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Banking on Agriculture: Hard Truths and Hope for Rural Communities with Sam Nesbit · Conservation Stories

• 0:00
  Speaker A: Foreign. Hello, friends. Welcome back to another episode of Conservation Stories. This is your host, Hilary Timmins Sims. And Conservation Stories is brought to you by Sarah, the Sandhill Area Research association and our friends from around Lubbock who are lending support. And today I have with me a good friend that I met through the Texas Agricultural Lifetime Leadership Program, Tall Sam Nesbitt. Sam, thanks for being here.
• 0:43
  Speaker B: Thanks for having me, Tillery. I'm excited to be here. Like Hillary said, my name is Sam Nesbitt. I'm a senior vice president for First United Bank. I do get to say that the views and opinions expressed here, which are those of my own and not of the bank or Plains Bank Corp. First United bank is proud to support agriculture. We are the third largest community bank in the West Texas and Panhandle region. We're one of the largest ag lenders in Texas as well as FSA lenders in Texas. We are a little over two and a half billion dollars in assets and serve through 23 banking centers in 20 West Texas communities. We have a rich history of serving the producers and businesses in West Texas for more than 117 years. And we are a true West Texas community bank and have no intentions of building any banks outside of the West Texas region. When we say that, we generally mean the 43 counties that make up the southern high plains of Texas, which I'm sure, as you all know on this podcast, is the largest cotton patch in the world. We currently farm about 2 1/2 million acres of farmland in this area with most of it being cotton.
• 1:51
  Speaker A: So you are in 20, 20 different. You have 20 different banks, and that means there's a whole lot of little towns. You have a whole lot of banks and a whole lot of little towns.
• 2:03
  Speaker B: Our model at First United has been to serve the communities where agriculture, agriculture is the predominant part of that, of those communities. So we have, we have banks. The bank started in Dimitri, and we also have banks across the southern High Plains that came through a recent Vista acquisition, which is where I actually got picked up by First United Bank. And those banks are in Haskell, in Plainview, Abernathy, of course we have them in Lubbock. There's Seminole Sea, Graves, Sudan, Earth, and Paducah, Childress and Wichita Falls. I'm sure that's not all of them, but these are predominantly small towns that really underserved in the banking community. And First United's model is to step up to that and make sure people still have access to their funds and banking needs, whether it be deposits or loans at the End of the day.
• 3:00
  Speaker A: Yeah. And having lived in a couple of small towns all my life, I know what it's like to. To not have a bank. Yeah. I mean, we've got. You have to have that.
• 3:11
  Speaker B: Having the drugstore in the bank or two major portion parts of a small community like that. And when one of the one or both of those things go way, it's really hard to continue in those communities when you have to go so far for basic needs.
• 3:25
  Speaker A: Yeah, it really is. And it seems like that's happening more and more. And I'm grateful that they were willing to make that purchase of that Vista Banks to make sure that we didn't lose that.
• 3:40
  Speaker B: Absolutely. And since the acquisition, which happened around March 1, I would say there's been a lot of revitalization already as far as staffing and breathing the life back into those community banks that have been there for so long. Really, at the end of the day, Vista bank had started in Rawls, which is one of the now first United locations. And we've just seen nothing but good things from all of these communities.
• 4:05
  Speaker A: That's amazing. So you're not from Lubbock. In fact, you're not even from Texas.
• 4:11
  Speaker B: I'm not. I'm a transplant Texan. I got here as fast as I could. I am from southern New Mexico.
• 4:15
  Speaker A: So you're close, but not from southern.
• 4:18
  Speaker B: New Mexico, in the Las Cruces region out of the Mesilla Valley. So agriculture looked very different to me growing up than what we saw today. We had many more vegetables and trees, things of that nature, onions, sometimes double and triple cropping in certain areas, depending on what you were doing, flood, irrigation, that sort of deal. So I moved up here back in 2011 and have worked in the banking industry ever since. I've been doing this for about 15 years and most of that time has been in the agricultural lending space.
• 4:49
  Speaker A: And I bet you 15 years you've seen a little bit of ups and downs.
• 4:54
  Speaker B: Ag economy is cyclical, like we all know, but we've definitely seen some major ups and downs. We had some major drought when we were first up in this area in the 11 through 15 region. Range of dates, I would say. And then we're seeing a lot of the same issues today. Water's fallen off in small communities. It's hard to irrigate. It's nearly impossible in some cases to turn a profit on what we're doing, even on a large scale. Because your listeners and you well know there's 98% of the farms in America are Still family farms, even when you're got 80,000 acres that you're farming for feed or whatnot.
• 5:28
  Speaker A: We released a couple of weeks back conversation between Doug and I on regarding our, our bankruptcy and what it was like to go through farm bankruptcy. And I felt like it was important for us to have that conversation because I saw so many people struggling. And when that was released, I got several calls just in that day, you know, people are, people are struggling. And so I wanted to, I wanted you to come on as my friend and somebody who I know really I'm not. I'm sure every banker cares about people, but I know that you have, you're deeply invested with your, your clients and you're making that struggling and making that walking this road with them.
