Edition #15

October 14, 2023

Good morning and welcome to the Braintrust Ag newsletter. Where we strive to help ag folks work smarter, not harder. Like this next-level dog…

A few notes to begin:

• If you’ve got a specific topic you’d like to discuss at an upcoming SOIL Gathering, shoot me a message or post it in the community forum.

• Starting in November, we’ll be having a monthly, live Q&A with industry experts. These will be open to all paid members and recorded for future reference.

• We hit 100+ members within the community, this past week. That’s a really cool milestone! (Price is increasing to a one-time $149 charge soon)

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:

• 🐑 Livestock Services

• 🕊️ Barn Pigeons

• 🌱 Seeds

• 🤝 Farm Mgmt Transition Tips

• 👨‍👩‍👧‍👦 Life Estates

• and more…

“AG-ADJACENT” SIDE HUSTLES Part 6

This is the final installment of this series… we may revisit with new ideas down the road!

Idea Breakdown

We’re going to continue looking at some ag-adjacent side hustles and do a breakdown on them.

Catch up on the first, the second, the third, the fourth, and the fifth installments by clicking the links.

Let’s dive in.

Livestock Services

Description: Anyone with livestock, whether for production or show, has some specific needs. If you’re willing to learn a needed skill, and do a bit of travel, you can swap your labor for cash by providing one of many livestock services.

And, this type of work typically gives you hours of face time with the owner/operator to help build those relationships.

Some ideas:

• Order buying

• Hoof Trimming

• Sheep shearing

• Judging livestock

• Showstock fitting

• Ration formulation

• Artificial Insemination

• Preg Checking/Ultra Sounding

• Hauling livestock (semis or just stock trailers)

Start-Up Costs: Low to Medium

Typical costs involved will be the gear, specific training, and transportation. Depending on which path you choose, this could be one of the lowest start-up cost ag-adjacent side hustles out there. For instance, I used to make up to $500/day shearing sheep with $3,000 worth of gear.

The Good:

• Specialized

• One-person jobs

• High hourly rates

• Complimentary seasons

• Word of mouth advertising

• Proximity to landowners, farmers, and ranchers

The Challenges:

• Physically demanding

• Upkeep of gear

• Scheduling

• Travel

Here’s what I’d do:

Evaluate which service I want to provide by looking at local demand, my skills, and my physical ability to withstand some of these jobs. Search online for local seminars or classes that teach these specific skills. For instance, there’s 2-day sheep shearing schools that teach you the proper technique & what gear you need.

Use the power of the internet communities to offer your services. Ask for referrals from each person you help.

Dial in your pricing. Research what others are charging for these services and figure out your costs plus a healthy profit margin. Consider a flat fee per head plus a mileage surcharge. Or, have a sliding scale for your pricing that gives discounts to larger numbers of animals.

To start, there will be jobs you take that don’t pay enough for the hassle. As you build your customer base, you can start to weed out those less profitable/less desirable customers and focus on efficiencies within your service area.

Keys to Success:

• Quality first, the speed will come

• Know your costs & charge enough

• Take care of your body and stay healthy

Conclusion

This ag-adjacent side hustle checks the box on our two-part test, which is:

1. Does it compliment your current or future farm enterprise?

2. Does it put you in proximity of other farmers & landowners to build relationships?

Many of these jobs are high labor, and specialized. That gives you a good “moat” around your services to limit competition and allow for higher rates. If you can become proficient, stay healthy, and innovate, the number of folks you’ll be competing with seems to be dropping each year.

Mini Breakdown

Barn Pigeons

This one may surprise people. Barn pigeons are a nuisance to farmers, plentiful, and in high demand for hunting dog trainers. So, for little more than the cost of fuel and some cheap cages, you can travel the region catching barn pigeons (alive) and sell them to dog trainers by the dozen.

Here’s what I did for a number of years to provide some extra cash:

1. Get some quality fishing nets and some durable cages.

2. Set up a holding pen at your place with pigeon food and water. Make sure this holding pen is big enough to keep a number of birds for a week or two, but not too big that it’s difficult to re-catch them.

3. Find a spot where barn pigeons hang out that you can seal off their entrance/exit to trap them in an area. Here’s where I used to find them:

   • Haymows

   • Dairy barns

   • Grain elevators

   • Old, unused grain bins & silos

4. Sneak into their area, close off their exit, and go to work catching them with your fishing net.

5. Bring them back to your holding pen with the cages/carrier.

6. Talk to dog trainers and mention you have barn pigeons for sale in one of the many online hunting dog training forums. You will have more demand than supply, trust me.

7. Arrange pickup & charge $4-$5 per bird.

Maybe I’m a bit strange, but I used to have a lot of fun grabbing a friend and traveling around catching barn pigeons. Who said your ag-adjacent side hustle couldn’t be fun?

SEEDS

• 📜 Estate Taxes: Here’s a good breakdown of Spousal Lifetime Access Trusts (SLAT) and how they can be used to help larger farms avoid estate taxes (which exemption amounts are due to sunset in 2026).

• 🐖 Pork Lawsuit: A Massachusetts law banning the sale of pork that doesn’t meet strict requirements (even more strict than the burdensome California law) is being challenged in court by a coalition of Iowa pork producers.

• ⚙️ Nexat: You may have seen pictures or video of a sci-fi looking machine harvesting acres over the last couple years. The Nexat is an 1,100 hp machine advertising lower compaction, increased efficiency, and decreased labor needs and will be tested during harvest in Illinois and South Dakota this fall.

• 👨‍💼 IRS Audit: Nobody wants to receive a letter from the IRS, unless it’s a fat check with a refund. Here’s a story of a Texas farm family whose $7,800 tractor repair triggered an IRS audit with some advice from a tax pro on what you can do if you’re contacted by the IRS.

