Joe Peiffer on The Big Show 9/17/2021
Attorney Joseph Peiffer recently chatted with Andy Petersen from The Big Show about how to plan ahead looking forward from the beginning of harvest. Listen below and feel free to read along!
Andy Petersen:
Well, let’s talk a little agricultural business here with a good Big Show buddy, and a business expert, Joe Peiffer, Ag & Business Legal Strategies. And Joe, this growing season has been unique like they all are, but what are some things that you’re thinking about from a business perspective here before the combines begin to roll in earnest? And of course, maybe thinking ahead a little bit.
Joe Peiffer:
This year with the drought, there have been the added difficulty of saying exactly what kind of yields are we going to have? What’s the weight of that corn going to be? How filled out are those soybean pods? Once those combines start rolling, those answers will come in. That’ll be good to know that. But that also leads into the questions of where do we go next year? What are we going to have as input costs? We know our fuel price is way up. All we have to do is look at the gas station every time we fill up. Gas and diesel are both up. We know fuel prices are up. We’ve heard that fertilizer prices are way up. We know that chemicals and seed is probably going to go up. And we can expect rent to go up because I think there were a record number of lease termination notices went out before the 1st of September in Iowa.
Joe Peiffer:
All of that means that all of those different inputs are going to be in play next year. We also know that the price of machinery is at record highs. Trying to get new machinery is difficult right now. We’ve got the supply side problems with the chips being short and all of our nice, fancy new equipment has a lot of chips in it. Just like our cars do. Well, if I need chips and I can’t get them, you can’t get the machine. So that’s why we’re seeing used prices be through the roof and some very good sales on a lot of used equipment right now.
Joe Peiffer:
So we’ve got a lot of different variables going on. So one of the things we’ve got to be looking at, even though we haven’t harvested the crop, it’s time to look forward. What are we going to be doing for next year? It will be time to renegotiate leases. And if we’re going to renegotiate leases, we better be figuring out what’s it going to cost us to put fertilizer in? What’s our fuel cost going to be? Chemical costs. And of course, rent is very hot, will be high in there.
Joe Peiffer:
And then we have to take that supply side of what we need the inputs. And we have to put that against what are we going to get in crop value? What’s it going to sell for next year? Can we lock in the price? How are we going to lock in the price? And it’s important to analyze all of that and lock as many things in as you easily feel comfortable doing before you decide how much am I going to pay for rent? Because if you decide your rent in the vacuum, without looking at some of those other things and having some things locked in, you may offer too much for rent. You might keep the farm, but you may wish you hadn’t kept the farm as far as a cash flow for next year.
Andy Petersen:
Yeah. So with all those questions out there, knowing cost to production may be a little bit difficult estimating that, but maybe then it sounds like a conversation with your financier before harvest would be a good idea?
Joe Peiffer:
It’s almost good to have a good conversation with your funder or banker. You need to know what they’re expecting, what your margins need to be, what your balance sheet ought to look like. To see whether you’ve got the proper short-term position. And get a good feel for what it’s going to take to make sure he’s going to be able to finance you for next year. He’s going to want to see next year’s cash flow. He’s going to want to know what you’ve done as far as protection, as far as marketing the grain. And he’d be interested in knowing what your plans are as far as locking in costs.
Joe Peiffer:
If you don’t come in with a package, he may look at just the averages, but every farm is different. Every farmer’s costs are different. You should be presenting to your bank, your package, not just the generic. Because no two farms are the same. And it’s very important that you know that going in and you work carefully with your banker as you plan next year.
Andy Petersen:
Joe Peiffer good Big Show buddy, Ag & Business Legal Strategies. And of course, if you need some help, maybe designing that presentation, they’ve got a lot of experience doing that. ablsonline.com is where you can find out more. Ag & Business Legal Strategies. Here today on the Big Show…
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