Latest / AG Bull / AG Squawk with Davis Michaelsen | Scott Sartor | CropTell

Transcript

AG Squawk with Davis Michaelsen | Scott Sartor | CropTell · AG Bull

0:10
SPEAKER_00: I saw a Christmas commercial on TV this noon.
0:15
SPEAKER_00: It'll soon be Hallmark Christmas movie season, I guess.
0:19
SPEAKER_00: And why not?
0:20
SPEAKER_00: I mean, harvest is over halfway done, well over halfway done in some parts of the country.
0:26
SPEAKER_00: So that means 2027 marches ever closer, and it feels like a great time to start talking about cost of production and to begin preparations for the next crop year.
0:48
SPEAKER_00: From behind the big blue, bodaceous microphone of Ag Bull, your pal Davis Michelson, so pleased to have you along with us for Ag Squawk in the afternoon.
0:58
SPEAKER_00: It's October 20.
0:59
SPEAKER_00: Already the Christmas commercials are on the TV.
1:02
SPEAKER_00: It seems a little early, but what the heck?
1:05
SPEAKER_00: It's a good reminder for us to start thinking, hey, you know what?
1:08
SPEAKER_00: Guess what?
1:08
SPEAKER_00: 2027's gonna be here.
1:10
SPEAKER_00: There are decisions that need to be made, preparations that need to be set in place.
1:15
SPEAKER_00: And I'm one of those uh sooner the better kind of guys.
1:19
SPEAKER_00: And I'm excited about today's conversation because I'm hoping that we can spur some conversation, maybe give some direction, a little bit of help.
1:26
SPEAKER_00: If nothing else, get the old noggin percolating on 2027.
1:31
SPEAKER_00: My guest today, a new uh a new face here on AgSquawk, Scott Sartor from Croptel.
1:38
SPEAKER_00: We're we're gonna get to know him and his company.
1:41
SPEAKER_00: And I want to talk about Trump's diesel price, uh fuel relief announcement.
1:45
SPEAKER_00: Did you catch this out of Kansas at a campaign stop?
1:48
SPEAKER_00: And like I mentioned, he's already talking about 2027, is Mr.
1:51
SPEAKER_00: Sartor from Croptel.
1:53
SPEAKER_00: So uh so it should be good.
1:54
SPEAKER_00: I'm looking forward to it.
1:56
SPEAKER_00: Hopefully, we get ourselves set and at least pointed in the right direction as we begin to uh to wrap up harvest and head in through.
2:05
SPEAKER_00: I mean, we're deep into pumpkin spice season already, but we're headed toward Christmas gang, and right after that is New Year's, and then pretty soon it's gonna be spring again.
2:13
SPEAKER_00: So we uh we do want to make the best laid plans to help us start out next year on the right foot.
2:20
SPEAKER_00: We hope to do that today.
2:22
SPEAKER_00: Let me uh direct you to AgBull.com.
2:26
SPEAKER_00: You can uh go to Agbull.com to check out our premium services or call 855-737 Farm.
2:33
SPEAKER_00: And uh by the way, I I got something in the uh in the mail just the other day.
2:37
SPEAKER_00: I got my very own AgBull Media Bluetooth speaker.
2:42
SPEAKER_00: We're happy to send that along your way just as a little thank you for a one-year subscription.
2:46
SPEAKER_00: I thought maybe a little uh demonstration would be in order.
2:48
SPEAKER_00: Let's see if we can get her to go.
2:50
SPEAKER_00: There she goes.
3:08
SPEAKER_00: Well, anyway, as much as I love that song, uh, it sounds even better coming through my Ag Bull Media Bluetooth speaker here.
3:16
SPEAKER_00: The idea is put it in your toolbox, clip it on your belt, take it with you wherever you want to go for a one-year subscription, 250 big ones.
3:24
SPEAKER_00: That's uh two months for free, actually.
3:26
SPEAKER_00: And we'll uh we'll send you one of these dandy speakers just as a thank you because we appreciate it.
3:30
SPEAKER_00: We really do.
3:31
SPEAKER_00: Or, you know, take it slow.
3:33
SPEAKER_00: Take it slow.
3:33
SPEAKER_00: 25 bucks a month for a monthly subscription.
3:36
SPEAKER_00: Give us a try.
3:37
SPEAKER_00: Just dip your toe in.
3:38
SPEAKER_00: Check it out.
3:38
SPEAKER_00: I think uh I think you'll be pleased.
3:40
SPEAKER_00: And along those lines, a quick shout-out to Jed Sidwell.
3:43
SPEAKER_00: Uh he and and Mike Sands, their Fat Tuesday show.
3:47
SPEAKER_00: They do this every week, but this week is particularly good.
3:50
SPEAKER_00: I can't I can't really talk about it because it's for premium subscribers.
3:55
SPEAKER_00: Other than I would just urge you, uh subscribers, go check out the Fat Tuesday video with with Mike Sands and Jed Sidwell.
4:02
SPEAKER_00: Okay, let's get into it.
4:03
SPEAKER_00: Pardon me.
4:05
SPEAKER_00: Let's go to a USDA daily export sale.
4:08
SPEAKER_00: The daily sales keep rolling in.
4:10
SPEAKER_00: 612,000 metric tons of soybeans to China for 2627.
4:16
SPEAKER_00: And over to the tale of the ticker.
4:19
SPEAKER_00: Corn and beans not really moving in the direction we'd like to see them.
4:23
SPEAKER_00: However, as we talked to uh Bubba yesterday, hope you caught that show.
4:27
SPEAKER_00: Check it out if you haven't.
4:28
SPEAKER_00: You know, seasonally, what are you gonna do?
4:30
SPEAKER_00: Here we'll just we're just gonna wait.
4:31
SPEAKER_00: We're gonna weather the storm and we're gonna look for opportunities here.
4:35
SPEAKER_00: Corn and soybeans and wheat futures glanced toward the upside briefly today, very briefly, at the open this morning and headed lower.
4:44
SPEAKER_00: Cattle futures moved mildly higher and nearby lean hogs joined in.
4:49
SPEAKER_00: Although deferred lean hog contracts were under light selling pressure and early trade.
4:53
SPEAKER_00: Rounding into the lunch hour, corn and soybeans were around a nickel lower.
4:58
SPEAKER_00: Winter wheat futures seven to eleven cents lower, with Chicago leading declines.
5:02
SPEAKER_00: Meanwhile, cattle futures built on early gains, and lean hogs remained mixed with those near buys higher.
5:10
SPEAKER_00: Let's go over to the uh closes here.
5:12
SPEAKER_00: Now I've got December corn ended up down a nickel, a nickel lower on the day for the December corn contract, down uh 462.
5:22
SPEAKER_00: November soybeans down five and a quarter, 1248 and one quarter.
5:26
SPEAKER_00: Soybean meal was lower, but oil was higher on the day, just slightly so on the oil.
5:32
SPEAKER_00: And then over to the winter wheats, the Chicago December down 12, 643 and a quarter.
5:38
SPEAKER_00: KC December wheat down eight and one half cents, six ninety-one.
5:44
SPEAKER_00: Uh Weissmeyer had some interesting thoughts earlier on.
5:47
SPEAKER_00: He was watching for, he says the first issue is whether corn can regain 470 after trading below 465 overnight.
5:55
SPEAKER_00: It was not to be.
5:56
SPEAKER_00: He says continued weakness could trigger additional speculative liquidation, particularly given the substantial managed money long position remaining after last week's reduction.
6:08
SPEAKER_00: But we actually wound up closing well below that 465 that it that he was watching, nowhere near 470.
6:14
SPEAKER_00: So we're gonna have to wait.
6:16
SPEAKER_00: We we may have to dip down to the next level of support before we can finally bounce.
6:22
SPEAKER_00: We'll just have to have to wait and see on the corns.
6:25
SPEAKER_00: Let's let's get over to the livestocks here at settlement.
6:28
SPEAKER_00: I've got the November feeder cattle futures up two dollars thirty-seven and one half, three forty-six thirty.
6:35
SPEAKER_00: Pretty decent day in the feeder cattle.
