View all past Braintrust Ag newsletters here.

Edition #28

February 17, 2024

Good morning and welcome to the Braintrust Ag newsletter. We’re like that uncle who doesn’t take himself too seriously, but once in a while has a bit of wisdom to share. This week, we’ve got:

A couple notes to begin:

• We’re close to 200 members! (feels like some sort of milestone 🤷‍♂️)

  • 193 at the time of typing this… can we get there this weekend?

    • Become a member by clicking here.

• If you missed last week’s newsletter, I took a stab at exploring the inner workings of Braintrust Ag & what we’re trying to accomplish. You can read it here.

Alright, let’s get to the topics that will help you build a strong, sustainable ag operation.

-Clint

Here’s what we have this week:

• 🧑‍🌾 Ag Census Highlights

• 🌱 Seeds

• 📅 Happenings

• 👶→🧓 Farmer Lifecycle

• 💲 Farm Futures Insight

• and more…

THE BIG IDEA

2022 USDA Ag Census Released

Per the USDA:

The Census of Agriculture is a complete count of U.S. farms and ranches and the people who operate them. Even small plots of land - whether rural or urban - count if $1,000 or more of such products were raised and sold, or normally would have been sold, during the census year. The Census of Agriculture, taken only once every five years, looks at land use and ownership, operator characteristics, production practices, income and expenditures.

Now, it’s a 757 page report, so today’s highlights are barely scratching the surface.

Also, I think it’s important to point out what qualifies as a “farm” for purposes of USDA’s Census: it’s any operation that produces $1,000 or more of agricultural products whether sold or not. So, the vast majority of the 1.9 million farms would be small, “hobby” farms.

Now that we have that lens to filter things through, here’s some highlights that stood out to me:

Producer Demographic Stats

• 1.9 million farms

• 880.1 million acres

• 3.37 million producers

Producers By Age:

• 300 thousand younger than 35 (↑3.9%)

• 1.78 million age 35-64 (↓9%)

• 1.29 million age 65+ (↑12.1%)

→ 30% of all producers have been farming for 10 years or less.

→ 62% worked "off-farm" either part-time or full-time

Finally, 42% of producers said their primary occupation was farming, and 58% said farming was a secondary occupation.

Note: USDA defines a “Producer” as: The term producer designates a person who is involved with making decisions for the farm operation... The producer may be the owner, a member of the owner’s household, a hired manager, a tenant, a renter, or a sharecropper.

Production & Sales Stats

→ The largest farms are fewer than 1% of the farms, but accounted for 42% of all ($543.1 billion) sales.

→ The smallest farms are 74% of the farms, but accounted for only 2% of all sales.

• 1% of farms had > $5 million in sales (42% of total)

• 5% of farms had $1M to $5M in sales (36% of total)

• 8% of farms had $250K to $1M in sales (15% of total)

• 12% of farms had $50K to $250K in sales (5% of total)

• 74% of farms had < $50K in sales (2% of total)

The report also breaks down top commodities by sales $:

Finally, of all commodity sales:

• Crops made up 52% ($281 billion)

• Livestock made up 48% ($262 billion)

As an aside, I found this stat to be confusing… mainly because I’m not tech savvy, but I would have expected this to be much closer to 100%:

Click here to view the entire 757 page Ag Census report

SEEDS

• 🛡️ Risky Business: Here’s a good take on the “Big Five Risks Faced By Farmers” so you can bone up on stories, ideas, and questions for an upcoming SOIL Gathering.

• 📄 Fact Sheets: USDA put together a couple of fact sheets to highlight some of the results from the recent Ag Census. Here’s the summary on Farm Producers, and here’s the one on Farm Economics.

• 🌽 Agronomy Management: Corteva (Pioneer) released their comprehensive Agronomy Research handbook for 2024. It’s 160 pages full of research results and management strategies for corn & soybean producers.

• 📊 Challenging Economics: Fractal, a company that helps farmers use capital equity to expand their operations, is hosting an online financial roundtable to discuss navigating a low margin, high interest rate economic environment for producers on February 22. Here’s the registration link.

• 📖 Preserve Your Story: A cool new way for ag people to share their stories is now available. The Gravel Road is a digital magazine where farmers, ranchers, and rural folks can memorialize the legacy of their ag heritage. Submissions are now open until 3/25/2024.

Become a member today for lifetime access to everything. It’s a small one-time cost with NO recurring subscription.

PEER GROUP HAPPENINGS

A couple mentions on what Braintrust Ag members are up to:

1. We set an attendance record for the recent SOIL Gathering this past Thursday. The topic was “Risk Management” and participants were quite engaging! So much so that we didn’t cover a lot of the ground I expected… so we’ll pick up where we left off on future Zoom calls.