• 6:12
  Speaker B: Absolutely. I mean, there's just no easy way to say that farming is tough right now. What we're seeing is deep losses instead of shallow losses that we've seen over the years. And really when we first talked about doing a podcast together, I was looking at more of the ag economy and kind of what leads up to things like bankruptcy. I think you guys story was, it's tough to share, but we need to hear those things and hear that there is life after bankruptcy and things can change and we can move forward with our lives even in the face of adversity. There. One of the things that is said in our industry is that everybody has a plan to stay in the game, but nobody has a plan to get out of the game. There's not an exit plan, emergency button that says, hey, how do I unwind this outside of going through bankruptcy? And in a lot of ways, it's where your local community banker, and there's lots of great community bankers in our industry to start with. They can help you unwind those things. And when things aren't going the way that they need to or equity is run out, then we definitely need to look at other options of how we're going to keep your operation going or liquidated or get you into a retirement situation. The average age of a farmer is also probably in the 65 to 68 range now. And so we are needing younger people to take on the responsibilities of the farm that we don't see. A lot of the kids, a lot of the farm kids that have gone through this have watched their parents struggle, have seen what's been going on. But I think all that adds to the stress of the current operator of what's going on. Especially if you're a legacy farmer back from, you know, you've Got a family farm that's been the family for 125 years. Well, Granddad farmed. It was probably started through the homesteading act out here in our neck of the woods. So granddad did it and then your dad did it and then you're doing it and everything. I think every challenge in those generations has been different, but nonetheless has been extremely hard to navigate at the end of the day, right now we're being equated a lot to the crisis of the 1980s, but we don't listen to the one with Damien as well. I followed him for a long time. I think he's a fantastic speaker. But if you're looking at farm financials, it's actually not as bad as the 1980s, but it's only on specific metrics that are put out there, things like debt to assets, where we're able to actually move forward with customer when we, when we are experiencing losses, we can, we can do that, but we can only do it for so long. And that's what we're really running into is that a lot of these guys are, they're just, they're. They're mortgage to the gill, they don't have anywhere else to go. And it really adds to a lot of the stress that's already on the farmer today.
• 8:48
  Speaker A: It's interesting you mentioned, you know, helping people think through an exit strategy. And I mean, I know for us it wasn't just one year. You woke up and it was over. That's what it was. It was just that death of a thousand cuts. I remember some conversations about, well, it'd be nice if you thought you could do something else, right, but you probably can't do something else.
• 9:08
  Speaker B: Well, and it's kind of boiling the frog too, is the way that we, we've seen it before is that it's never, it's usually not overnight. We are seeing it happen much faster, though generally it takes a couple of seasons of losses to where your equity that you've built up really isn't there anymore to use, which is the crutch that the bank is going to use to prop up the borrower in that situation. Today, really, we're seeing a couple of interesting and disheartening things as far as the farming operations go. And one way I put this, is basically the umbrella of income that we're going to see. So you're generally going to have the crop, if you make a crop, you're going to have the crop insurance, you're going to have government payments and equity dividends. From gins and whatnot for the year. Well, all of those have to work together in order to repay the massive amount of investment that goes into these farms to produce the commodities we all use every single day.
• 10:01
  Speaker A: So that's a, I think that that's a great place to, to touch on for just a minute for people that don't understand what it looks like. Maybe people have a business and you know, they know what it costs to operate that and they have, they've got income that's coming in that's offsetting those costs along the way. Where when you're farming, your income isn't really coming in along the way.
• 10:26
  Speaker B: We're really doing predominantly single pay notes because what you're looking at paid once a year after a crop has been done. And we're budgeting along the way to make sure that you're, you can make it to the end and that we can get there. So there's a lot of really good tools out there. There are some planning tools for our software goes, but also AgriLife Extension, which is an absolutely wonderful organization that in my opinion is just underutilized at the end of the day. I did, I have a couple of budgets that actually are, that are put together by region so it's not just blanketed across the state or Mississippi or anything like that. And really what they're, what those budgets are telling us from the AgriLife extension is that in our region, which is the South Plains District 2, the only way to make a profit in cotton is to have drip. And to make that drip you needed to have like a 1500 pound yield, which is a three bale yield, which is a pretty dang good yield out there. The other two scenarios which are predominant in our area are going to be dry land and pivot. Pivot irrigated. And really in both of those scenarios they should, I mean that, that's from the, I wouldn't say the government, but it's from the state officials that are going out and testing these and actually, actually producing that crop and keeping track of exactly what they spent on it. So if we're setting somebody up for failure, we don't want to do that. And we, we definitely are looking at more and more operations that are diversified. So how do we combat this? Right, so we diversify the operation and now we're running some cows. We've got some, a mix of different crops and things of that nature. But also in our area we're limited in our crop choices. We can't hop from corn back to cotton back into peanuts or something. Some, any of those natures. There's, there's certain growing regions that work well for that and don't work well for that at the same time. So sometimes we're, we're stuck doing what we need, what we have to do, which is produce cotton at the end of the day. And we're running into an oversupply of cotton versus. Versus the demand of cotton.
• 12:30
  Speaker A: Yes, right.