6:37
SPEAKER_00: The fats had a great day.
6:39
SPEAKER_00: The December contract up two dollars fifteen, two thirty, seventeen and one half at settlement.
6:46
SPEAKER_00: And then the Lean Hogs did end the day mixed.
6:49
SPEAKER_00: However, the April contract managed to eke upward toward unchanged.
6:54
SPEAKER_00: That was at 73.85.
6:56
SPEAKER_00: The uh December contract, which I've got on your screen here, I believe.
6:59
SPEAKER_00: Yes, 67.15 at settlement.
7:02
SPEAKER_00: That's up 80 cents on the day.
7:06
SPEAKER_00: All right, before I bring Scott in, I just want to put this out there because there was a it was an announcement.
7:12
SPEAKER_00: I mentioned it earlier on in the program this morning or this afternoon already, but uh USDA announced$8 billion in harvest fuel relief as farm costs amount.
7:22
SPEAKER_00: Payments could ease cash strain, but rates and delivery dates remain key.
7:27
SPEAKER_00: This just a blurb from Weismeyer.
7:29
SPEAKER_00: The Trump administration announced yesterday USDA will provide$8 billion one-time harvest fuel relief payments, adding another round of federal assistance.
7:39
SPEAKER_00: As producers confront higher operating costs, the FSA will administer the program under the CCC.
7:45
SPEAKER_00: That's the Commodity Credit Corporation Authority.
7:48
SPEAKER_00: Despite its fuel-focused name, Weissmeyer says the program's announced design reaches beyond reimbursement for diesel purchases.
7:56
SPEAKER_00: USDA plans to calculate assistance, yada yada yada.
8:00
SPEAKER_00: We're gonna get into that a little bit deeper with Scott here, and maybe he can help us make sense of the yada yadas.
8:05
SPEAKER_00: And in fact, let me bring him in.
8:13
SPEAKER_00: From Croptel, it uh gives me great joy to bring in Scott Sartor.
8:18
SPEAKER_00: Croptel is where he hangs his hat.
8:20
SPEAKER_00: Scott, welcome to Ag Squat.
8:22
SPEAKER_00: Glad to have you here with us.
8:23
SPEAKER_00: The first timer.
8:24
SPEAKER_00: How are you doing today, buddy?
8:26
SPEAKER_01: I'm doing great, Davis.
8:27
SPEAKER_01: Thanks for having me.
8:28
SPEAKER_01: Excited to uh talk about this interesting topic we have today.
8:32
SPEAKER_00: Absolutely.
8:32
SPEAKER_00: No uh no shortage of things to talk about today along these lines.
8:37
SPEAKER_00: Before we get too deep, I don't want this to get away.
8:40
SPEAKER_00: You're a first timer.
8:41
SPEAKER_00: I've I make everybody do this their first time on, heck, sometimes on their second time on.
8:45
SPEAKER_00: But uh I'd I'd like for my audience to get to know you just a little bit.
8:49
SPEAKER_00: Who are you?
8:49
SPEAKER_00: What's your background?
8:50
SPEAKER_00: What's your deal, Scott?
8:52
SPEAKER_01: Yeah, I'm Scott Sarder.
8:54
SPEAKER_01: I uh grew up in Mississippi and still live here and cut my teeth in agriculture, you know, with my father, with my grandfather, who was a farmer in North Mississippi, and my father was a uh agronomist slash crop consultant.
9:09
SPEAKER_01: So I walked a lot of cotton fields in the Mississippi Delta, you know, as a kid and then in college, did a lot of corn and soybean scouting as well, and then got into commodity trading after after college and did that for the first part of my career.
9:24
SPEAKER_01: But I also was really focused on on finance and cost of production.
9:30
SPEAKER_01: So I went to work for an ag lender and I really liked you know the black and white area of finance rather than the gray area of economics and commodity trading.
9:38
SPEAKER_01: So uh so I kind of leveraged that into you know being a fractional CFO for farmers and a consulting CFO.
9:45
SPEAKER_01: And we built some software through the years to to help farmers at you know at scale be better at knowing their cost of production and some of the things we'll talk about today.
9:54
SPEAKER_00: Excellent, excellent.
9:55
SPEAKER_00: So it sounds like uh we've got farm cred truly and fully established here.
10:00
SPEAKER_00: And I noticed a uh a guitar hanging on the wall back there.
10:02
SPEAKER_00: So you're in good company.
10:03
SPEAKER_00: We got the right guy.
10:04
SPEAKER_00: That's excellent.
10:06
SPEAKER_00: Yeah.
10:06
SPEAKER_00: Um you know, a few a few years ago with a different company, I was I was traveling around giving uh a series of of talks to farmers, and I don't remember if this would have been 13 or 14, maybe not even, maybe a little longer ago, even than that.
10:23
SPEAKER_00: But the talk among cotton farmers in Mississippi was that, well, we're we're we're selling the cotton picker and we're we're gonna put a corn head out there in the field and we're gonna grow corn.
10:33
SPEAKER_00: I wonder if you could talk to us about that trend just a little bit as an observer, because that gum, the the South has made some real advances in growing corn, haven't they?
10:43
SPEAKER_01: Yeah, we're our yields are steadily increasing here.
10:47
SPEAKER_01: And if we have really good temperatures at pollination, we can make some really good yields.
10:53
SPEAKER_01: So there's been a lot of that done.
10:54
SPEAKER_01: We put in a lot of grain bans, you know, around 08, 09.
10:58
SPEAKER_01: And cotton market, you know, really took a hit from, you know, not to get too political yet, but the NAT, yeah, NAFTA really it tanked the the U.S.
11:08
SPEAKER_01: cotton industry, specifically um, you know, in the Delta too.
11:12
SPEAKER_01: So, you know, corn prices were rallying, you know, you had$15 soybeans, so grains became you know more of a forethought rather than a secondary option.
11:23
SPEAKER_01: And the economics and the finances panned out, so you had a lot of a lot of farmers doing that.
11:29
SPEAKER_01: But there's still you know cotton grown, and and those for those producers that have really high quality soils, class A soils, you can make high yields in cotton, as we'll probably talk about here in a minute.
11:41
SPEAKER_00: Well, yeah, and I guess at the time in my conversations then, and I don't know what I know about cotton, you know, you could you could fit on the head of a fountain pen, but it it feels like that's a pretty monumental decision for a crop grower to make.
11:56
SPEAKER_00: If you're gonna switch out of cotton, that's that's gonna be a big check to write to to switch back in.
12:03
SPEAKER_00: That's not an easy back and forth, is that right?
12:06
SPEAKER_01: That's right, especially with the cost of of pickers, you know, uh they're very sophisticated.
12:11
SPEAKER_01: All the equipment, of course, is really appreciated as far as the cost goes.
12:15
SPEAKER_01: But yeah, you can't just switch over on your fixed cost structure and your equipment cost that easily.
12:21
SPEAKER_01: So, really back then when a lot of the I would say marginal producers were leaving that industry or the ones that just said, I don't think I can make it.
12:30
SPEAKER_01: A lot of it's being tied into a good gen where the where the quality you know comes through, a good cotton gin can can make you money.
12:37
SPEAKER_01: And and that's what a lot of farmers that stayed in the business were really tied in with good with good gens too.
12:44
SPEAKER_00: Yeah, yeah.
12:44
SPEAKER_00: Yeah, excellent, excellent.
12:46
SPEAKER_00: Well, let's let's move over to croptail just a little bit, uh, just in big bold letters on the website there.
12:53
SPEAKER_00: I want to give you give you a chance to tell us what croptail is and and what the goal is because that's that's gonna help us with the whole rest of the conversation there.
13:01
SPEAKER_00: But the heading is farming has changed, farm finance needs to start us there.
13:07
SPEAKER_00: Tell us about croptail, Scott.
13:10
SPEAKER_01: Well, we're in a new era of farming with the cost structure uh being so uh you know uh grand and and growing the way it has, and and margins uh becoming very thin or even negative in the past few years.
13:24
SPEAKER_01: So we have to adjust how we manage our businesses in the farm in the farm world.
