Edition #19

November 11, 2023

Good morning and welcome to the Braintrust Ag newsletter. A live look at ag folks when they see this email notification ⤵

📢 Upcoming Virtual Event

I’m excited to announce our first ever Expert Q&A!

This virtual event is a chance for members to learn from the experts on growing your legacy and creating a sustainable succession strategy.

The experts will present for ~30 minutes then we’ll open it up for members to have their questions answered.

More info and the Zoom link can be found on the Events 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:

• 🎯 Mission Statement & Business Plan

• ✖️ X Insights

• 🎈 Balloon Payments

• 🐂 Grazing Corn Stalks

• and more…

WHOLE FARM PLANNING:

Mission Statement & Business Plan

Getting your planning game on point is important for farm life. It's all about staying ahead of the game, tackling those one-of-a-kind farm challenges head-on, and setting up the farm for a win not just today, but way down the road too. That’s why we’re taking the Whole Farm Planning approach, step by step.

Previously, we discussed the approach, the farm family, and individual & business assessments. This week, let’s take a look at developing your farm’s Mission Statement and then the first of 5 essential plans: Business Plan.

Mission Statement

Alright, let's start with the mission statement. This is your farm's battle cry. It's a quick rundown of why your farm exists in the first place. A good mission statement keeps everyone on track—it's like the North Star for your farm business, guiding all your decisions and actions.

Tips for Crafting a Mission Statement:

• Keep it short and sweet: You want everyone to remember it, right?

• Make it a mirror: It should reflect what your farm is all about—the core values and the big why.

• Align it: Ensure it matches up with what you're actually doing out there in the fields and how people see your farm.

Here’s an example from an Iowa corn, soybean & cow/calf operation:

The heart of our farm is to produce top-tier corn, soybeans, and grow a reputation cow/calf operation, maintaining the right size to ensure a solid living for our family and employees. We're creating a place where kids can grow up with the land and learn the value of hard work. Our aim is to practice sustainability, guaranteeing our farm's economic viability for future generations.

In our example, this Iowa farm’s mission statement isn't just about growing crops and cattle. It's about providing for the family, giving employees a solid job, and creating a place where kids can grow up right. Plus, they're looking long-term, wanting the farm to last for generations.

Business Plan

Moving on to the business plan, think of this as the blueprint for your farm's success. It’s more than just figuring out the day-to-day stuff, like which corn variety to plant or which bulls to use for breeding.

Here's what you should include in a Business Plan:

• Big Picture Thinking: It's not just about growing products. You've got to plan for the money side, how you'll sell your products, who's going to help run the show, and how to cover your bases if things go sideways.

• SWOT Analysis: This is a handy way to take a good look at your farm's Strengths, Weaknesses, Opportunities, and Threats. It's like taking your farm's pulse to see what's healthy and what needs a bit of TLC.

• Get Detailed: Outline everything from cash flow to how you'll deal with risks like bad weather or price drops. And don't forget about who's doing what on the farm.

• Set Directions: This plan should lay out where you're headed and how you're going to get there. It’s the roadmap for your farm's future.

We did an in-depth, comprehensive, 7-part series on building a business plan a couple months ago. Click here to see the last newsletter in that series, as it has links to each part for more details, ideas, and a template.

When you're putting this together, remember all these plans—business, retirement, transition, estate, and investment—they all tie together. They're like the spokes on a wheel; if one's out of whack, the ride gets bumpy. So, when you're planning in one area, think about how it impacts all the others. i.e. if you're smart with your investments, you'll have more cash to play with for the business or for when you retire.

Each part of your plan should be helping the others out. It's a team effort, and when done right, it'll keep your farm rolling smooth for the long haul.

Next week, we’ll dive into a farm’s retirement and transition plans.

INSIGHTS FROM THE WIDE WORLD OF X

RESOURCES UPDATE

A few more resources have been uploaded since this list was made, but this is an (almost-complete) compilation of the resources available for download.

LOANS

Outlined some loan basics with a beginning farmer recently...

He thought I should share a bit on balloon payments, since that was new to him.

So, for those unfamiliar:

You may have heard of a 30 year amortized loan.

That may or may not be how long you have to pay it off. The amortization calculates your payment amount if you paid equally over the 30 years.

But, often loans will have a much shorter term. That means there's a big chunk that doesn't get paid through normal payments.

What's leftover is a "balloon payment."

So, the borrower will need to get an extension, refinance the loan, or pay the lump sum when the term comes due.