• 12:31
  Speaker B: Our low, our low point of, of output has been so low we're down. Yesterday I was looking at the boards and we were probably at 69 cents for December. The break evens on most of These budgets are a dollar seven or 95 cents. So we're not even getting close to where we need to be. And it's really, it's not a supply drip. Cotton is a funny, funny animal, I would say, because it does follow the laws of supply and demand. But it also, right now it's more of a demand driven equation. So unless demand changes, we're not going to see any changes in that pricing. And there's a couple of factors that are really signaling us to where the demand isn't changing. It's more staying the same. Part of that goes into the banking world of interest rates. So when interest rates are high, you see a couple of things. Number one, you see operating notes that are more expensive. If you were to borrow a million dollars, which is probably a normal operating note today, if you were to borrow a million dollars, you'd be paying $50,000 in interest over the year. If you, at 5%, if you change that to 10%, you're now paying $100,000 for that million dollars. Where did the magic extra $50,000 come from? Did you cut something? Did you out produce something? I mean, there's just so many angles that we have to look to do on this stuff. And really, as we scale bigger, there is a point of diminishing returns. And we're starting to see that because USDA puts out all sorts of reports on a monthly basis. One of those being gain reports. Right now they're estimating 10.1 million acres of cotton being produced. And we're two of that and that's still going to. They're also forecasting to have a surplus at the end of the day. So that tells us that we're overproducing for the market, which is going to reduce the price at the end of the day.
• 14:32
  Speaker C: Out here on the Texas plains, water is everything. And there's a resource that's as vital.
• 14:37
  Speaker A: As it is fragile.
• 14:38
  Speaker C: Our Playa Lakes. These lakes are nature's reservoir, catching rainwater to recharge our aquifer and provide lifelines for wildlife. But now they need our help. In collaboration with the Texas Pilla Lakes Conservation Initiative and the Cargill Global Water Challenge, Sarah has started the Our Legacy Is Tomorrow's Water initiative to inspire and work with landowners to restore and protect our Playa Lakes. Each playa we save helps secure a sustainable water future for the generations that will be coming after us. Whether it's improving soil health, restoring habitats, or recharging groundwater, we are committed to.
• 15:19
  Speaker A: To making a difference.
• 15:21
  Speaker C: Together, we can build a legacy that we can all be proud of. To learn how you can join in, visit the Playa Lakes Restoration Initiative page on the SARA website. Let's keep Texas water flowing strong for the future. Visit sara-conservation.com.
• 15:44
  Speaker A: Yeah, and that's one of the things, you know, that you mentioned Damian while ago, that he's the first person I ever heard just openly talking talk about the fact that we are overproducing because you hear so much of the opposite, like we've got to increase, we've got to increase, we've got to increase, you know, and I mean I'm sure it's. That's not always the case with every.
• 16:04
  Speaker B: It's commodity, commodity, I would say. But I also work the way the 1980s was shaped up really was driven by the 1970s. So 1970s it was plant, road, plant, fence to fence, row to row, everything that you can and ended up in overproduction and lower commodity prices. And we thought the good times would never end. But as you go into the 1980s and kind of focusing on more my expertise, which would be the financial markets there. Interest rates in the 80s did rise very high. The highest Wall Street Journal prime on record is December of 1989. It was 21.5%. But those numbers though, grew gradually over time. One of the things that we're seeing in the changes, interest rate went up very fast, very sharply and it stayed there. It was very sticky when everybody thought, oh, this might be a temporary thing or something of that nature. And it hasn't been so combating interest rates. And really where the Fed thinks that the economy needs to be is important. I mean, in our country we run off of monetary and fiscal policy, right? So monetary policy is coming from the Fed, fiscal is coming from the government. The monetary guys are basically carrying out the actions of what Congress is telling them to do. And as of today, you know, we don't our Inflation rate is going down, but it's not going down fast enough. And employment is better than they expected to in many cases. So those are signals for a rate cut, which we're hoping to see in the near future. But we don't control all of that. And there's. There's a lot of things that are out of our control that really add to the stress of what we're doing.
• 17:47
  Speaker A: Yeah. And, you know, you mentioned that million dollars that, that is, you know, the, the burden that farmers are carrying. And just to break it down very, you gotta borrow this money in order to pay all of your expenses all throughout the year. And if you don't have a job off the farm, that's gonna include your living expenses. And your prayer is that at the end of the season you've made enough money to pay off that note and the interest and you have a little bit left.
• 18:21
  Speaker B: And that's the ideal world right there. A lot of the ways that we build our lines though, as well, when they include family living, if you pay off that line, then you earn all of equity that you needed to in the year, because everything's included in it. I think the danger is when we're seeking financing, total financing in different places, right. You've got the John Deere house, you've got the, you have the chemicals and the seed. And a lot of those guys are going to offer you a 0% financing until it's due at the end of the year. And we budgeted that into our budget. And so as you go through the year, you end up coming up short because you have this extra bill that's hanging out there. And they're sizable, Right. I mean, these are not, this is not $20,000 we're talking about. We're talking about seed in this type. Type of person that could be 150, $250,000. And most people just don't have that laying around that we could say, oh, limited, just write you a check and be done with them.
• 19:17
  Speaker A: Yeah, that's. It's in. And that's where you get into that, who you wind up owing at the end of the day. And it's. It's a huge struggle. And I think that that's where, you know, it begins to impact outside just the bank.
