Edition #6

August 12, 2023

Good morning and welcome to the Braintrust Ag newsletter. After a couple months apart, it’s good to be back together!

And… with a new name & website platform!

A few notes to begin:

• Thank you to those who have been exploring and engaging on the new website platform. So far it’s been much easier to share resources & ideas, but like all things… it’s still a work in progress.

  • If you were previously a paying subscriber, you should have received an email inviting you to hop on the new platform that looks something like this:

• The pricing model has changed from a monthly subscription (which nobody likes) to a one-time price for Lifetime Access.

  • So, if you weren’t previously a paying subscriber, consider unlocking all the resources, content, and connections available to members by clicking here.

• Planning on starting a new series where members tell their Ag Origin Stories. How they got into ag & what key takeaways they can pass on to others. If you’d be interested in contributing, DM or email me.

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:

• 📃 Business Plan Recap

• 🌱 Seeds

• 🤝 Cooperatives

• 💡 Transition Strategy

• and more…

BUSINESS PLAN SERIES

We left off in the middle of building out a farm business plan. As a refresher, successful farms and ranches don’t just happen by mistake.

They are the result of a well thought out plan that allows for growth and flexibility designed to reach a distant goal.

Whether you have been running a farm for years, are looking to start one from scratch, or are somewhere in between, you ought to have a business plan.

To get everyone up to speed, here’s the previous installments of the series:

Here’s Part 1: Business Description

Here’s Part 2: Products & Services

Here’s Part 3: Marketing & SWOT Analysis

Here’s Part 4: Operational Plan

Next time, we’ll look at the financial aspect of the business by building out a Farm Financial Statement & Forecast.

Reminder: we’re working through this Google Docs template to build out our example. If you didn’t already do so, download and save a copy to build out your own business plan.

RESOURCES UPDATE

We’ve got some brand new resources available to download on the website. Here’s a few I’d like to highlight:

18 Farm Financial Ratios eBook + Calculator

Use the explanations, formulas, and recommendations in this eBook to better understand and manage your operation’s financial health. Plus, there’s a Calculator spreadsheet available to help you crunch your numbers.

Complete Business Finance Series (By ESP Joey DeWit)

This series breaks down how to look at your operation’s finances as a CFO through a complete .pdf guide, video explanations, and templates. Access them in the “Resources” space on the website.

Each State’s Extension Service Link

Some are better than others, but one of the most under-utilized resources for tools, templates, and data is your state’s Extension Service. Plus, other states have resources you can adapt for your region.

I’d encourage you to look at the other resources available on the site, and check back from time to time as new tools get uploaded.

SEEDS

• 📉 Ag Risk: Interesting way to look at risk in agriculture separated into production risk and human risk in this article.

• 📝 Carbon Contracts: This is an in-depth breakdown of the legal concepts folks should be aware of when looking at Carbon Contracts. These contracts “speak a different language” than most agricultural contracts, so landowners ought to understand the terminology and clauses.

• 🌎 Land Prices: The Chicago and Kansas City Fed expect farmland values to stabilize due to higher interest rates and lower commodity prices. Though, it’s unlikely we’ll see land prices decrease.

• 🌱 Farm Scorecard: Evaluating your farm business progress through the use of a “Farm Scorecard.” Look at your business through four lenses: people, processes, partners, and financials. (Though, I’d replace financials with profits just so all four words start with a “p.”)

• 📱 Grain Storage Calculator: Here's a handy, simple online calculator to be used for estimating the ideal moisture content for stored grain with a variety of factors.

LEGAL

Newsletter #5 looked at the fourth of 5 business entity types that agri-businesses could fall into, Corporations.

To recap, there’s:

• Sole Proprietorship

• Limited Liability Company (LLC)

• Partnerships

• Corporations

• Cooperatives

Each has their own best uses along with their unique pros and cons. This issue, we’ll wrap it up with Cooperatives…

An ag cooperative (coop) is a producer cooperative in which farmers pool their resources in certain areas of activity.

While organized as a corporation, coops differ from investor owned corporations that are designed to maximize profit, since coops are designed to maximize benefits to its members.

Most folks think of their local elevator when they year the word cooperative, which is the most common version. This would be an example of a service or supply coop.

Coops for production farming & ranching operations are rare in the US, but globally they are more common among smallholder farming communities.

Use As Production Cooperatives

Production coops are formed by multiple farming operations pool their production resources (land, machinery, buildings, etc) and the coop members farm jointly.

One example is: smaller farmers may not be able to justify the purchase of expensive farm equipment, which is often used irregularly, so local farmers may get together and form a machinery pool that purchases the equipment for members to use.

Summary

Cooperatives are definitely the most rare of the 5 available business entity types for farmers & ranchers.

Each formation type has its specific pros and cons, which should be considered when forming your ag business entity. Also keep in mind these important issues:

• Limited Liability

• Tax Implications

• Payment Limitation Issues

• Corporate Farming Statutes

• Bankruptcy

• Fiduciary Duties

In closing, here’s a good article from The National Ag Law Center further examining these issues & business structures.

RISK MANAGEMENT

Want more?

ESP Devin Patton is ready and willing to answer any questions regarding Risk Management for your operation. Shoot him an email here: [email protected]

Disclaimer

Trading futures and options involves substantial risk of loss and is not suitable for all investors. An investment in futures contracts involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of their margin deposits. You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources, and other relevant circumstances. Past performance is not necessarily indicative of future results.

SUCCESSION/TRANSITION

Some version of this question is brought up occasionally:

Here’s my (Clint Fischer) thoughts on this great question:

First, a relationship needs to be built.

He needs to get comfortable with you & be able to trust you.

Best way to do that is by offering to help him w/ farm tasks. More often than not the farmer is not going to turn down an offer for help.

The trust is built as you go above and beyond on whatever the tasks are... no matter how low on the totem pole they are.

Second, be curious.

Ask intelligent questions.

Show you genuinely want to learn the ins and outs of his particular operation.

Third, make sure he knows your goal is to own an operation of your own some day.

Work that into the conversation as frequently as you can. Mix that with step 2 by asking his advice on how he got started farming; what he would do in your shoes.

Fourth, show you're able to understand the risks & can be successful given an opportunity of your own.

See if he'd be willing to rent you his equipment or custom farm some ground for you if you found a few acres to rent. Then, outline your business plan & ask him for his feedback.

Best case scenario he has some land that he rents that he's willing to let you take over... Or even rent you some of his ground if he's looking to scale back.

Typically, the future of his farm will come up in those conversations & that's when you sincerely express that you're ready, willing, and able to take over his operation.

Finally, if he indicates he may be willing to transition the farm to you, spend time outlining what that could look like & present him a detailed plan with various options.

Work with an advisor on a proposal and see if he's sold on the idea.

Key things to remember:

• Build a relationship where he trusts you.

• Prove your willingness to take some risk & manage your own operation.

• Present a solid plan that shows you've done your homework.

Then, get all decisions and agreements in writing.

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.

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.