13:30
SPEAKER_01: And so financing is a big thing.
13:32
SPEAKER_01: Not many farmers can farm out of their out of their back pocket.
13:36
SPEAKER_01: So getting to an operating loan or getting a land loan or equipment loan, it's a it's it's it's become a more vital part of their operation, and it's more expensive now to do that.
13:48
SPEAKER_01: So we take a view of profitability and like help farmers with knowing their cost of production so they can translate that and communicate it to their risk management professionals, their their crop insurance professionals, their accountants, and and you know, all the ecosystem that helps them, even their agronomists and and people that help them on the production side.
14:10
SPEAKER_01: But really, where it's coming down to leverage that out is you know, finance, everything's so expensive, the financial decisions are driving things almost as much as the agronomic decisions do sometimes.
14:22
SPEAKER_01: So we want to prepare farms for that through a lens of profitability, knowing their numbers and knowing how to leverage those numbers and communicate them to the people that need to know it, their ex their team of experts to help them.
14:35
SPEAKER_00: I imagine that can end up in some lamentable paradoxes, if I can use a couple of college words right in a row there.
14:42
SPEAKER_00: I mean, that could be a real bummer if you're if your bottom line is making your agronomic decisions for you.
14:48
SPEAKER_01: Well, it I mean, you it's not making the decisions for it, it's just driving, you know, seeing the differences and knowing where the changes are, being flexible, I call it having the freedom to farm.
15:01
SPEAKER_01: I mean, if you're penciling, if you keep penciling out losses or you see that things aren't improving, you know, that's one thing.
15:08
SPEAKER_01: But even in good years, when you're managing the bottom line, like purchasing fuel, what we might talk about here in a few minutes, how how are you purchasing better so you can uh expand your operation so you can make decisions more rapidly?
15:24
SPEAKER_01: And knowing cost of production is part of that, you always want to be profitable.
15:28
SPEAKER_01: That's what sustains you in business.
15:30
SPEAKER_01: So we help farmers understand that and be able to make decisions rapidly and then leverage their data and information with their financial partners.
15:39
SPEAKER_00: Well, and you and I were talking before we hit the big red button to record this conversation.
15:44
SPEAKER_00: You you talked about all the different data points and the the different data that's kind of converging right now and the the days of you know squeaking by by just selling across across the scale.
15:59
SPEAKER_00: They're they're not going to catch up with all those data points.
16:01
SPEAKER_00: How does Croptail bring all those together?
16:04
SPEAKER_01: Well, you're right.
16:05
SPEAKER_01: I mean, it's so there's top line management, and these are these are B-school terms, but they're real world, you know, they're the real world realities.
16:13
SPEAKER_01: John Deere and and FedEx and large companies have these, you know, terms that they operate under.
16:20
SPEAKER_01: You know, top line management is looking at your revenue first, which I I get that.
16:25
SPEAKER_01: That's the fun part.
16:26
SPEAKER_01: We check our phones every day as farmers.
16:28
SPEAKER_01: Hey, what where what what do we do today?
16:30
SPEAKER_01: We go up or down?
16:31
SPEAKER_01: What are we doing now?
16:32
SPEAKER_01: You know, what should we do?
16:34
SPEAKER_01: But the bottom line is is frankly where the margin managers can make money on on lean years and make a lot of money on on the years when everybody else is like, well, we made a good yield, so we must have made money.
16:47
SPEAKER_01: Like we help farmers understand their profitability at any point in time.
16:53
SPEAKER_01: And we have a daily view that we look at.
16:56
SPEAKER_01: We don't want to overanalyze things on a daily basis, but we do want to be aware.
17:00
SPEAKER_01: And then there are certain milestones and markers, you know, through the year, mainly monthly, that that we help engage farmers engage with from their bookkeeping systems so that they'll know, okay, my break, you know, fuel has gone up 43% this year, my break-even has totally changed, and therefore I have to change my marketing on corn and soybeans.
17:21
SPEAKER_01: So that's the sort of thing we help farmers do, and that's what they need to do in order to put more money in their pockets on most years, and then maybe some years just stay alive for another year.
17:33
SPEAKER_00: Yeah.
17:33
SPEAKER_00: The game has changed, and so the way that farmers need to participate in that game has also changed.
17:40
SPEAKER_00: Let's let's move on to this this Trump eight billion dollar announcement.
17:44
SPEAKER_00: He was in Kansas talking about some diesel price fuel relief.
17:50
SPEAKER_00: And I don't know how much you've had a chance to look into this and and work out the black and whites and the nuts and bolts and and the particulars, but and I yada yated over this part here, but I'll I'll just go ahead and read it.
18:02
SPEAKER_00: USDA plans to calculate assistance using modeled 2026 crop losses, drawing on reported plant acres, production cost estimates, and USDA yield and price projections.
18:17
SPEAKER_00: That all adds up to a formula.
18:19
SPEAKER_00: Dude, that that sounds like an awful lot of math for a guy like me.
18:22
SPEAKER_00: Have you got your head around it at all?
18:24
SPEAKER_00: Can you make sense of it?
18:26
SPEAKER_01: I was just running some numbers before we got on the call.
18:28
SPEAKER_01: And if you look at just, you know, if you just took 180 million plus or minus of corn and soybean acres, I mean, that the the eight, if that if that 8 billion was only scattered across, you know, the major row crops, it would be on a dollar per acre basis more than the actual cost increase was.
18:46
SPEAKER_01: So, you know, secondary crops are going to come into play.
18:49
SPEAKER_01: So that's a key thing.
18:50
SPEAKER_01: So here are the here are the main bullets.
18:53
SPEAKER_01: The they're you they're calculating the formula off of uh obviously FSA certified acres.
19:00
SPEAKER_01: Okay.
19:01
SPEAKER_01: So they are going to do that on Title I commodities first.
19:04
SPEAKER_01: So major row crops, the ones that the USDA tracks that you can pull up data on any day, you know, in the NAS crop conditions report, et cetera.
19:12
SPEAKER_01: Corn, soybeans, wheat, cotton rice, barley, oats, sugar beets, you know, the Title I commodities.
19:20
SPEAKER_01: And then the secondary commodities are going to be calculated after they come up with the formula for that for that Title I calculation first.
19:27
SPEAKER_01: Now, they're not going to reveal what the calculation or what the rates are until November.
19:33
SPEAKER_01: So we don't know anything until next month.
19:36
SPEAKER_01: And then the payment eligibility doesn't come around until January or the payment application won't happen until January.
19:45
SPEAKER_01: So that's sort of the timeline.
19:46
SPEAKER_01: It's November, they'll announce the rates for Title I commodities.
19:50
SPEAKER_01: They'll they'll I don't know why they're doing that other first, other than to see, you know, what the political response is almost, and then and then announce the rates for the secondary commodities, uh, secondary crops.
20:04
SPEAKER_01: And they sort of did that with the one big beautiful bill, you know, the 13 billion.
20:08
SPEAKER_01: They came out first with 11 billion for major row crops, and then they came out with 1.1 billion for the secondary crops, and then they added some for the secondary crops later because they realized they didn't, you know, provide an equivalent amount to those, to those businesses.
20:23
SPEAKER_01: So that's it's very interesting, you know.
20:26
SPEAKER_01: I think a lot of political speculation going on as to you know why this was announced at this time.
20:31
SPEAKER_01: But I also thought it was really interesting, Davis, that you know, the reason was for losses.
20:37
SPEAKER_01: Well, we don't really have losses on the books yet.
20:39
SPEAKER_01: We don't know.
20:41
SPEAKER_01: We know we know that fuel price increased.
20:44
SPEAKER_01: We we don't know if if we lost money because of fuel or not.
20:48
SPEAKER_01: But certainly if you did lose money this year, fuel would be one of the reasons you you lost money.
20:53
SPEAKER_00: Well, absolutely.
20:54
SPEAKER_00: And you know, I I guess my big takeaway from that and my my warning to my viewers might be hey, it it it might be a minute before the check comes in the mail.
21:06
SPEAKER_00: Is that fair to say?
21:07
SPEAKER_00: Can we boil up into that deep?