• 19:31
  Speaker B: It does. Especially in West Texas and a lot of these communities. AG is the driver for this. I mean, we may not be the largest industry on paper there, especially in Lubbock. You've got medical care, you've got shopping, some other things, retail, retail stores, but if the farmers aren't there and they aren't injecting this kind of capital into those communities, there's nobody to go shopping at those stores and there's nobody to buy those products or to get that car fixed or to buy a brand new car. But I think all that to be said too is it builds into this farm level stress of what people are seeing every day. And we're seeing lower repayment of loans and restructuring of debt today, which basically is taking those notes that weren't paid back 100%, restructuring it and stretching it over a number of years. Well, great. As long as we have equity to do it, it's still cash flows and everything's moving in the right direction. One of the things that I talk about in my office a lot is we really have three buckets of customers. You have A, B and C. Right. So in an A bucket of customer, prior to everything that's been going on, which I do call this a crisis. So during this crisis, you had customers that had money in the bank. They weren't borrowing anything, they were farming out of cash. And they were, I would call them more of a legacy type farmer that had their land paid for and they were ready to go. And then you had the B group of customers which were borrowing some more that usually using the line, more reliance on the line than say the A customer. But they still had quite a bit of room of equity to fall back on and be able to. And then you had the C group of customers and those are guys and guys and gals because there's men and women in this industry and they had borrowed every penny that they could up and prior to this year and they had zero room for hiccup. Well, when we had what happened in 23 and 24, we did have another hiccup. And so when that happens, everything shifts over. So that C group is now with FSA or alternative lender or something of that nature. And they're struggling to keep it together, period, to stay in business. And then the C group is now filled with several of the B group folks and the A group folks are now in that B group. And that A group is almost. It exists, I'm not saying it doesn't, but it's fewer and fewer between that you would have seen along the way. So that stress and feeling like you've got your back against the wall. I mean, we're dealing with high input costs and low output costs. We had inflationary actions that happened especially in fertilizer and fuel things of that nature and it's just gotten more expensive. Five years ago we probably could have got out for 60 cent cotton and we wouldn't have made a ton, but we would have actually paid everything off and moved forward. Today that matrix just doesn't work anymore.
• 22:15
  Speaker A: That's just five years ago with just five years ago. And that's the thing that I've always seen is like when the cost of something goes up, your input, it doesn't go back down and it doesn't matter if, if the cost of your commodity goes up, that is going to go back down.
• 22:36
  Speaker B: That's exactly what happened as well.
• 22:38
  Speaker A: Yeah. And so when you're talking about what this crisis is, the two hiccup, the hiccups from the last couple of years, what are those things?
• 22:46
  Speaker B: Well, part of this comes into the uncertainty that we're facing today. So the, between the farm bill and the safety net that what we're seeing is the hiccups that we had was that a producer that actually produced a crop and finished a crop came back worse than somebody who used crop insurance. In my opinion, crop insurance is the cornerstone of American agriculture. It's part of the farm bill. It's one of their titles and it is absolutely crucial to what we do right now. We are operating under a 2018 farm bill and that is pre Covid, pre inflation, pre everything that we're seeing today. So prices aren't reflective of what's in the farm bill and that's what we're still using. It's been extended twice now, which puts us under a seven year farm bill. And what that does is on, on the, on my side of the table and on their side of the table. We lack certainty, we lack understanding what we can and can't do and be protected. At the end of the day. There's been a couple of ad hoc programs that go out there, there. It's not our first choice to go to ad hoc because that's basically going back and asking, hey, we didn't foresee this coming. Can we get a band aid to fix this? Well, we don't want band aids. We want meaningful change that is in the farm bill that says when this happens, something else is going to happen. Farm bills are highly politicized. They're done every five years. But they are, they, they include nutrition, they include Title 1 commodities, crop insurance, all sorts of different things that are crucial to the agricultural world and what's going on. Nutrition alone accounts for 80% of the farm bill. So the other 20% includes all of.
• 24:27
  Speaker A: Crop Insurance, all of everything that's going.
• 24:30
  Speaker B: To the farmer, everything going to the farmer is a small portion of the farm bill to start with. And for us to not have that certainty and know where our price decks are and know what it looks like when we do have a disaster, it's tough, it's hard to plan for. We now on our side, we rarely pencil in government payments because that is a, a wild card in our opinion. It's never going to be the same. It may be sporadic, it may happen, you know, they may announce something because so much of it's political, totally political. And so as, as we go through that process, we're hoping to get a meaningful, meaningful farm bill that does have strength and safety net and additions to crop insurance as well. Because without crop insurance, nobody could do this. Crop insurance is paid, 65% of the premium is paid through the farm bill. If, if we were to have to pay 100% of that, really any more than what we are today, nobody could afford to do it.
• 25:26
  Speaker A: So it's my understanding that we are now down to two insurance carriers in our region because we've had so many losses that people just cannot continue to carry that load code.
• 25:42
  Speaker B: It's just like house insurance. Whenever, when you're getting hailed on your house and they're replacing too many roofs and you have a high risk area of what's going on, the insurance companies and the actuarials show that, hey, this isn't a good bet for us anymore and they do pull out. There aren't many crop insurance companies to start with. And so for having those guys, pulling out of our area is a very drastic, hard part for choice on that piece of it. There's not many choices out there, there and in our area as well. Of course it's drought, this is probably number one. But then we also have, you know, windstorms, things of that nature getting hailed out.