In this $420k loan example, the payments are calculated on a 30 yr amortization, but in year 5 there's a $393k balloon payment.

That means the borrower needs to plan ahead so they're not caught off guard when the big payment comes due.

It's a good idea to review your loans at least annually to make sure no surprises are coming your way.

GRAZING CORN STALKS

According to USDA, in 2019 farmers leasing corn ground to livestock producers generated over $95 million in economic activity. And, grazing corn stalks can be traced back to 1662 when the original New England colonies began the practice.

A couple years ago, UNL did a case study on grazing corn stalks with a cow herd vs feeding only hay.

Here’s the full article.

And here’s my summary of the case study:

Key Points:

Winter Feed Dilemma: The article discusses the challenge of choosing between grazing standing forage or feeding hay, especially in dry years when winter grazing options may be limited.

Feed Cost Cow-Q-Lator Tool: This tool, developed by UNL, helps farmers compare different feed options. It allows for custom inputs to fit various scenarios.

Case Study Parameters:

• Herd Size: 80 spring-calving cows, each weighing 1,200 lb.

• Winter Pasture Cost: $45 per cow per month, or $1.50 per day.

Hay Feeding Costs:

• Cost of Hay: $165 per ton in the field, equivalent to $0.08 per lb.

• Daily Hay Consumption: 30 lb per cow, leading to a daily feed cost of $2.40 per cow.

• Additional Costs: Including hay waste and delivery, the cost increases to $0.157 per lb of feed, or $4.71 per day per cow.

Grazing Corn Residue Costs:

• Rent Cost for Corn Stalks: $30 per acre.

• Stocking Rate: Approximately 2 acres per cow.

• Daily Cost: $0.49 per cow, making it a more affordable option.

Scenario Analysis for Remote Herds:

• Distance to Corn Fields: 600 miles for an 80-cow herd.

• Transportation Costs: $150 per cow for a 1,200-mile round trip.

• Total Grazing Cost: $58.88 per cow for 120 days of grazing.

• Supervisory Visits: $15.75 per cow, including travel and labor.

• Total Winter Cost for Grazing Corn Stalks: $224.63 per cow.

Comparative Analysis:

• Feeding Hay for 120 Days: $565.20 per cow.

• Combination of Grazing and Hay Feeding: Assuming 60 days of winter range grazing at $1.50/day and 60 days of hay feeding at $4.71/day, the total cost is $372.60 per cow.

• Economic Advantage: Grazing corn residue, even with transportation costs for distant herds, is significantly more economical than only feeding hay.

Summary:

For farmers and landowners, grazing corn residue emerges as a cost-effective winter feeding strategy for cattle, especially when compared to the higher costs of hay feeding. This is true even for herds located far from corn fields, considering transportation and other related expenses.

Note: refer to the original article for more details, and use some of the tools available out there to run your own calculations.

TESTIMONIALS

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

Thank you, kindly!

VALUE-ADDED AG

Last week’s SOIL Gathering focused on value-added ag opportunities, and how it could be a way for new & 1st gen farmers to get their foot in the door.

Seems there's a wide variety of value-added opportunities out there and many definitions…

In general, it's increasing the $dollar value of ag commodity products and/or consumer appeal by creating or capturing value at the farmer level that otherwise would go to someone else.

Some examples:

• Changing the physical state of the product 

i.e. wheat into flour; corn into ethanol; steers into steaks

• Manner of production 

i.e. organic crops; grass fed beef

• Differentiating the product through traceability 

i.e. certified angus beef; high protein soybeans

• Repurpose a "waste" product 

i.e. capture & convert methane to generate energy

• Locally produced & marketed products 

i.e. farmer's market sales; D2C online sales; branded products

As you can see, value-added can come in many forms.

Here’s a few of the nuggets I took away from our SOIL Gathering discussion:

→ Producer who focuses on organic and non-gmo corn & beans...

"It takes time to learn the nuances of specialty crops - don't dive in too big, too fast."

→ Cattle rancher selling direct to consumer freezer beef...

"Post on Facebook ($0 marketing budget) and demand quickly outpaces supply."

→ Farmer created a local market to sell real clean corn to fill deer feeders

"Don't overcomplicate it - look around at your local demand and fill their needs"

→ New poultry operation using different freezing technology and selling direct to grocery stores

"It's all about the taste. Provide a better tasting product to demand a premium price."

Those are just a few highlights and ideas that were discussed. It's remarkable the various ways ag folks can find to carve out a niche and put more $ per acre or head in the farmer's pocket.

The sharing of ideas is what it's all about.

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.