21:10
SPEAKER_01: Yeah, so you know they're pushing the login.gov now for every for everybody, and farmers are no exception.
21:18
SPEAKER_01: And so login.gov, it has to be tied in to the FSA and the your USDA account.
21:24
SPEAKER_01: So, so you know, we're seeing data become more relevant in the Trump camp in the Trump administration from the USDA on.
21:33
SPEAKER_01: We have, you know, you probably have a whole other podcast about that.
21:36
SPEAKER_01: But so you have to use your login.gov account, and they will have it's said on the on on the info spot on USDA's website, pre-populated applications will be available in January.
21:48
SPEAKER_01: That means they already have some information on you on your business, and they're going to pre populate the farm.
21:55
SPEAKER_01: You just got to do the rest.
21:56
SPEAKER_01: So the best thing I would advise farmers to do is get with their local FSA office and make sure their status is good with their login account and that they have that available.
22:06
SPEAKER_01: And they, since they said that that those Would be available in January.
22:10
SPEAKER_01: I'm assuming we cannot we will not see a payment until uh sometime in January at the earliest.
22:16
SPEAKER_00: Yeah, yeah, very well.
22:18
SPEAKER_00: You know, that reminds me, we had a a conversation with his eminence uh former ambassador Kip Tom, geez, a month and a half ago, maybe, talking about these modernization efforts in the FSA and and all this sort of stuff.
22:30
SPEAKER_00: We should probably get him get him back on there.
22:33
SPEAKER_00: Joe, remind me of that if you would, please, brother.
22:36
SPEAKER_00: Okay.
22:37
SPEAKER_00: And here's here's the thing, you know, I got calls, a couple of calls, not a lot, and I'll text really back in in January of 26 asking me about diesel.
22:49
SPEAKER_00: Um because there is a seasonal tendency that I've noticed, and clearly farmers have noticed it as well, and you know, people who are switched on to this sort of stuff.
22:59
SPEAKER_00: You know, and the the question is always the same: should I be buying diesel?
23:02
SPEAKER_00: Oh, how much should I get?
23:03
SPEAKER_00: Well, how much should I buy?
23:05
SPEAKER_00: I tend to run a little conservative, and I kind of wish that I had maybe you know been a little more aggressive with my responses to this.
23:13
SPEAKER_00: You know, hey, go out, don't do anything crazy, fill, you know, part of your needs, as much as you're comfortable that you can account for and you're yada yada, this whole thing.
23:22
SPEAKER_00: Here I am back to yada yadas, but but uh it it just seems like the smart money rolled the dice in January and just hooked into all of it at one time, didn't it?
23:32
SPEAKER_01: Yeah, absolutely.
23:33
SPEAKER_01: Seasonality is real in in purchasing, it's it's a major factor.
23:38
SPEAKER_01: I mean, I live you know 20 miles away from FedEx World Headquarters, and you know, they have you know at one time hundreds of people working on fuel purchasing and energy purchasing.
23:49
SPEAKER_01: And farmers are no exception.
23:51
SPEAKER_01: They run a business too that's subject to energy prices.
23:54
SPEAKER_01: So when fuel dips in those seasonal times like winter, you know, November, December, January after harvest, and and then uh there's usually a small dip in the summer as well before harvest.
24:07
SPEAKER_01: Those are two buying opportunities just from a just from a baseline perspective.
24:12
SPEAKER_01: If you're buying dips, then you're you're doing you may not be making money, but you're you may not but you won't be losing as much as you would have if you if you didn't buy the dip.
24:21
SPEAKER_01: So, I mean, that's an obvious statement.
24:23
SPEAKER_01: But the there's a thing in farming called cash flow that we struggle with sometimes.
24:28
SPEAKER_01: And so, you know, cash flow is an issue if if if farmers don't have the ability to buy in the winter time, you know, because they don't have cash, they they're not sure where they landed on profitability and they're trying to figure out how to get their loans repaid or when they're gonna pay their loans back, or they got, you know, they're gonna pay their loans back, but they've got March contracts that's tying up their capital, you know, that that's a that's a problem.
24:52
SPEAKER_01: So what we like to do is go ahead and focus on next year starting in the summertime.
24:58
SPEAKER_01: And that way you can go to your lender if you borrow money, and if you don't have working capital, you might be able to borrow on next year well ahead of the actual calendar year, so you can be prepared to buy fuel when it dips.
25:15
SPEAKER_01: And it's it's a it's a huge deal.
25:17
SPEAKER_01: I mean, I did talk to Farmer uh on Saturday, I think he was in Michigan, and he knew his cost of production, and he had some working capital in January, and he bought like 80% of his of his fuel needs for there.
25:29
SPEAKER_01: You have to have the ability to store it, and sometimes you can prepay and and you know they'll they'll they'll keep it for you until you need it at your local job or but you know that's that's a key thing is that freedom to farm.
25:42
SPEAKER_01: If you know your numbers, you can your the your possibilities increase.
25:47
SPEAKER_01: And so when you have these seasonal dips, you can take advantage of them.
25:52
SPEAKER_00: I like that.
25:53
SPEAKER_00: Freedom to farm when you know your numbers, there's possibilities that that arise there.
25:57
SPEAKER_00: That's that's really good.
25:59
SPEAKER_00: Before we get too far along, croptel.com.
26:02
SPEAKER_00: Is that the best spot to find out just what we're talking about here today?
26:06
SPEAKER_01: Yeah, and they can also doing a good bit on TikTok.
26:09
SPEAKER_01: So uh crop tell scott at tick tock is a good spot too.
26:13
SPEAKER_00: Croptel Scott at tip tick tock.
26:18
SPEAKER_00: I I do want to get to it to a TikTok that you put out just here recently with with a with a pretty good little nugget in it, but but first I think you brought some visuals.
26:27
SPEAKER_00: Let's jump over to these and start talking about 2027.
26:31
SPEAKER_00: You mentioned you know, you you really gotta start having those conversations in the summertime.
26:36
SPEAKER_00: You you might argue that I'm I'm coming to the party just a little bit late here in mid-October, Scott.
26:42
SPEAKER_01: Well, one of the best farmers I know, he says, I'm always thinking about three crop years at a time.
26:48
SPEAKER_01: And so that implies that he's storing grain, he's in a current year of production, and then he's looking at next year.
26:55
SPEAKER_01: And Davis, I mean, you know, you've been in this world a long time.
26:59
SPEAKER_01: You you look at the board, I mean, I can I can book prices out to 29 on some crops right now.
27:05
SPEAKER_01: If I wanted to hedge as a farmer, being long corn for eternity, you know, I could put a hedge on for for, I believe, 29, starting this new marketing year in August for 29 crops.
27:18
SPEAKER_01: So, like this, this is a reality.
27:21
SPEAKER_01: We have to be thinking almost in perpetuity on how we're going to defend our operation and look for opportunities to expand our operation if we want to, not in acres necessarily, but in profits.
27:33
SPEAKER_01: And so when you look at a cost of production, this tool that you have on screen is our profit matrix.
27:39
SPEAKER_01: It's a simple tool.
27:40
SPEAKER_01: A farmer can create it in Microsoft Excel.
27:43
SPEAKER_01: We provide it with uh you know our data and the farmer's data connected in.
27:48
SPEAKER_01: So when you look at the uh X axis, you have the cost, I mean the prices at the top.
27:54
SPEAKER_01: When you look at the Y-axis, you're looking at yields.
27:57
SPEAKER_01: So this is a basic tool that a farmer can use to help communicate.
28:01
SPEAKER_01: Uh, first of all, look at their own uh profitability potential.
28:05
SPEAKER_01: If yields go up, move up and to the right, if yields yields go down, move to the left and down.
28:12
SPEAKER_01: If if prices go up, you move up and to the right, if prices go down, you you move to the left, and the combination of the two.
28:19
SPEAKER_01: So if you look at that dark green number 215 on the uh Y-axis, say that's your APH or your yield that you're projecting this year, and then you you go over to the right and you find that column where the green is the price, that$493, that would be in my demo farm there, that's that's my weighted average price with my unsold uh production times the market price and plus the my sold production times the my sold price.