• 26:19
  Speaker A: Right.
• 26:20
  Speaker B: There's a number of different things that even if you do get a stand up on the cotton side, you have a high risk of losing it. And the other part is you also have a high risk of growing a crop that's not worth much. Right. So if we have our. One of the parts of 24 is everybody got a stand, we were super excited. And everybody got a plant and rain. Everybody's got a stand and you've got it in. Part of the rules of farming is you have to take care of that in their normal farming practices.
• 26:46
  Speaker A: You put the money into it.
• 26:47
  Speaker B: You have to put the money into it. You can't you can't cheat the system. You can't skimp on anything. You have got to go in there and treat it right and do what you're supposed to do. And we do that. But as we go through that, you have to spend the money. And then at the, at the end of the day in September, which It's usually around September 9, it's 115 days after the day you plant to it. So there's a little bit of a window there. But when that happens, you can fail it out on the bull count, but you're still gambling. And you may not, you may still not get what you need out of the insurance to be rectified and to be close to made whole again.
• 27:22
  Speaker A: Yeah, you may not even get enough to cover what you put in. So. But there is. I mean, if it hadn't been for insurance, I think we would have lost a lot more farmers. Like, I mean, we'd be worse now. But has it also kept us doing the same thing over and over again?
• 27:41
  Speaker B: I don't know that it's kept. That's what keeps us doing the same thing over and over again. I believe that it is the. It would be the water restrictions, it would be landlords. It would be the way that the land is used is not driven by insurance or an insurance payout. I believe that it's protected by an insurance and an insurance. Insurance part of that. But really you're only looking between, I mean, 65 and 75% of what you're putting in being covered. And that's only the crop. It doesn't include your fertilizers or anything of that nature that stay with the lands.
• 28:16
  Speaker A: I'm just thinking about how difficult it may be for people who don't, you know, don't have a background in farming to understand some of the things that we're talking about. I just feel like I remember when I had somebody trying to teach me how to play spades and I was like, I don't even understand what a trump intuces. Like. Like, you're just talking these words like, I know what you're talking about. So I'm hoping that people can, you know, that don't. Because I want people to understand that it is extremely difficult. It is. It is a, an occupation where the risk are so extreme and the costs are so high, you know, so I can't, you know, I always try to think of like, is there something else that can equate to the, to farming as far as the, the amount that it costs to, to do this job. And, and then the enormous risk every year that you take.
• 29:15
  Speaker B: If I were to, to equate anything close to farming it would be mining. But mining, you have an idea of the reserve that you're going after.
• 29:24
  Speaker A: Right.
• 29:24
  Speaker B: And so you can kind of. But yes, you're talking billions of dollars, but you know that there's multiple billions of dollars of whatever you're mining down in there. I think the hard part on farming is that it's a brand new plant every year, especially in our neck of the woods. It's not talking tree nut, something different. Okay, we can adjust that conversation, but for what we're doing, we're growing a brand new plant every single year and hoping that we get favorable growing conditions to pass a myriad of tests that are, that are performed on this. We well know and our listeners do as well. But all cotton goes through the classing office and the classing office grades it based on a myriad of different things from color to strength to micronair to staple to trash to color. I mean there's just a number of things. I don't remember exactly how many there are, but there's a bunch of. And that can, can either give you a bonus on your cotton for being of high quality, but it can very, very much as easily give you a ding for your quality of cotton. And it all depends on some of the stuff you can't see from the naked eye. So micronair would be equated to the thickness of a straw. If you're looking down it, you can't see that unless you have the equipment to test that. And we have to go on what they say of saying, hey, this, this is what it is at the end of the day, but it really is demand driven. And what we're looking at and the disaster gap that we're seeing too. So from 23 and 24 we did get a payment through the American Relief act that was very helpful. But prior to that we hadn't got any sort of ad hoc program payments for the 23 or 24 crop year. In some of the readings that I've seen in those two years, there's approximately $40 billion of losses that are sitting out there that are being propped up by the equity of the farmer themselves and the cash of the banks. And so unless we can get some meaningful help that goes towards those types of numbers, then it's going to be hard for any, anybody to survive in this type of environment.
• 31:26
  Speaker A: And I think it's interesting too because we're at a Time where people don't like the idea of a corporate farm. And even though they misunderstand what that means and that that's really not what's happening, that's what could happen now. You know, like, if you think about, let's just say a third of your customers are there, they all go out. Now, they're not all going to own their land, but if you just put, for the sake of the conversation, they all own their land. And who is looking at buying land? It's investors, you know.
• 31:57
  Speaker B: Well, they're not making any more land is what I will say. And really, as you talk about corporate farms, it's not a touchy subject, in my opinion. I think it's just. There's a lot of misinformation, just misinformation. And that's where I think it really gets some folks in trouble. If you do look at it, we say 98% are family farms. Well, they are family farms, but we also have corporations and LLCs and limited liability partnerships. And just like every other industry, a lot of us are sole proprietors, creditors. But once you get to a certain size and your balance sheet is sizable and you can be sued for something by anybody, for anything these days, right. Let's be real. We use corporations and LLCs to, to protect those assets.
