Edition #23

December 30, 2023

Good morning and welcome to the Braintrust Ag newsletter. We’re here to cheer you on to your New Year’s resolution goals…one step at a time.

A few notes to begin:

• Our next SOIL Gathering will be at 3:00 pm CST instead of the evening. Changing it up to hit a variety of schedules.

  • Become a member to join us Thursday, January 4 via Zoom

• If you have any spreadsheets, calculators, checklists, guides, or other resources to share with the group, email [email protected] and I’ll get them posted.

• Links to the past Expert Q&A’s are up on the Media Page.

Alright, let’s get to the topics that will help you build a strong, sustainable agri-business.

-Clint

Here’s what we have this week:

• 📆 Goal Setting

• 🌱 Seeds

• 📈 Budgeting

• 💵 Debt Issues

• 📸 Side Hustle Idea

• and more…

THE BIG IDEA

Setting Goals for Your Operation

It may be cliché to talk about goal setting on this last edition of 2023, but that’s alright. We’ve a fresh year ahead, so why not start things off with some direction. When I don’t set goals, I end up wasting resources (time, energy, $$) on things that don’t impact my desired outcome. Without goals as my compass, I wind up lost, looking back wondering where my efforts went sideways.

For many, farming is more than just tending to crops and livestock. It's about nurturing dreams and ambitions, both for the land and for the family. In this journey, goal setting is a vital roadmap. It highlights the path to food, gas, lodging, and ultimately, to success.

So here are some key points to consider as you set your 2024 goals:

Understanding Goals

Goals are the heartbeats of aspiration. They are unique to each farmer and their family, reflecting their values, resources, and the challenges they face. Goals evolve with time and circumstance, requiring regular reassessment and update.

The Importance of Goal Setting

For farmers, goals are the guiding stars in the decision-making process. They provide focus and motivation, helping to navigate through uncertainties and celebrate achievements. By setting goals, you not only map out the future of your farm but also bring the family or team together in pursuit of a common dream.

The Seven Steps of Goal Setting

1. Assess the Past: Look back at where your operation was and learn from it.

2. Resource Evaluation: Understand what you have and what limits you.

3. General Management Plan: Develop a broad strategy for your farm.

4. Specific Goals: Determine what exactly you want to achieve.

5. Prioritize: Decide which goals take precedence.

6. Action Plans: Outline steps to achieve your goals.

7. Progress Measurement: Regularly check and adjust your goals as needed.

Developing SMART Goals

Remember SMART: Specific, Measurable, Action-oriented, Reasonable, Time-bound. These types of goals take a dream and make something tangible out of it. For instance, instead of “I want to make more money” try “to increase income by $20,000 in 2024.” The first is vague, not measurable, and has no end date. The second is a SMART goal.

Write them down, make them visible, and ensure they're challenging yet achievable. Set these goals as a family or team, not in isolation.

Prioritizing Goals

Ask yourself: Which goals are vital for the family and farm? How do short-term goals align with long-term ambitions? Prioritize without ignoring less urgent goals, and consider setting unique goals for both personal and business objectives.

Implementing Goals

Effective goal setting requires investment in planning and commitment. Anticipate problems, plan for them, and integrate individual goals with the broader family or team objectives. Avoid pitfalls like setting overly ambitious goals or ignoring valuable information.

Summary

Goal setting is not just a task; it's an ongoing process that forms the backbone of farm management. It requires careful thought, constant reassessment, and a willingness to adapt. By setting and pursuing well-thought-out goals, you can ensure the growth and sustainability of your farm, bringing pride and a sense of accomplishment to all involved.

Remember, every successful farm starts with a dream, a goal. So, take that first step today, and set the course for a thriving, fulfilling future in farming.

SEEDS

• 🤵 Candidate Interview: Republican presidential candidate Ron DeSantis answered a few ag related questions ranging from USDA to ethanol to taxes in a recent radio interview. Here’s the transcript.