• 🌱 Mystery Seeds: If you receive an unsolicited packet of seeds from China, please don’t open them and plant them. They could be noxious weeds or even cannabis, and here’s an article explaining more about these mystery seeds.

FARM MANAGEMENT TRANSITION

The 5 Phases of Farm Succession

(Summarized from https://extension.missouri.edu/publications/g516)

Each farm, ranch, and ag business transition is unique. That said, here’s a five phase recipe for success to incorporate the successor generation into the business management duties. Not all situations will hit all 5 phases, nor will all operations spend equal time on all 5 phases, but this is an outline for you to consider regardless which generation you are.

1. Off-Farm Experience & Education

• Successors should work away from the family farm to gain different experiences, skills, and mentorships.

• Exposure to various aspects of the value chain and non-farm skills enhance successors' readiness.

• Formal education and joining professional networks also add to their skill set.

2. On-Farm Trial Period

• Successors are hired as paid employees with clear expectations.

• This period serves as a test for both seniors and successors to gauge compatibility, separating family and business dynamics.

• Honest evaluations conclude this phase, determining if the successor progresses or exits the business.

3. Initial Management & Ownership

• Successors manage specific farm functions or enterprises.

• They should be given decision-making authority for these areas.

• Begin the process of asset ownership, with consultation on transfer strategies.

4. Advanced Management & Ownership

• Successors take full charge of a designated farm enterprise or function.

• Complete financial management, including understanding costs, returns, and investments, is crucial.

5. Majority Management & Ownership

• Successors hold the primary stake in the farm, making most business decisions.

• Asset transfers, especially for larger farms, require careful consideration and consultation due to tax implications.

• Clear transfer of assets assures the next generation of their future stake in the farm.

LIFE ESTATE 101

Occasionally the idea of a life estate comes up in farm succession discussions. But what should you know about it?

A life estate is a legal mechanism for transferring assets, usually a home or land, intended to remain within the family. Typically, parents pass these assets to their child or children while still retaining the rights to inhabit the property and/or earn from it, like through land rent. Upon their passing, the ownership automatically shifts to the children.

What is a Life Estate?

• Legal transfer of assets, typically house and/or land, to keep within the family.

• Allows the original owners (usually parents) to live in the home or receive income rights (like land rent) until they pass away, then the asset transfers to the next set of owners (usually children).

Owners in a Life Estate:

• Current Owner (Grantor): Person initiating the deed.

• New Owner (Life Tenant): Owner(s) of the life estate.

• Future Owner (Remainderman): Individual(s) who inherit the property post-life tenant's death.

• One party can have multiple roles, e.g., the grantor often is the life tenant. Multiple people can share a role.

Types of Life Estates:

• Granted Life Estate: Typically within a will. Upon the passing of one spouse, the other becomes the life tenant with children as remainderman. Helps to avoid probate.

• Retained Life Estate: Created when the grantor is alive. Property transfers to the remainderman upon grantor's death. Used as an alternative to a revocable trust and to avoid probate.

 Creation & Asset Inclusion:

• Created by an attorney through a written document.

• Executed via a new deed with the county or through a will/trust.

• Appraisals often advised to determine fair market value for gift tax purposes.

• Common assets: family real estate, certificates of deposit, bonds, REITS.

• Depreciable assets are typically avoided.

 Advantages:

• More cost-effective and efficient compared to other options.

• Bypasses probate but is part of the taxable estate.

• Life tenant retains control and usage rights.

• Sale needs agreement from both life tenant and remainderman.

• Remainderman gets a stepped-up basis upon life tenant's death.

• Some protections from Medicaid costs based on the state.

 Disadvantages:

• Irrevocability: challenging to alter.

• Sales prior to life tenant's death need agreement from both parties; can result in significant capital gains.

• Assets aren't safe from lawsuits, divorce, or bankruptcy.

• Medicaid can mandate asset sales if life tenant moves to an extended care facility within five years of deed creation.

• Probate may be necessary if the remainderman predeceases the life tenant.

• Filing a gift tax return may diminish the lifetime exemption.

Conclusion:

In conclusion, while life estates offer unique benefits and long-lasting advantages, they might not suit everyone's needs. It's crucial to evaluate individual circumstances and understand the specific requirements associated with this legal mechanism. Although the learning curve and associated costs are relatively low, the potential rewards and peace of mind they can provide are substantial.

ESP SPOTLIGHT

Endorsed Service Providers are pivotal to the Braintrust Ag community. These industry experts know their professional services niche and how they directly impact farmers, ranchers, and other ag business owners.

This week, I’d like to direct your attention to ESP, Steve Hasche with Hasche Insurance.

If you’d like to learn more about the ESP program, click here.

FINANCE

Looking to incorporate a new farm family into your operation?

One consideration is this: will the addition generate enough gross income so the operation doesn’t go backwards?

A study by Kansas State found the average farm family has $70,000+ in living expenses. Assuming your new farmer is living on a tight budget, how much gross revenue does the farm operation need to bring in to handle an additional $70,000 in “salary?”

Use the 5:1 ratio.

For every $5 of revenue, your farm will net $1.

So, if you’re adding an additional $70,000 in family living expense, here’s what your operation’s gross revenue needs to increase by:

$70,000 × 5 = $350,000

Now that you have the target number, think of ways to gain this additional revenue. Here’s some ideas:

• Successor farmer replaces current hired labor

• Efficiencies through technology and new ideas

• Expansion of current enterprises

• Addition of complimentary enterprises

While every situation is unique, it’s important that both the successor and legacy generation are in agreement on the expansion strategy, to ensure both generations are fully “bought-in".

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.

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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.