View all past Braintrust Ag newsletters here.

Edition #35

April 13, 2024

Good evening and welcome to the Braintrust Ag newsletter. Building smarter ag operators one week at a time...

A couple notes to begin:

• Thanks to a connection I made with a Braintrust Ag member, an entirely rebuilt-from-the-ground-up website is in the works. Expect an ‘unveiling’ in 6-8 weeks!

• Congrats to our first ever Braintrust Ag NCAA bracket challenge winners:

1. Mark Roberts

2. Jordan Harts

3. Jaton Shaffer

• I have to eat some humble pie… out of 78 brackets, I somehow managed to get DEAD LAST. Not next year, though!

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:

• 💲 Inventory

• ☀ Unique Contracts

• 📅 Happenings

• 💡 Update

• ⛈ Prevent Plant

• and more…

THE BIG IDEA

BA Pro Manager Series

#3: Take An Inventory

Sure, warehouses and big-box stores track inventory religiously, but that’s not exactly the type of inventory we’re talking about today. We’re looking at taking an inventory of your whole farm business (and ideally your non-farm holdings). This practice of taking a detailed inventory is often overlooked but crucial to running a successful farm business. Whether you are planning for growth, preparing for a transition, or simply aiming to maintain a stable operation, understanding what (and how) you own and owe is a key component of being a pro manager.

Why Inventory Matters

In any business, clarity about your assets and liabilities sets the foundation for informed decision-making. For farms, where assets range from tangible property like machinery and livestock to intangible assets like crop futures and goodwill, the complexity is high. Knowing what you have, it’s legal title, and how much you owe not only helps in day-to-day management but is also vital for strategic planning.

Most importantly, banks require detailed balance sheets for loans and assessing financial health, but the usefulness of inventory goes beyond satisfying lender requirements. It’s about gaining a full picture of your farm's financial and operational status.

Most of you are familiar with the basics of a balance sheet, and that’s a good start. (Grant Wiese has an excellent template to download for free… just enter your email address where it asks for a password.) But we also want to track items and aspects of your items that accountants & bankers don’t readily need.

Starting with What You Own

An inventory of assets should be comprehensive. Here’s one way to break it down:

1. Current Assets: These include cash, checking, and savings accounts, readily available to meet short-term obligations. Don't overlook cash value in life insurance policies or stocks and bonds, which can be liquid assets.

2. Receivables and Notes: Include all notes and accounts receivable that highlight money owed to you. This ensures you know your incoming cash flow.

3. Physical Assets: Detail all crops and livestock under your care. Prepaid inputs and supplies should also be cataloged to track investments already made into future operations.

4. Fixed Assets: This covers your machinery, equipment, and real estate. Each piece of machinery and each plot of land should be documented not just for value, but also for depreciation, maintenance, and insurance purposes.

5. Investments in Closely Held Businesses: If you hold interests in other businesses related to your farming operation, these should be clearly listed.

6. Personal and Household Items: Often overlooked, these can include vehicles and equipment used on the farm that are not directly tied to farming activities.

Understanding What You Owe

Liabilities are all forms of debt and obligations:

1. Accounts Payable: Includes all outstanding payments due for goods and services.

2. Loans and Notes Payable: Any form of borrowed money, whether short-term or long-term, must be accounted for.

3. Taxes Payable: Often fluctuating, keeping a close eye on what taxes are due when is critical.

4. Mortgages and Land Contracts: Long-term liabilities tied to real estate should be tracked separately due to their impact on cash flow and investment planning.

The Often Overlooked Aspect: How Assets are Titled

Beyond the numbers, how assets are legally titled can significantly affect your business operations and transition plans. Assets can be owned individually, jointly, or through entities like LLCs, corporations, or trusts. Each has implications for risk, taxation, and succession planning. Pro farm managers need to understand these nuances to mitigate risks and plan effectively for the future.