• 🏖️ Retirement Planning: A potential tool to be used for farmers and ranchers looking to save for retirement is the One Participant 401(k). Investing in this plan is a way to 1) save for retirement, 2) reduce taxable income, and 3) provide the potential to borrow from the plan.

• ⚖ Fair vs Equal: Here’s an article providing some tips on handling the “fair, not equal” issue that often arises during farm succession planning.

• 💲 Grant $$: The Resilient Food System Infrastructure Program (RFSI) is a USDA grant opportunity to help support local and regional food systems. For example, Kansas recently announced $6.4 million in grants available for application. Check this page for a list of all the states and to see if your state has opened the application process.

• 📉 Economy Woes: A monthly survey of rural bankers shows a bleak outlook on farm income trends and over half the bank CEOs surveyed expect a recession in 2024.

Become a member today for lifetime access to everything.

FINANCE: Budgeting

As we welcome the new year, it's crucial for those involved in agriculture to focus on effective budgeting. Today, let’s shed some light on two key types of budgets: the whole-farm budget and enterprise budgets… essential tools for maximizing farm efficiency and profitability.

Whole-Farm Budget: The Blueprint for Success

Whole-farm budgets are essential tools for assessing the overall profitability of your farm, especially when considering significant operational changes. They help in forecasting the potential revenue, costs, and profits associated with a specific farming plan. Additionally, these budgets are valuable for comparing the financial outcomes of different farming strategies, assessing the impact of changes in farm size, and determining the availability of essential farm resources such as land, labor, capital, and management.

The process of creating a whole-farm budget involves initially calculating the total expected income and variable costs for all planned farming activities (i.e. the various enterprise budgets explained later on). Subsequently, other sources of farm income, like earnings from custom work, fuel tax refunds, and government subsidies, are incorporated. The final step involves deducting fixed farm expenses, which may include depreciation, insurance, repair costs, taxes, interest, utilities, and vehicle-related expenditures, to determine the overall financial standing of the farm.

The whole-farm budget acts as a comprehensive summary, detailing the physical and financial aspects of your entire farm business. It's not just about numbers; it's about understanding the intricate relationships between different parts of your farm and how they contribute to the bigger picture. Here’s how to approach it:

1. Set Clear Goals: Align the budget with your farm's goals and objectives.

2. Inventory Resources: Assess the resources at your disposal, such as land and capital.

3. Production Data: Determine the physical production data for input/output processes.

4. Price Analysis: Keep abreast of input and output prices.

5. Cost and Return Calculations: Estimate both variable and fixed costs alongside expected returns.

Remember, this budget must align with both your farm's direction and your family's aspirations. It's a strategic tool that harmonizes farm management with family goals, efficiently utilizing resources.

Enterprise Budgets: Detailed Insight into Specific Ventures

Enterprise budgets are more focused, detailing the expected financial outcomes of specific farming practices and products. They are crucial for understanding the profitability and break-even points of different farm products.

They are instrumental in creating comprehensive whole-farm budgets, offering insights into the total profitability and resource needs (such as land, machinery, and labor) associated with a specific farm plan. Furthermore, enterprise budgets are valuable for preparing projected cash flow budgets, enabling you to forecast periodic cash inflows and outflows, as well as determine the financing requirements for your agricultural operations.

When seeking financing, presenting a well-prepared set of enterprise budgets to your lender demonstrates your thorough evaluation of potential profits and financial needs, enhancing your credibility in the borrowing process.

Key elements include:

• Production Goals and Techniques: Define what you're producing and how.

• Resource Allocation: Detail the land, capital, and labor required.

• Cost Analysis: Include both variable costs (like seeds and fertilizers) and fixed costs (like depreciation and insurance).

• Revenue Calculation: Account for all revenues, whether from sales or internal use.

This budget is pivotal in decision-making, despite uncertainties like weather and market fluctuations. It allows for a structured analysis of different farming enterprises and systems.