28:49
SPEAKER_01: So that way you're looking at a$4 plus or minus you know break-even at 215 bushels and$493 corn.
28:57
SPEAKER_01: And so that's when when a farmer can see that and look at, hey, if if if price goes up 20 cents, you know, and I keep 215, I'm I'm making, I can't, I can't read the the data, but you know, I'm making that much more per acre.
29:12
SPEAKER_01: But about what we're about to talk about, your lender, this is how lenders look at your operation.
29:18
SPEAKER_01: They do what's called stress testing.
29:20
SPEAKER_01: They want to see if the farmer tells me that my cost of that his cost of production is$975 per acre on corn, what happens if fuel goes up and his cost of production is$990 per acre?
29:33
SPEAKER_01: Will he still make money and will I get repaid?
29:36
SPEAKER_01: So we're not doing we're doing this for our own, we're doing this for our profitability on the farm.
29:42
SPEAKER_01: But when we borrow money, we the best way to take advantage of your data and save money on interest rates to get better deals is to tell your lender that you know what's gonna happen if if movements in the markets or yield occur.
29:55
SPEAKER_01: Yeah.
29:55
SPEAKER_01: How do you have a plan accordingly?
29:57
SPEAKER_00: Yeah.
29:58
SPEAKER_00: Yeah.
29:58
SPEAKER_00: So so is is it a sliding scale sort of that you're that you're dealing with?
30:04
SPEAKER_00: Because I mean, we don't know what diesel is going to look like in in six months.
30:08
SPEAKER_00: How do we account for the uncertainties in the market then?
30:12
SPEAKER_01: Well, you nobody knows, you know, and this if this was ever a uh any type of black swine event this year in diesel, this is it.
30:21
SPEAKER_01: If it if you could call it a black swine, you would call this a black swine event in farming because diesel did go up 40 to 50 percent.
30:29
SPEAKER_01: Nobody could have known that, right?
30:31
SPEAKER_01: But again, it comes back to if you know your numbers, here's what here's what you need to think.
30:37
SPEAKER_01: If you know your numbers, you still have to buy diesel because you have to harvest the crops, even if you didn't pre-buy.
30:42
SPEAKER_01: You might be paying six dollars and fifteen cents at the pump because you got to get that crop out, like what's what we're in the middle of harvest right now, like you said at the beginning of the show.
30:51
SPEAKER_01: But at least you can say, all right, if you do walk into the bank in January to get that operating loan renewed, you have a perfectly good explanation with on paper, and you can show the banker, I here's the adjustments I made so that I could remain profitably profitable or and or pay you back.
31:12
SPEAKER_01: And the thing is, a good ag lender, obviously they know that diesel has increased too, but it's just like anything.
31:18
SPEAKER_01: You have to communicate what your plan is and how you adjusted that plan during the year if you were able to adjust it, and then and then if it don't just expect things to fall into place.
31:30
SPEAKER_01: You know, you got to say, you know, we're able to survive this year because we made these adjustments, or hey, we lost money, but you know, we planned well, we couldn't do anything about about$15 uh an acre increase in diesel this year.
31:44
SPEAKER_01: So let's have a conversation about how we can, you know, take care of this year and keep farming.
31:49
SPEAKER_01: And those conversations are just gonna so much gonna go so much better when your lender sees that you know your numbers.
31:56
SPEAKER_01: I asked no matter how they happened.
31:59
SPEAKER_00: Right, right.
32:00
SPEAKER_00: I asked uh I asked another guest last week, you know, help us figure out what we need to have in the briefcase in the file folder when we walk in to talk about renewals for operating loans, and when we talk about you know cash flow for next year, this is exactly the kind of stuff that we were talking about just then.
32:17
SPEAKER_00: You're you've you've brought it all together and congealed it into, and even given us sort of a peek up the skirt at at what the guy on the other side of the desk, or the gal, if you like, is is looking at and how they view a particular farm operation.
32:33
SPEAKER_00: You've got a second graphic here for us.
32:35
SPEAKER_00: I'd like to uh to bring that up.
32:36
SPEAKER_00: Joe, can you pop that up for us once again?
32:38
SPEAKER_00: What are we looking at?
32:39
SPEAKER_00: So we looked at the stress test.
32:41
SPEAKER_00: What are we looking at here right now?
32:43
SPEAKER_01: So we're looking at the USDA's projected cost of production for 2027.
32:48
SPEAKER_01: And so they the ERS, which is the economic research service uh uh uh part of the USDA, projects cost out.
32:57
SPEAKER_01: And so this was their June projection.
33:00
SPEAKER_01: If you look at the left-hand side, the blue uh fine, that that's the USDA numbers.
33:05
SPEAKER_01: And they're projecting, you know, uh cost of reduction on all crops um to be you know one to three percent higher.
33:13
SPEAKER_01: And then we have our data at Croptail, what we think costs will be two, and ours are more uh recent on August 31st, I think is when we did that.
33:21
SPEAKER_01: And and the USDA will come out again in November with their biannual uh cost adjustment and project uh projection for next year.
33:30
SPEAKER_01: And it's kind of like we said at the beginning before we got on camera, like you know, finance is kind of the red-headed stepchild.
33:36
SPEAKER_01: Everybody's looking at Wise reports.
33:37
SPEAKER_01: I mean, I love it too.
33:38
SPEAKER_01: You know, I'm a former commodity trader, but I build within the lens of being that commodity trader and thinking about how to manage costs this way.
33:46
SPEAKER_01: So when you look at cost production increasing for next year, the best time to plan and get in the bank is is now to get into the bank before the mad rush comes in in January and February.
34:00
SPEAKER_01: And everybody else is walking in the door without a plan or with a with a you know a half-cocked plan.
34:06
SPEAKER_01: So I like to tell our customers, we help you get ready beforehand, and you need to be thinking about you know those three crop years at a time, last year, this year, and next year.
34:16
SPEAKER_00: Yeah.
34:17
SPEAKER_00: It does seem like if we can bring that up just one more time, maybe I'm looking at this incorrectly, but it does seem like on the the far right column there, the plus or minus by percent column, you're you're leaving a little more air in there, a little a little more margin for wiggle, shall we call it?
34:36
SPEAKER_00: I don't want to call it margin for error, but margin for wiggle, margin for uncertainty, maybe than than USDA.
34:42
SPEAKER_01: Am I thinking about that the correct way?
34:45
SPEAKER_01: Well, I think I don't know how the like the USDA's methods.
34:49
SPEAKER_01: I mean, we have our methods to build this, and we have our actual data, you know.
34:54
SPEAKER_01: So what we look at, yeah, I'm I have the benefit of of having three more months worth of data and my trend analysis to build that forecast than the USDA did.
35:05
SPEAKER_01: So I think theirs will probably come out.
35:08
SPEAKER_01: My point is theirs will probably come out in November.
35:10
SPEAKER_01: They could be higher than than Croptel's estimated increase.
35:13
SPEAKER_00: Okay, okay.
35:15
SPEAKER_00: That makes sense.
35:16
SPEAKER_00: Yeah, that makes a lot of sense.
35:19
SPEAKER_00: Okay, croptel.com or croptel scott on uh on the TikTok maker.
35:26
SPEAKER_00: You had mentioned a TikTok that you made that uh that fascinates me that titled Ag Lenders Were Told to Ask You This Question.
35:36
SPEAKER_00: Lay it on me, brother.
35:38
SPEAKER_00: What's what's this all about?
35:39
SPEAKER_01: Well, I I like to keep the pulse of what's going on in the lending world so I can know best how to position our clients and customers, whether they're consulting clients or software customers, into their operating loan discussions.
35:53
SPEAKER_01: So I was on a webinar last week, uh major secondary uh provider of capital to banks and the farm credit system in the U.S.
36:03
SPEAKER_01: And there were 400 and something, 425 or so bankers on, and Dr.
36:08
SPEAKER_01: Cole, Dr.
36:09
SPEAKER_01: David Cole, which you guys have probably heard of, was the speaker.