• 32:44
  Speaker A: Right?
• 32:44
  Speaker B: And so that's just like any other business. Just like any other business. And a trust would do the same thing. There are many families that operate out of trust because grandparents are the way they wanted to do it. I've also seen it where, you know, the parents passed away and there were four kids, and so they made an LLC and 25% owner. If you don't want to play nice with your brother or sister in the sandbox and go get a loan on your land, buy them out and say, we'll see you later, which is. It does happen. We've seen it more than once.
• 33:11
  Speaker A: And that's happening more and more. I think, as you know, more land ownership is away from the farm. It's happening more often.
• 33:21
  Speaker B: It really is. That was one of the big differences I saw from where I grew up up versus where I ended up laying my stake. And having my profession was where I was from. Everybody who was a farmer lived on the farm. And one of the things about our area is it's treated more where I live elsewhere off the farm. And I go to the farm as a job, like as a place of employment. And so that was a big paradigm shift for me because I hadn't necessarily.
• 33:47
  Speaker A: Seen a lot of that, that really happened. My generation made that change, change that shift. And I think a lot of it had to do with what they wanted for their kids, you know, and, you know, you, you maybe you marry somebody that grew up in more urban area and you come to some type of, you know, we're going to figure out how we're going to have a balance between these two lifestyles.
• 34:11
  Speaker B: Exactly. I think we saw it a lot with kids that grew up on the farm, they left the farm. And then whether guy or gal, and that also, again, that's an equal statement there. They married a Dallasite or they married somebody from Houston. Well, they may be passed by a farm, but they don't want to go live on the farm. And even if you wanted to go back and farm, then, yeah, you probably could. But that's, that's a tough lifestyle change and that's a big buy in from somebody who's been used to big city living for a long time.
• 34:39
  Speaker A: Well, I remember the first week that we lived in Lubbock. I called my husband, said, there's a reason people moved to town because it's easier than living in the country.
• 34:47
  Speaker B: It is. The grocery store is easier. Child care is different. I mean, there's so many different things that go into that. And it's really been a shift that's not been a bad one. But also being in tune with what's going on with the farm is very important. And so if you do live 30 or 45 minutes from your farm, are you going there every day? Are you going there every week? Do you have a hand out there? What does that look like, like at the end of the day?
• 35:13
  Speaker A: But, you know, it's a, it's, it's interesting because it's a commute, just like you would commute if you, you know, lived in Dallas or whatever. And I do remember when all of you know, it was kind of like this mass migration, you know, really kind of to Lubbock. I remember seeing that. And, and you know, you, you understand why I wonder too, if part of it is that, that so many in my generation were really able to go to college. Like a vast majority of those kids on the farm were able to go somewhere and get an education, even if they planned on coming back to the farm. And then when they did, they saw the advantages too. It's just easier.
• 35:57
  Speaker B: It is a lot easier. And one thing I'll note on this piece as well is living on the farm isolated. You can get, you can lend to depression and some other things, but when you're out in the middle of what some would consider the middle of nowhere, and you're watching the farm every day, I always say to be in tune with the farm, but it's also pretty depressing to watch your hard work wither up and die in front of you as well.
• 36:20
  Speaker A: It is. And one benefit maybe for people that are going through it now, that are living that kind of separate life, is that maybe their kids aren't as impacted. I know it was super impactful on our kids. I still see the impact of that, especially the belief that if you work hard, it equals success. And when you are watching every day, a dad that gets up and leaves before the sun is up and you go to sleep and he still hasn't come home day after day after day, and then you lose everything. It's like, it really takes a long time for that. That to impact, you know, because what is it? What do they say? For every negative thing, you need, like, three positive things. You know what I mean? It's like, so it's like really trying to overcome that sense of it's just a despair or despondency, you know, it really is.
• 37:18
  Speaker B: And I also see it a lot with the single man. You know, basically, you've got, you know, your kids have moved off, wife's gone off or whatever happened, like, there, and you're out there alone. And I think we see that quite a bit. And those are the ones that we definitely try to check in on and say, you know, is everything going okay? What's going on? That sort of stuff. But I think you kind of little note here, and I said the same thing. I said, you know, the mentality is to suck it up and get over it. I mean, that. That's. That's basically what we're taught to do as men, is to suck. You put on your boots every day, you go out and do what you're supposed to do, right, and everything will be fine at the end of the day. And if I keep doing that, that no matter what, everything's gonna be fine. And I think today that it's changed a little bit because we do need the team of people around us, having a good banker, good attorneys, good CPAs, things of that nature that can help you navigate these waters. Because setting up an LLC may be the best or a trust may be the best thing for that older farmer to do who's living on the field alone and is out there without. He hasn't talked to anybody in a week and a half.
• 38:38
  Speaker C: Today's episode is brought to you by Evan Stone with Clear Rock Farm and Ranch, part of the Clear Rock Realty Group in Lubbock, Texas. Evan understands west Texas land, agriculture and what it takes to buy and sell farms and ranches in our unique region. If you're ready to make your next move, trust someone who knows the lay of the land. Visit Evan at clearrockrealty.com serving Lubbock and the surrounding communities. Clear Rock Farms and Ranch, your partner on the plains.