Overcoming Budgeting Challenges

• Resource Evaluation: Understand your farm's unique resource situation before applying budget data.

• Future Predictions: Use historical data cautiously to predict future prices and yields.

• Risk Management: Consider best and worst-case scenarios and use probability distributions for better insights.

• Time Investment: While budget preparation is time-consuming, the long-term benefits often outweigh the initial effort.

Why Budget?

Budgeting isn't just about tracking expenses and revenues; it's about strategic planning and risk management. It helps you:

• Simulate organizational changes before implementation.

• Identify and manage overlooked costs.

• Enhance current organizational structures.

• Facilitate credit acquisition from lenders.

• Improve overall farm organization and planning.

In conclusion, both whole-farm and enterprise budgets are indispensable tools for US production ag folks. They provide a structured approach to managing your farm's resources, understanding the financial implications of your decisions, and ultimately steering your farm towards sustainable success. Remember, good budgeting today leads to a more prosperous and efficient farm tomorrow.

DEBT ISSUES

Borrowing money comes at a risk, because we’re obligated to pay it back. While we all intend to make the timely payments as they come due, that’s not always reality.

Whether from lack of organization, poor decisions, or things outside someone’s control, sometimes there’s not enough cash to make all the payments. So what’s the best way to respond if that happens?

I recently spoke with a farmer who’s got the following payments coming due:

1. Financial Company: $50,000 December 31

2. Fertilizer Company: $85,000 December 31

3. Mortgage w/ local bank: $65,000 January 15

And he’s got $100,000 to work with.

Without diving into the loan covenants, terms and conditions, and the fine print, we discussed a practical approach to weathering this storm. First, communication is key. I’ve spoken with many lenders over the years and generally they want to be flexible and help out. But, they can’t help when the borrower doesn’t communicate. Keeping the lender in the dark leads to frustration and the likelihood of them calling the note. So, reach out and explain the situation and ask for potential options.

Second, we talked about prioritizing the payments. For him, the mortgage on the home farm is the primary priority. By making that payment, not only does it protect his 4 walls, but it maintains the positive relationship with the local bank who may be his best option for an operating line to take care of the other two payments.

Third, there needs to be a solid plan to not only clear up these payments, but a path forward to prevent this situation from happening again.

The bottom line is that open and honest communication when we’re in a tough spot is the best approach to cleaning up the mess.

SIDE HUSTLE?

How many hours do we spend scrolling through for-sale listings of vehicles and equipment? For most ag folks I’d imagine it’s a lot. Something that’s always puzzled me is how many for-sale-by-owner listings have the worst photos imaginable.

When I see someone selling a six-figure tractor and it looks like they ran out to the shed at dusk and snapped some pictures with their eyes closed, I see an opportunity. Quality photos & video will draw more attention from serious buyers and increase the likelihood of getting the asking price.

So, I would think sellers would realize that by paying someone a few hundred bucks to take professional pictures, they could make a few thousand from their sale. That’s a pretty good ROI.

I don’t know if this is a viable side hustle, but I could picture a service where you travel around the region taking professional photos & video of vehicles & equipment for a fee. Feel free to take this and run with it or let me know why this might be a terrible idea!

MEME OF THE WEEK

That’s a wrap, folks.

Until next week, thank you to everyone involved in ag. Come engage on the new platform & let’s grow profitable ag businesses together.

And, share this email with 5 of your friends.

If you’d be willing to take a minute, click here to leave your testimonial.

Was this shared with you? Click 'Subscribe' to get next week’s delivered straight to your inbox. Free.

DISCLAIMER: All content, communications, and resources provided by Braintrust Ag, its principals, operators, or members is intended to merely be educational and entertaining. Nothing published by Braintrust Ag should be relied on as legal, financial, investment, or other professional advice. Investments and legal matters involve substantial risk and are not suitable for all individuals. It is recommended to enter into a client relationship with an ESP for obtaining professional advice.