36:13
SPEAKER_01: And you know, he's got he's got a lot of strong pulse on the ag lending world.
36:18
SPEAKER_01: He works with a lot of lenders and farm credit system, and and he said the number one thing that farmers, your farm, you need to push, he was talking to bankers.
36:28
SPEAKER_01: He said, the number one thing you're going to need to push your farmers on this renewal season is do they know their breakeven cost of production and their cost of production?
36:38
SPEAKER_01: And so I just put it out there on TikTok, like this is what they're going to expect from you.
36:43
SPEAKER_01: And so I think some of a few things that we mentioned earlier, Davis, is what I said.
36:47
SPEAKER_01: If you know your numbers, you know, farmers kind of get tired of, well, you know, I everybody says I'm supposed to know my cost of production and my break-even cost, but how am I supposed to know it before the year's over?
36:56
SPEAKER_01: Well, you do projections, you do stress testing, you use a profit matrix to kind of say, well, what if things, I know what they are now, I know what I budgeted for, what has changed since I did my budget, and how can I work that into a projection?
37:10
SPEAKER_01: This is what companies like Deer and Bear do.
37:14
SPEAKER_01: They know their numbers and they're selling you products.
37:17
SPEAKER_01: So you should know your numbers so you can have freedom to operate and farm.
37:22
SPEAKER_01: And so when a farmer sits down with his lender this year and the lender says, you know, you you said your budget was going to be this, but you were over budget.
37:30
SPEAKER_01: Well, what happened?
37:31
SPEAKER_01: That's knowing your cost of production.
37:33
SPEAKER_01: That's knowing not only fuel went up, but maybe your labor went up, or maybe you know, you put more corn in the ground than you thought, your rotation changed, and you and and you didn't buy, you know, nitrogen as well as you normally have.
37:47
SPEAKER_01: So you you being able to explain it, knowing that cost of production helps you defend your your ask for how much loan money you're trying to borrow.
37:55
SPEAKER_01: And it, like I said, it gives you freedom to farm.
37:58
SPEAKER_01: And and when you know this information and you talk to a banker about it, they're gonna see that you actually understand your business and they're gonna be on those lean years when it is hard to get a loan because they're penciling things in tighter, they'll be more apt to work with you and loan you money, even in the face of uncertainty.
38:18
SPEAKER_00: It feels to me like maybe your goal, Croptell's goal, a lot of people's goals, people who who do these sorts of things to provide these sorts of services for producers.
38:28
SPEAKER_00: The idea is to kind of level level the playing field when it comes to information, because you said, you know, the big guys, they all know their numbers, they know what what they're gonna need.
38:38
SPEAKER_00: They're, you know, and they've figured in their variable costs, their fixed costs, and all this sort of stuff.
38:43
SPEAKER_00: It only makes sense that the uh the farmer should have the tools to do that as well, fair.
38:48
SPEAKER_01: Oh, absolutely, fair.
38:49
SPEAKER_01: In fact, that's I love what you said.
38:52
SPEAKER_01: I mean, we are highly focused on farm sustainability and helping farmers, you know, last from from years to come until now.
39:02
SPEAKER_01: Generational families.
39:03
SPEAKER_01: I mean, it's great when you meet a farmer, and one of the first things he says when you're getting to know him is, you know, I'm a fifth generation farmer.
39:11
SPEAKER_01: Yeah.
39:11
SPEAKER_01: I mean, the biggest thing we want to do in this industry is keep our family farms and our our family farm businesses intact and to do all the things that made us, you know, a solid uh country and the best farmers in the world.
39:26
SPEAKER_01: And so where we are, as we said earlier, now we're in a new era though.
39:32
SPEAKER_01: And I believe that the margins, when margins can flip on you instantly, we're in this erratic global environment, you know, and farmers are price takers.
39:42
SPEAKER_01: Let's just call a spade a spade.
39:44
SPEAKER_01: I mean, they're getting the prices that the markets are giving them.
39:47
SPEAKER_01: So you have to be able to shore up those deficiencies anywhere you can.
39:52
SPEAKER_01: And it's always been a good uh practice to try to do so on the cost side and input purchasing.
40:00
SPEAKER_01: There's several strategies to deploy to lower your input cost and protect your margins so you can make more money as well.
40:09
SPEAKER_00: A price maker, not a price taker, I think is kind of where where you want to be.
40:13
SPEAKER_00: It almost sounds like a Pat Benatar song, just a little bit.
40:16
SPEAKER_00: I think well, you you get the guitar down and start strumming, and I'll follow along.
40:20
SPEAKER_00: We'll go.
40:20
SPEAKER_00: Don't you dare me.
40:21
SPEAKER_00: Don't you dare me, Scott.
40:24
SPEAKER_00: You know, I want to talk about operating loans and and renewals just sort of generally here, but I do have a question.
40:30
SPEAKER_00: I'm looking at your background there.
40:32
SPEAKER_00: Let's just diverge just a little bit.
40:34
SPEAKER_00: Am I seeing arrowheads back there?
40:36
SPEAKER_00: You got arrowheads going on the wall?
40:38
SPEAKER_00: What's the story there?
40:40
SPEAKER_01: Well, uh, you walk a lot across a lot of cotton, corn, soybeans, and you're gonna find them.
40:46
SPEAKER_01: So uh yeah, I I've I've collected since I was you know a child and uh used to go with my father before I was working for him, and then when I was working for him, we found more, and he's got you know thousands, so he's got a lot more than I do, but yeah, that's what that is.
41:02
SPEAKER_00: Oh, that's really cool.
41:03
SPEAKER_00: My dad and I, my dad got me into rock hounding a little bit.
41:07
SPEAKER_00: We were hooked on agates, and so we would travel all over.
41:10
SPEAKER_00: I still go on little camp outs and little missions to go find you know the perfect agate bed and walk around looking at my feet for days at a time there.
41:19
SPEAKER_00: So I could I can appreciate what goes into a collection like that and what it might mean to you.
41:23
SPEAKER_00: I uh I like that.
41:25
SPEAKER_00: I like that a lot.
41:26
SPEAKER_00: Let's let's get into operating loans, let's get into renewals here.
41:30
SPEAKER_00: I want to make sure that you've got us set up thinking straight about these.
41:34
SPEAKER_00: I guess maybe one question I would have is uh have you, and I don't know if you're in a position to even know this.
41:43
SPEAKER_00: But can you talk to the to the general health of sort of the the system when it comes to operating loans?
41:51
SPEAKER_00: Are we seeing delinquencies?
41:52
SPEAKER_00: Is there concern, consternation out there?
41:55
SPEAKER_00: Because these are tough economic times.
41:57
SPEAKER_00: We haven't even talked about the high price of fertilizer.
42:00
SPEAKER_00: We've we've stuck with the diesel.
42:02
SPEAKER_00: You put those two together, plus all the other things that go along with the modern production system, brother.
42:08
SPEAKER_00: And uh, I can see where it would cause some anxiety here.
42:11
SPEAKER_00: Delinquency is a problem, or or uh do we know?
42:15
SPEAKER_01: Well, the Fed, so Federal Reserve of Kansas City, I think some of their data ticked up a little bit on not delinquencies per se, but across the board, there was they said maybe some yeah, I'm sorry, delinquencies did, and then losses, you know, aren't known yet on crops at least.
42:36
SPEAKER_01: So, but yeah, there have some payments have been a little bit slower, and so I think they're starting to see some of that, you know, but their data is very lagging, right?
42:44
SPEAKER_01: They're looking at last year, they don't have very up-to-the-minute data.
42:48
SPEAKER_01: So I would say we will see more of that in the next nine months reported out of the Fed across all Federal Reserve banks.
42:57
SPEAKER_01: I mean, everything I mean, I we have customers in you know, 16, 17 states in the Corn Belt, everywhere east of the Rockies.
43:05
SPEAKER_01: And I talked to a lot of lenders last winter uh about you know where they were.
43:10
SPEAKER_01: So there is there is an interesting conversation there on the aggregate uh farm loan economy because where do a lot of our finance come from is input finance and vendor programs.