• 39:11
  Speaker A: Yeah, and those folks are, they're out there, you know, and I know I have a friend that's a rural mail carrier and they continue to push them to, you know, only spend X amount of seconds at, you know, delivery and you can't take anything to the door. And she says, I am the only person that does a, well checkup on these people. Like it is way more than carrying the mail, which I didn't even hadn't thought about this conversation going this direction. But our rural communities, you know, we have someone here in Lubbock that's doing some work on our rural, rural areas and she is a very well known and very successful. She's known for ending the world, the global AIDS epidemic. So she's an epidemiologist and she was traveling during COVID through the rural communities and said this is as bad as any third world country that I've been to. And she's like, I've never seen anything this, like this is really bad, bad. So it was through her advocacy with people that would donate the money to, to invest in this work of her going in and looking at these communities and what can we do to help, you know, and, and I remember hearing, hearing her say that and just the impact it had on me to realize we are, we are as bad as it feels like we are. I mean like we're in as bad a shape and, and I think it's hard for us as Americans who we've always seen ourselves as better off than and we are in so many ways. It's hard to embrace that there are places other than where we are right now. There's better things about living in those places than here.
• 40:56
  Speaker B: We've seen quite a bit of revitalization of some towns as well. I would say there has been some federal dollars that went into Main street revitalizations, things of that nature. And there's several west Texas communities that have, have benefited from that. Our neck of the woods was, is not all that old, I will say. And a lot of it came through was developed because of the railroad and so we have a whole bunch of towns that are 15 to 20 miles apart.
• 41:23
  Speaker A: And that's right.
• 41:25
  Speaker B: And the reason for that was because that's about as far as the train could go before it needed more water to go further. Right?
• 41:30
  Speaker A: Yes.
• 41:31
  Speaker B: So that's. So having all of those small little communities, not all of them were going to survive, period, at the end of the day. But what we've seen is more consolidation than I think anybody would have liked out of that. And so as we go through these things, having the revitalization of these small towns and people that want to live a true country lifestyle of farming and living off the land and carrying on a tradition that's been around in their family for hundreds of years. We have several century farms in our neck of the woods that they came and they never left. I think we've done a good job with our area. We've always done what we were told this was. Our neck of the woods was put together through the New Deal and whatnot. And they basically said, go, go farm it. Go, go do what you need to do. And we busted out all the sod and we did what we need. We did what they asked us to do, and it contributed to the dust bowl of the world and us going through all these different things. And now we're regenerating it. We're. We're using more regenerative practices, I would say, say that I think are good for the soil and the work of Sarah as well, with the replenishing of the groundwater. Because, I mean, that is the lifeblood of what we're doing. And we need the water in order to have the town, and we need the town in order to have somebody to give water to.
• 42:47
  Speaker A: That's interesting that you brought that up, because that's a conversation I have had with Doug before about being in, you know, some other. Other places, other states and going, why are there small towns? They don't seem to be, you know, drying up and blowing away like ours are. And that was his point, was they're not as close as ours are. And I can remember even when we moved to Earth, like, I couldn't go to one place to do everything. I had to go here to go to the bank. I had to go here to go to the grocery store. I had to go here to go to the doctor. I went here to go to church. You know what I mean? So it's like, you know, there was never. It wasn't that there was one central community that was benefiting from all of that economic. It Was like all of it was spread across all of these communities, you know, And I do wonder, like, it'll be like, okay, who's. What's going to be. Who's going to be left? What's going to be left? But, you know, as they get smaller and smaller, what does get to be left are the people who can't leave, you know, or those are places where now there's housing that people can't afford. They can go there and they can live and now. But they're in a food desert, you know, so there's. There's a lot of. There's. There are things I do see. Like, I see when I go to Brownfield, you know, the benefits that they've had from. I was there at the Armory and, you know, the city. And then one of our local vineyards has gone in and wineries and fixed that. And it's. It's fabulous. It's. It's an amazing place.
• 44:16
  Speaker B: That would be a good example of a downtown that was revitalized at the end of the day. And it's amazing what happens when you do have. We have an actual grocery store. You know, we've got dollar generals and we've got.
• 44:31
  Speaker A: Yeah, dollar.
• 44:32
  Speaker B: Yeah, you name the dollar store. I don't know them all, but it's kind of. It's disheartening to me when the only thing in that town is a dollar.
• 44:41
  Speaker A: General store scourge of the south.
• 44:43
  Speaker B: It's. I mean, you're talking about a $30 billion industry. And they're not into the business. Big cities. They're all in these small communities because that's where they're making their money. Because there's no options.
• 44:52
  Speaker A: Yeah. And I've. I have seen some good things. Like, I know I was through Sudan the other day, and their little. What? They're all subs. They have like a. They have a little grocery. I mean, like a good legit grocery section, you know, not stuff that's like a can of beans that's got dust on it because it's been there for five years, you know, it's like legit, you know, and so I think that people are creative and can come up with ideas, but it is a hard time. And I hope that people can, you know, not for this to be like this just complete negative, but like a reality check for people, you know, that are maybe completely separate from anybody that is making their living on the farm.