Inventory management is not just about keeping track of assets and liabilities; it's about having the insights needed to make proactive decisions and secure the future of your farming operation. In an industry as dynamic as agriculture, the ability to quickly assess your position and adjust your strategies accordingly can be the difference between thriving and merely surviving.

It allows you to not only understand your current position but also to plan effectively for your farm's future. As we continue this series, keep in mind that every piece of information you gather adds up to a clearer, more comprehensive view of your farm business.

Use this Farm Business Interview Worksheet to help with this process.

CONTRACT CONSIDERATIONS

There's been a recent uptick in farmers/landowners asking about these contracts:

• Solar panel farms

• Carbon contracts

• Wind energy farms

• Data center leases

While the $ might be attractive, the devil is in the details.

Each type of contract has unique issues, but here's some general risks to consider when approached:

→ Long term commitments

These contracts often span decades, potentially limiting future land use, succession planning, or adaptation to new technologies.

→ Assignment of rights

Many contracts allow unlimited assignment which means future companies aren't the ones you made the deal with.

→ Environmental compliance

The installation may lead to environmental concerns bumping up against federal or state regulations.

→ Impact on property value & marketability

This could negatively affect future sales or even the ability to get loans against the land.

→ Removal & restoration

Who is responsible and able to remove installations and restore the land at contract's end?

→ Maintenance

Is the company obligated to keep the structures in good repair and how can you hold them to it?

→ Interference with ag operations

Equipment & structures may hinder farming activities and reduce usable land area.

→ Tax implications

Changes in land use can affect property taxes and eligibility for ag tax benefits.

→ Liability for accidents or damages

Added infrastructure and workers increases the risk of the landowner potentially being implicated if people or property are harmed.

→ Energy production restrictions

Contracts may restrict the landowner's ability to develop or benefit from their own renewable energy projects.

→ Data ownership & privacy

Who owns and can access data generated on the land?

→ Stacking/multiple use restrictions

Some contracts prohibit engaging in other revenue generating activities on the same land.

→ Bankruptcy of company

What is the remedy if the company goes bankrupt? Or the third or fourth assigned company (see above risk)

→ Impact on neighbors

Large projects can strain relationships with neighbors due to landscape change, noise, and increased traffic.

This isn't an exhaustive list. But, they're some issues of concern when wading through the 20+ page boilerplate agreements the companies are providing.

So, before signing on the dotted line... please have your attorney review the contract and advocate for you.

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

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) Last Week’s SOIL Gathering

Last Thursday we had a great turn-out for our Zoom discussion on land access to start & grow an ag operation.

Some considerations we kicked around: custom farming to gain footing, reputation & relationships, financial prudence, leasing vs purchasing, cold outreach, gov’t programs, etc…

Here’s the link to the written summary of what we discussed (I hope you can join us live for the next one)

2) Upcoming Expert Q&A: “Starting a Market Farm From Scratch” w/ Steve Strasheim

A true first-gen story, Steve is going to tell us his saga around starting Twisted River Farm, a three-acre market farm located in Mitchell, IA. Specializing in vegetables, herbs, microgreens, and flowers, the farm distributes produce through a CSA program, local grocery stores, farmers markets, local restaurants, and an upcoming on-farm store. 

Originating from a sugar beet farm in Eastern Montana, Steve left in 1998 for college and moved through North Dakota and Minnesota before settling in Iowa. Although initially not intending to pursue farming, the connection to agriculture was rekindled in 2014. Starting with a small 5x10' garden, the farm expanded to over three acres by dedicating evenings and weekends to building a customer base and learning the trade. By 2018, the operation grew to full-time, employing five seasonal workers and marking a significant transformation from its modest beginnings.

Here’s a link with more details.

3) Off-line outreach

1,000 of these postcards were mailed out this week.

An experiment to try raising awareness for Braintrust Ag off-line.

Will it be effective? Or will it be a waste of $890?

I’ll share the results with you in the coming weeks - just trying to share with all of you what I’m trying, what’s working, and what’s not.