43:24
SPEAKER_01: Those are not on anybody's books except for the balance sheets of the companies that take on the debt.
43:31
SPEAKER_01: So it it actually was a pretty big uh LinkedIn discussion last week amongst the the ag finance and ag econ community because uh Reuters reporter wrote a story about the unknown debt in farming, and that is input finance.
43:48
SPEAKER_01: So, which a lot of people they don't know the size of it.
43:51
SPEAKER_01: So there's been some some research done on that.
43:53
SPEAKER_01: I think it's pretty large.
43:55
SPEAKER_01: And the thing is, it does affect farmers' ability to borrow from a bank.
44:01
SPEAKER_01: And we can talk about how that would happen, but so getting into renewals, how the best way to prepare for renewals.
44:09
SPEAKER_01: Is get in early with a good budget that's more than just a yellow tablet sheet of paper with a few numbers on it.
44:18
SPEAKER_01: And you don't have to wait for your tax returns to be complete.
44:23
SPEAKER_01: Like farmers are I'll hear them say, Well, I need my I don't I haven't talked to my accountant yet.
44:28
SPEAKER_01: Well, you need to make a projection for your business of what you think your income is going to be on that crop.
44:35
SPEAKER_01: And you need to include everything you spent to make money to put into that crop and and then take into consideration what you borrowed and and show the bank, hey, here's where I am.
44:48
SPEAKER_01: I will be I'll be able to pay you back once I deliver all of my corn and soybeans and on the March contracts.
44:54
SPEAKER_01: Or hey, cost of carrying is favorable right now, and I've got some May delivery contracts.
45:00
SPEAKER_01: So, you know, that's when farmers, if they can just explain why they're making these decisions to the lender, it makes the operating loan renewal go much easier.
45:11
SPEAKER_01: And so I kind of went around the world there to get to the operating loan renewals prom where some of the challenges have been.
45:17
SPEAKER_01: They will they were scrutinized more heavily last year because of a lot of farmers did not have working capital.
45:23
SPEAKER_01: And they'll be scrutinized again just because where we've been the last you know two to three years at farming, where profits have been reduced, working capital has eroded to a point where a lot of farmers don't have any anymore and they had to refinance land to inject capital back into the business.
45:40
SPEAKER_00: It feels like when we're talking about the what is it, the one login system modernizing the FSA and bringing all that kind of under one umbrella and pulling in data.
45:52
SPEAKER_00: I'd never thought about this before, but as you were talking, it occurred to me if if there are third party lenders, would the would those show up under that system?
46:02
SPEAKER_00: No.
46:03
SPEAKER_00: Under under a farmer's file?
46:05
SPEAKER_00: No?
46:06
SPEAKER_00: No.
46:10
SPEAKER_01: The banks in the farm credit system are required to report their capital positions, obviously.
46:16
SPEAKER_01: And so that's how the reserve, the Federal Reserve, and a regulated market can come up with those numbers.
46:23
SPEAKER_01: But you know, Sangenna or Bayer loaning a farmer money for early paid seed discount is is for early paid seeds purchases, is not um, is not put on the books anywhere that has to be reported except for in the public 10Ks, the public filing reports.
46:42
SPEAKER_01: And so there's been some professor, a professor from Kansas State that's done a lot of research on it.
46:48
SPEAKER_01: You know, it's I call it the ghost capital effect.
46:51
SPEAKER_01: You know, there's a lot of debt out there, and that's usually what is carried over year to year, if you've heard of carryover debt, because the banks have a pretty good position.
47:00
SPEAKER_01: They they loan, you know, 60 to 65 percent of the value of the crop, and they have first lien on the crops if it's a cash flow loan, not an asset, you know, not an asset backed loan only.
47:12
SPEAKER_01: So cash flow loan, they got the first lien position.
47:15
SPEAKER_01: The chemical company or the input provider comes in, they have a second or even third lien on the crops sometimes.
47:21
SPEAKER_01: Sometimes it's unsecured, and they are the last to get paid a lot of times.
47:27
SPEAKER_00: So wow, I'm not sure what to do with with all that.
47:31
SPEAKER_00: I I need to process that just a little bit, but that just kind of blew my mind just a little bit there, Scott.
47:36
SPEAKER_01: Just for just for a second.
47:38
SPEAKER_01: There this is why farmers need to know their numbers.
47:42
SPEAKER_01: Like we can talk about it year to year and break-even and being able to call up Tommy Gristafi and say, Tommy, my break-even cost of reduction is four dollars and sixty-one cents.
47:52
SPEAKER_01: So that's that's how we build our marketing plan, you know, around that break-even cost of reduction.
47:57
SPEAKER_01: And then we make adjustments if fuel goes up and our break-even changes to 468.
48:02
SPEAKER_01: Okay, from then on, it doesn't matter what we've done.
48:05
SPEAKER_01: What we're doing from now on, we got to be above 468.
48:08
SPEAKER_01: We're not trying to hit home runs, we're hitting singles in some some years, like this year.
48:13
SPEAKER_01: But longer term, knowing your numbers enables the farmer to improve his balance sheet, to take profits from the farm and move it to the balance sheet so those that rainy day fund, aka working capital can persevere you through the tough years like we've had the past few years.
48:33
SPEAKER_01: And then you can reduce your debt.
48:36
SPEAKER_01: You may not have to borrow from vendor, you may not have to tap into vendor finance and you use cash to buy inputs and you can save money there.
48:45
SPEAKER_01: There's all sorts of ways to save money using cash to buy inputs.
48:49
SPEAKER_01: And I am concerned too on the overall debt on the farming economy because at some point that unknown amount that's held in these third-party uh finance providers' hands might come to bear.
49:03
SPEAKER_01: It could, it may not.
49:06
SPEAKER_01: And I'm just gonna throw it out there, it might be a little controversial.
49:09
SPEAKER_01: They may be making so much money on the input sales that it doesn't matter.
49:14
SPEAKER_01: The finance is just a lost leader for them making sales.
49:18
SPEAKER_00: Interesting.
49:19
SPEAKER_00: Interesting.
49:20
SPEAKER_00: Well, there's a there's a whole lot here, croptel.com and croptel Scott.
49:27
SPEAKER_00: Scott, I think we're gonna start moving toward the door here.
49:30
SPEAKER_00: You've been very generous with your time this afternoon.
49:33
SPEAKER_00: I don't want to keep you here all day.
49:34
SPEAKER_00: I uh we're we're gonna need to talk again sometime because I got just a I've been writing down just notes here as we go along, but I'm I'm fascinated by all this.
49:43
SPEAKER_00: A friend of mine wrote a book several years ago, uh more of a pamphlet, but you know, he's my friend, so I'll call it a book called uh Making the Family Making the Family Farm the Family Business.
49:55
SPEAKER_00: And I and I think that kind of gets to the heart of what you're talking about here.
50:01
SPEAKER_00: But before we move on and and begin to close out the show here this afternoon, can I can I burden you once more?
50:10
SPEAKER_00: Can I ask you to to kind of boil it all down, wrap it all into a into a parcel.
50:19
SPEAKER_00: If there's one thing or one line of thought you want to make sure that we get communicated this afternoon, what would that be, Scott?
50:27
SPEAKER_01: I can't argue with Dr.
50:29
SPEAKER_01: Dave Cole when he told lenders, you know, ask your farmers about cost of production.
50:35
SPEAKER_01: It's it's just as important.
50:37
SPEAKER_01: And that cost knowing those numbers gives you that freedom to farm.
50:42
SPEAKER_01: In the family business, it's like I said at the beginning, we're focused on internal transparency, reporting to yourself.
50:51
SPEAKER_01: That's knowing your numbers.
50:53
SPEAKER_01: If you can generate, you know, through crop tail or whatever platform you use, a report that says, hey, we're projected to make money or we're projected to lose money on corn versus soybeans.
51:04
SPEAKER_01: That's highly important to know.
51:06
SPEAKER_01: That's knowing your numbers.
51:07
SPEAKER_01: That gives you freedom, whether even if it's bad information, even if it doesn't look good on paper, you the freedom is knowing.