• 45:35
  Speaker B: I think it all goes back to planning and having a plan when you sit down to farm or any other business. I think it's extremely important to have a business plan and have a plan of what you going to do and what that looks like to stay in or to get out at the end of the day. I think moving forward, these crises will further consolidate farms. I think that's a given. I don't believe that we've changed the amount of farmland that we have in our area, but we have definitely changed the number of farmers that are in our area and the average farm size is getting larger and they're having to find other ways other than only farming in order to stay in the game and do what they love.
• 46:16
  Speaker A: Yeah, well, I appreciate what you're doing and I think that is one thing that is important and I feel like it's something that maybe has changed since we went through bankruptcy is they just didn't seem like there was anybody who knew how to help us or what to tell us, you know. So I think finding, finding. Finding someone that you trust that you know has your best interest at heart is so important. And you have to know for sure that that's, that's what you have at the end of the day, you know, is somebody that says we, we succeed when you succeed, and if you can't succeed, we're going to figure out how to help you get out with the least amount of damage. That's the thing. And I think for us it was like we never had an escape plan. I mean, and you just could never figure out how to. How do you get past the tax burden and losing all these things? This, the complications of trying to get out are extreme.
• 47:18
  Speaker B: And that's the team of people I like to talk about. It's not one person that you put all your eggs in one basket with those sorts of situations. But if you don't have a team of people around you that really is trying to help you get out of something or move forward. It's important to listen, it's important to sometimes say, maybe my plan wasn't the best plan and now these are all my business decisions and somebody's willing to help me get out of it. Well, take the help to get what you need because in our situations as well, you're dealing with high stakes, high emotions and big dollars of what you're dealing with. And so if your goal is to get out and sail into the sun mindset, then I say go for it. I wish you the best of luck. Let me help you do this, and let's do this as painlessly as possible because I mean, you go into a bankruptcy situation, you're going to end up doing the same thing that we're talking about. It's just going to cost you 25 to 30% more.
• 48:14
  Speaker A: Yeah. And, you know, if you haven't listened to the podcast where Doug and I talk about going through bankruptcy, I think it's important to remember too that like, they're are, there are people in their other industries that are looking for farmers. They don't know they're looking for farmers, but they're looking for them because they have the work ethic and they have that ability to problem solve that is just, it's common among all farmers. You're, everybody's going to have that. You know, it is a given to me. You know, you wouldn't be doing what you're doing if you weren't able to do those things. And so there people are looking and, and, and note to industry, if you're looking for good people, there may be some folks and it may be even that you don't even know that that farmer that, you know, if you go to them and say, hey, if something ever happens, I'd sure love to have you work for me. You could be giving them, you know, what they need. The assurance that they need that if they go ahead and move in a different direction, they're going to be okay.
• 49:11
  Speaker B: That's right. And I think that's where the plan comes in. And when you're looking at, you know, the, the debt and retiring debt, how do we do that? Do we hold a farm sale? Do we put our land with a realtor? Like, what, what, what do we do on that? On that front, I think is important. But I also think that as you get older, one of the things that farming lacks as well is succession planning. And so going in and saying, okay, at the end of this, when I'm going to be, I'm 60 average age 65, 68. Something of that nature. So I want to go into retirement. I don't have a kid that wants to take this over. I don't really want to cash lease it. So what, what does this look like for you over the next 10, 15 years of the rest of your life?
• 49:51
  Speaker A: Right. And the end, frankly, realtors helped my parents do that. Evan Stone, recently. So thanks for coming. It's. I don't want it to seem discouraging, but I'm also, let's be honest about, you know, where we are and so that other people can be aware of what, you know, somebody that maybe is living next door to them and love Lubbock. And they know that they farm, but they don't have any idea what's, what's really happening, you know? So I hope that it helps those of us that live in urban areas to remember to be checking on our, our neighbors that are in agriculture.
• 50:21
  Speaker B: That's right. We all live in the same fishbowl, as one of my friends likes to say. And I will say that the urban folks can't exist without the rural folks, and vice versa is the same thing.
• 50:31
  Speaker A: Yes.
• 50:31
  Speaker B: And I think that there has been too much of a rift, in my opinion, between that stigma and I think if we can do anything to break those barriers down and understand that we're all people just trying to do the best that we can. I think that farming is the most noble, noble profession, mainly because they are feeding and clothing people they don't know. They're sending it around the world. We're doing, we're carrying out our task in order that everybody else can do theirs as well. So I do see it as a cornerstone of a, of a community and a society. And I always try to remember to thank a farmer, but not only the farmer, but his wife who cooked the meals and the kids before dawn, before school and whatnot. And there's. It's a. It takes a group effort. And so thank you for having me. I'm glad to be here.
• 51:20
  Speaker A: Well, thank you. And we appreciate First United bank letting you come and speak your own opinions.
• 51:27
  Speaker B: Sounds good to me.
• 51:31
  Speaker A: So, friends, thanks for joining us on this edition of Conservation Stories. And I hope that you have found this to be helpful and educational, and if you have, would you share it with a friend? That's a great way for us to get our message across and to help the people that we really love and want to serve. We will see you again on another episode.