   Here’s a summary of what we discussed:

2. Looking forward to an upcoming Expert Q&A with Grant Wiese on February 27th. He’s a member, ag lender, and discusses all things farm finance through his content at Farm640.

FAMILY FARMER LIFE-CYCLE

A common issue with many ag operations is the best way to bring the next generation into the business.

A framework to help get a grasp on how that process ought to look is viewing a farming career (especially one who is joining a family operation) through a life-cycle.

Ultimately, there’s 4 main phases of a family farmer:

I was recently speaking to a 71 year old row crop + cow/calf farmer who is a 2nd generation owner/operator. His son is the third gen and hopefully his 2 grandkids will become 4th gens.

Now, his story may not have aligned directly with the 4 phases (Laborer, Leader, Manager/Owner, and Laborer/Mentor) but his story more or less followed the trend.

I share this story because I think it’s important to view the management duties and ownership rights as separate.

First, the management/decision making responsibilities ought to be transitioned.

Then, the ownership can be transitioned.

Too often, there’s no management transition plan in place and the owner generation ups and says, “well, I guess I’m going to retire” (or worse they pass away) and the next generation gets all the roles, responsibilities, and obligations dumped on their lap.

Whether they’re ready or not.

So, if we can view operating a farm through this life-cycle, maybe we can prevent some of the disfunction that can happen with a sudden transfer.

Here’s that farmer’s story:

Phase I: Laborer

He grew up working hard, manual labor on the farm.

Joined the Army right out of H.S. & returned after 6 yrs away. He ran heavy equipment in the Army & learned diesel mechanic skills.

Provided a big help when he returned to the farm as a "lowly farmhand."

Phase II: Leader

Dad put him in charge of equipment repair & maintenance thanks to his Army mechanics skills.

Took to the shop & started building all sorts of useful tools.

Eventually started building cattle equipment & selling to neighbors.

Phase III: Manager & Owner

Over the years he rented & bought ground of his own.

Shared equipment w/ Dad and they helped each other during the busy times.

He bought the cattle herd & most equipment as his dad started transitioning out.

Eventually, bought everything but the land Mom & Dad still owned.

Phase IV: Laborer & Mentor

His son has been farming with him for 15 years now, and he's ready to "sunset."

Told me he still wants to work most days, but leaves the management up to his son.

"I'm back to where I started → as a tractor driver."

The key takeaway to his story is this:

There was a gradual transition of responsibilities and expectations from his dad to him (and now from him to his son).

It happened over years, not all at once.

So, maybe it’s time to start thinking about letting go of some of the decision making and let that next generation prove themselves through an orderly transition.

EMPLOYEE OWNERSHIP

A Kansas farm family developed a succession plan to sell their operation to an employee...

→ Employee proved himself over the years

→ Created new LLC to own/lease equipment

→ Transfer existing leases into new LLC

→ Employee buying interest in LLC over time

→ Both families share in profits of LLC

→ LLC leases land from retiring generation

It's a way for the owner/retiring generation to:

• Leave a legacy

• Not sell to the highest bidder, and

• Help a young farm family who wouldn't ordinarily have that opportunity.

Click this link to the story on how they accomplished it.

FARM FUTURES INSIGHT

3 Takeaways from the Farm Futures Business Summit, 2024

Last month, Matt Boos of Agrigrowth Consulting attended the Farm Futures Business Summit in Coralville, Iowa. Here’s what he reported back as some key insights:

1. Utilizing the Entrepreneurial Operating System (EOS) on the farm: Jay Joy of Brideforth, LLP mentioned implementing EOS within both farms and agribusinesses and the impact that has had for transforming management. The easiest and most impactful piece of EOS to implement would be an accountability chart and holding structured, weekly meetings.

2. Labor Concerns: “I ask my guys every summer if they are up for another harvest. One of these years they are going to say ‘NO’.” Neil, a ND farmer who operates on 7,000 acres, states labor as one of his primary issues to address going forward. In many cases, part-time retired people are the only available employees, and the only folks holding an operation together.

   Formulating a labor plan will be key to addressing both the short-term and long-term issues. Things like hiring an H2A worker or offering equity incentives to long-term employees are strategies that may be utilized to “fix” these labor concerns.

3. Loan underwriters placing less weight on balance sheets. A regional ag lender mentioned they’re looking closer at the sophistication of farm operations and their management, and viewing lending as 20-30 year partnerships, with a heavier weight placed on professional farm operations.

   This means documenting processes and plans to be shared with lenders, and treating operations as a true multi-million dollar business will give producers a leg up in the future of ag lending.

MEME OF THE WEEK

That’s a wrap, folks.

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

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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.