51:14
SPEAKER_01: And the freedom is being able to make adjustments and prepare for the future, however, short term that future may be.
51:20
SPEAKER_01: Like I'm getting my, I want to go meet with my banker next week, or long term, like, hey, in 10 years, I want to own, you know, 50% of the ground that I farm.
51:29
SPEAKER_01: So that's the that's the goal is knowing your numbers, that internal uh knowledge and being able to have transparency and communicate those numbers to your family first and yourself and then to the financial and other experts that help you hopefully profitably make money on the farm.
51:50
SPEAKER_00: Knowledge is power.
51:52
SPEAKER_00: And Scott, it feels like you're you're doing your uh dead level best to pull the the pertinent knowledge together that that any farmer may have regarding their their operation and their production practices and and helping them use that information to their to their best advantage.
52:09
SPEAKER_00: Scott Sartor from Croptail, I really do appreciate you being with us today.
52:14
SPEAKER_00: Before I cut you loose, I see you got a uh a window back there.
52:18
SPEAKER_00: You're down now, you're down in Mississippi, not far from from Memphis, right?
52:22
SPEAKER_00: That's right.
52:23
SPEAKER_00: Ish, sort of.
52:24
SPEAKER_00: Okay.
52:24
SPEAKER_01: Okay.
52:25
SPEAKER_01: 20 miles.
52:26
SPEAKER_01: 20 miles.
52:27
SPEAKER_00: 20 miles from Memphis.
52:28
SPEAKER_00: Uh, if you looked out that window right now, um, what uh what are current conditions right now in your backyard?
52:34
SPEAKER_00: What's the weather like right now, brother?
52:35
SPEAKER_01: We're sunny and warm.
52:37
SPEAKER_01: We are very dry, Davis.
52:39
SPEAKER_01: We are very dry.
52:40
SPEAKER_01: In fact, they're furrow irrigating uh wheat land in the delta so they can plant.
52:45
SPEAKER_01: I mean, we are way, way overdue for a rain.
52:49
SPEAKER_01: And so we had good yields down here despite of that on our irrigate crops, cotton, corn, soybeans, irrigated did really well.
52:56
SPEAKER_01: Even non-irrigated has been doing pretty well as well.
53:00
SPEAKER_01: Uh, we did have a few pockets where, you know, um we were very dry from late July until early October.
53:08
SPEAKER_01: And so we had a few misses on some non-irrigated soybeans, but I think otherwise we're in pretty good shape.
53:13
SPEAKER_01: But yeah, we are our subsoil moisture load.
53:15
SPEAKER_01: The NAS report yesterday had a 60% in the very short category.
53:19
SPEAKER_00: Yeah.
53:20
SPEAKER_00: Wow.
53:20
SPEAKER_00: Wow.
53:21
SPEAKER_00: Now, when a when a born and raised uh Mississippi farm boy says it's hot, you know, I imagine that's gotta mean like 115, 116, maybe.
53:31
SPEAKER_00: What is hot equity?
53:33
SPEAKER_01: Put a number on it.
53:34
SPEAKER_01: Let's go with uh 103 plus.
53:36
SPEAKER_00: Oh, 103 plus.
53:38
SPEAKER_00: That sounds right.
53:39
SPEAKER_00: That sounds right.
53:40
SPEAKER_00: We're uh we're 72 degrees.
53:42
SPEAKER_00: It's gorgeous here in Kansas City right now.
53:46
SPEAKER_00: We're 77.
53:47
SPEAKER_01: We're 77.
53:48
SPEAKER_00: Okay, all right.
53:49
SPEAKER_00: Well, I think for this time of year that probably counts as hot, doesn't it?
53:52
SPEAKER_00: Dry anyway, for sure.
53:54
SPEAKER_00: We're dry here as well.
53:55
SPEAKER_00: I got a vest on here.
53:57
SPEAKER_00: I see that.
53:58
SPEAKER_00: I see that.
54:00
SPEAKER_00: We uh I expect harvest across the Midwest will continue at a uh breakneck pace.
54:06
SPEAKER_00: We got uh higher than expected normal temperatures, below normal precipitation expected for the short time.
54:12
SPEAKER_00: Let's look over to the National Weather Service, uh, who is calling for temperatures below average in the West, given the developing upper trough pattern.
54:21
SPEAKER_00: Meanwhile, a building ridge in the central U.S.
54:25
SPEAKER_00: will promote above average to well above average temperatures through this weekend.
54:29
SPEAKER_00: Temperatures in the eastern average to slightly below average for the next few days, thanks to the lingering nor'easter.
54:37
SPEAKER_00: Scott, I got to torture you just a little bit longer here.
54:40
SPEAKER_00: I do this every single day because uh, you know, I like to spur mild interest where I can.
54:46
SPEAKER_00: I've got some items of mild interest from this date in history.
54:50
SPEAKER_00: Are you ready?
54:51
SPEAKER_01: Ready.
54:52
SPEAKER_00: The uh the first one, 1803.
54:55
SPEAKER_00: The United States Senate ratified the Louisiana Purchase.
55:00
SPEAKER_00: You probably know some people that say Louisiana, don't you?
55:02
SPEAKER_00: That far south?
55:03
SPEAKER_00: Yeah.
55:04
SPEAKER_00: Yes.
55:04
SPEAKER_00: Louisiana Purchase, uh ratified by the Senate this day in 1803.
55:09
SPEAKER_00: Here's one.
55:09
SPEAKER_00: Uh Grandpa Jones, American singer and songwriter and banjo player.
55:15
SPEAKER_00: You may know him from Hee-Haw, born in uh 1913.
55:19
SPEAKER_00: I remember watching He-Haw at my uh my grandma's place.
55:23
SPEAKER_00: And just one more.
55:25
SPEAKER_00: This date, October 20, 1979.
55:28
SPEAKER_00: It's the birthday of John Krasinski.
55:30
SPEAKER_00: And here he is, of course, uh depicted uh sporting his famous smirk as Jim Halpert on The Office, one of my uh favorite shows.
55:38
SPEAKER_00: You office fans will see what I've done with that visual there.
55:43
SPEAKER_00: Scott Sarter from Croptell.
55:45
SPEAKER_00: Brother, um, thank you so much for spending so much time with us today, for uh, for making some of these things clear.
55:52
SPEAKER_00: It's it's uh it's obvious that that you've you've got this figured out, you've got a heart to do it, you've got a great reason why people um need to get their get their finances put together and and all put together under one roof there.
56:07
SPEAKER_00: I'd like to talk to you again sometime, Scott, real soon, if you don't mind, sir.
56:11
SPEAKER_01: Absolutely.
56:12
SPEAKER_01: Appreciate it.
56:13
SPEAKER_00: Had a great time.
56:14
SPEAKER_00: Scott Sartar from Croptell.
56:16
SPEAKER_00: He's also Croptel Scott.
56:18
SPEAKER_00: Go to croptel.com if you want to dig in to uh to what he's uh what he's talking about here and get yourself together if you need to do that.
56:26
SPEAKER_00: I'd uh I'd like to thank Trade the News.
56:28
SPEAKER_00: Trade the News provides support for what we do.
56:31
SPEAKER_00: My folks here on the squad use trade the news every day for news that we can use.
56:36
SPEAKER_00: Heavens, it's useful.
56:37
SPEAKER_00: Use trade the news for useful news you can use, use trade the news.
56:42
SPEAKER_00: And I'd like to also direct you to AgBull.com where you can dig deeper with AgBull Intel.
56:47
SPEAKER_00: Take your marketing by the horns with Agbol.
56:50
SPEAKER_00: Visit AgBull.com or call 855737, followed by the letters F-A-R-M.
56:57
SPEAKER_00: That's 855-737 FAR, followed by the letter M for the details, AgBull.com.
57:05
SPEAKER_00: We'll be back first thing in the morning with AgBull A.M.
57:08
SPEAKER_00: to set you up bright and early, and then I will talk about updated fertilizer prices at retailers tomorrow afternoon, right here on AgSquawk in the afternoon.
57:16
SPEAKER_00: We hope to see you then, everybody.
57:17
SPEAKER_00: Come on back, won't you?