27:27 you've got four things that are sitting that are not making that. In fact, they're all costing you money as they sit. 00:27:32 The boys and the trucks are all are costing you money. And I know that when people love to say that, and Jeff, you probably can back us up. 00:27:37 I've heard farm people so long say, well, I'm not worried that's paid for. Well, well, it still has a cost, right? 00:27:43 An asset that's paid for is sitting there. It still has a cost, Even if you wanna say that the truck is paid 00:27:48 for the light bill, the grocery bill, uh, the gas bill's not paid for next month, and that truck could produce the revenue to provide that, 00:27:55 and then it doesn't have to come off that acre of corn. Yep. Jeff Jansen, I'm a farmer. I'm doing okay. I'm a little bit stressed out, uh, you know, 00:28:01 financially, et cetera, et cetera. I come and see you for advice. And this is in your role as your financial services manager, 00:28:07 uh, or when you're a former banker with all the body of work and expertise you've, uh, accumulated, what do you, 00:28:13 what's your first thing you'll tell me going here into 2025? First thing I'm gonna say is, what's your business plan? 00:28:18 I I need to know, do you understand what position you're in? You know, if you're looking at $1,100 per acre cost 00:28:24 of production, A do they know that B obviously we're staring at $4 corn. Well, unless they can produce 260 bushels an acre, 00:28:31 they have a negative working plan right there. So it's the first thing that I'm always looking for is the awareness to do you know 00:28:37 what situation you're in? And if not, we're gonna show you exactly where you're at and what you need to do, um, to address it. 00:28:43 And the person that just heard that say, wait a minute, these guys keep saying $1,100 per acre cost of corn, I, I can produce it for only 600 or 700. 00:28:50 Because what are they doing? They're, to your point, they're not, They're not figuring everything, okay? 00:28:56 They're not figuring everything on cost. Um, historically we see consolidation happen during a contraction, right? 00:29:05 Contraction of the economics and contraction and equals consolidation of the farming operation. Uh, and again, barring any big farming legislation 00:29:13 to come outta USDA programs, whatever, whatever. Um, if you're a person that wants to expand a little bit right now, Mr. 00:29:19 Janssen, what, what do you tell him? What am I, what should I do? Yeah. So hopefully if you're looking to expand right now, 00:29:24 you've been taking care of your working capital the last couple of years, and by that I mean, you don't need to be flush 00:29:29 with working capital, but you know, if your working capital is maybe a one-to-one, but you've been paying down intermediate debt, 00:29:35 long-term debt, and there's a growth opportunity, now's the time where maybe you've had two years of, of not padding that, 00:29:42 but you've built your equity now maybe you have to pull some equity out of your land, um, to say, Hey, I, there's some land available. 00:29:49 I don't have the cash right now, but I've got some equity. I'm gonna leverage some equity right now and, and go out 00:29:53 and, and, and get some expansion done. But, But even then, the leveraged, you use that, but you're also, then you're taking on a little bit be 00:30:00 cognizant, I guess, of the interest rate because you're, you're, you're, yeah. Yeah. Last thought on, uh, 00:30:08 this whole thing about fin maximizing your farms financial position. You've seen the storms, you've been around this for, 00:30:13 uh, 30 plus years. What, uh, what's your last piece of advice on maximizing your farm's financial position? I'll hear it from Jeff and I'll hear it from Kelly. 00:30:21 Yeah. Again, I, I'll just go back to, you need to know your situation. You need to know what you're up against. 00:30:26 You need to know that what your, what your expenses are for the year. And then you need to have a plan to act on that. 00:30:31 You need to make sure that you're exhausting all revenue options. Make sure you got the right crop insurance plan in place. 00:30:36 Make sure you've got a good marketing plan and you need to monitor that every day. It can't be, Hey, in January, that's a good plan, you know, 00:30:43 I'm in and wait and see how that happens. We need to be looking at that daily, you know, to make, to monitor it and make adjustments on the fly. 00:30:50 Kelly, I think that that one has been, uh, I've heard that now, and I think it's worth it. It's been repeated three times 00:30:56 and it's worth repeating is no, this is not a one time, one day per year, uh, thing when you meet your accountant or your banker, because there's a very good chance stuff 00:31:05 went off the rails in the last 300 days, 400 days, whatever the hell it was. That, and you need to make sure that you're on top of it. 00:31:12 Yes. You know, I would tell you that you, you need to educate yourself and you need to understand it. And you also need to listen to the banker. 00:31:21 Uh, you need to listen to the financial analysis. When, when we're talking about agronomy, uh, is the agronomist you work with, the guy 00:31:27 that sells you all your MPAK, did it ever occur to you that his job is to sell you the M mpa k You know, is he really looking out for your best interest? 00:31:36 He's not. He, he doesn't want you to fail, but is he really working for you? Your banker doesn't want you to fail, 00:31:43 but they work for the bank. They don't work for you. You're a customer of the bank. You need to have someone like Jeff, 00:31:49 or you need to do it yourself, and you need to understand your position. You cannot rely on those other people all the time 00:31:55 that are sitting on the other side of the table. And you've gotta be proactive, not reactive. You've gotta educate yourself 00:32:01 and you've gotta understand the details. I like it. A lot of good stuff, Frank, there. The, the main one is that, uh, 00:32:08 it's kinda like the same reason you might have an independent agronomy, uh, person is because then you get straight information. 00:32:13 The reason you have somebody like Jeff Janssen is because the banker is, is does not work for your farming operation. 00:32:18 They work for the bank. I think that's a very good point. And we we're fine with banks, 00:32:22 but just, uh, understand their objective. Yeah, I'm fine with the bank, but just understand what the relationship is. 00:32:27 They're, they're not bad, they're not wrong, but they don't work for you. You are a customer of them. 00:32:32 Yeah. Maximizing Somebody. If you can't, Maximizing your profits, maximizing your profits is your business, 00:32:38 maximizing their loan returns is their business. At the end of the day, there's only one person that's gonna look out for you, and that's you. 00:32:46 We're leaving it right there. Jeff Jansen with JC Ag Financial Services, that's Jared Creed and the boys out of Dunlap, Iowa. 00:32:53 If you wanna learn more about that, find, uh, uh, one of us and we can connect you with them. 00:32:57 And, and Mr. Janssen, uh, Kelly Garrett, obviously Garrett Land and Cattle, uh, area in Iowa, 00:33:02 which is really actually North Dow City if anybody's been there. And I have. So anyway, till next 00:33:07 time, thanks for being here. Hundreds of videos just like this, and we've got, it's a, it's a free library of information. 00:33:13 We've recording the Cutting the Curve podcast now for three and a half years. Go share this with somebody that can benefit from it. 00:33:20 Also, if you wanna up your game, become an Extreme Act member in 2025 for seven $50 a year, you can become a member and you'll get a direct line 00:33:28 of access to the guys like Kelly. If you wanna go a little deeper on a subject, you can get question and answer if platform with them. 00:33:34 You also get trial data at the end of the year that non-members don't get, you get special offers, like, for instance, from our friends at Nature's, you can go 00:33:41 to Commodity Classic for free. So think about that. You're going to Commodity Classic for free, the seven $50 membership. 00:33:47 It almost then pays for itself right there. I encourage you to check that out. Go to Extreme ag.farm. So next time, thanks for being here. 00:33:52 On behalf of Jeff Jansen, Kelly Gart, I'm Damien Mason with Extreme Ag. That's a wrap for this episode of Cutting the Curve. 00:33:58 Make sure to check out Extreme Ag Farm for more great content to help you squeeze more profit out 00:34:04.375 --> 00:34:05.655