MARCH UPDATE

Was curious where the 234 members hailed from, so I did some tallying…

Of the 163 who disclose their location, we’ve got

• 6 countries

• 30 US states

Also, it’s time for the March month-end Braintrust Ag update:

What is BA? Online peer group of ag people sharing ideas & tools.

Who’s it for? Anyone looking to start, expand, or transition an ag operation/business.

The Numbers: 

• Members: 234 (prev - 209) 

• Newsletter (free) subscribers: 3,226 (prev - 2,318) 

• Endorsed Service Providers (ESP): 10 (prev - 10) 

Some Great Things: 

→ Visited with 5 members on their transition planning scenarios

→ Learned a ton about FSA Farm Loans through our Expert Q&A hour (it’s recorded) 

→ Created 2 videos to help members better use the community page

→ Member & his wife executed wills to protect their young family

→ Budding partnership programs to generate more value for members

Needs Improvement: 

→ Finalize affiliate program for outreach

→ Consistency with platform engagement

→ Clearer messaging that membership is NOT an annual subscription *Spoke with 4 people recently who didn’t realize it’s only a small one-time cost. 

Final Thoughts: A question I get is why are you putting so much effort into this community as a side project?

Honestly, for three reasons:

1. I genuinely want to learn from members & pros different business & transition strategies; also, to stay current with ag developments all over the place.

2. I’ve determined I have one skill that outshines most others: connecting people. I enjoy (and am pretty good at) making people feel included & match those seeking info w/ those providing it.

3. Raise awareness for my legal practice where I can help SD people with transition/estate plans & ag business legal services. (also, some non-SD consulting) 

Finally, March saw 25 new members. That’s great and I’m so thankful for all of you.

But I’d be lying if to say it wasn't a bit of a let-down.

Like any venture, my hopes are for a hockey stick, up-and-to-the-right trend.

Jan had 35, Feb had 33, and now 25.

A tiny snapshot and a new project, I realize this. Just want to share the emotional rollercoaster of starting something from scratch.

On the plus side, a record 908 newsletter subscribers were added.

Alas, we'll keep trying to provide value to members and grow this community. Thank you one & all!

PREVENT PLANT

Endorsed Service Provider Steve Hasche shares with us this summary of prevent plant to gear up for this 2024 season:

Prevent Plant is like an onion...it has lots of layers to it. Crop insurance is notorious for its rules and manuals, so here’s a general overview of what PP Insurance is about.

Prevented planting is the failure to plant an insured crop with the proper equipment by the final planting date or during the late planting period, if applicable. To qualify, you must be prevented from planting by an insured cause of loss that is general to the surrounding area and that prevents other producers from planting acreage with similar characteristics.

Final planting dates and late planting periods vary by crop and by area. Prevented planting coverage is available for most crops and covers floods, hurricanes, or excess precipitation that occurs during the insurance period...but you can also have a PP claim with a cause of loss due to drought!

In order to have a PP drought claim you must have “insufficient soil moisture for progress toward maturity,” which means the crop may germinate but there is insufficient moisture to sustain the germinated plants.

Documenting your claim is very important with either excess precipitation or a drought.

Here are some bullet points that go with PP claims...

• To qualify you must have planted, harvested, and insured in 1 of the last 4 years.

• You must meet a 20/20 rule by Unit Structure and by crop (corn, soybeans, wheat all stand on their own)

  • Basic Unit, Optional Unit, Enterprise Unit, etc...

• You must call the PP acres the crop that is planted in the field unless there is a 2-crop history or planting intentions was filed on new land that has been acquired by your operation.

• You can plant an approved cover crop on your PP acres and have more flexibility when to hay, graze, or cut for silage and still get 100% of your PP payment.

These are the basics of a PP claim.

Reach out to Steve with more questions! https://www.hascheinsurance.com/

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MEME OF THE WEEK

That’s a wrap, folks.

Until next week, thank you to everyone involved in ag.

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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.