Ag perspective with Ken Root

Ken

Root: We are grateful that you are joining us for another episode of the Ag View Pitch, as we know that your time is very valuable. Our team at Ag View Solutions is always here for you for any questions or comments that you may have. Please feel free to reach out to us at cbarron@agviewsolutions.com. And now, here is your host, Chris Barron.

Chris

Barron: Welcome everybody to another episode of the Ag View Pitch, and today we're going to have a conversation with Ken Root retired farm broadcaster with 43 years of experience. And so we're excited to have Ken on here. He's been with WHO Radio, WMT, Iowa Agribusiness Radio, and it's just an honor to have you on here today, Ken. How you, how you doing, Chris?

Ken

Root: I'm doing all right. I'll let people know that I'm in Florida and I have avoided this since November, and I think it was a pretty good move for me to take my farming operation South until April, because, you know, I watch weather recreationally here, and I am amazed at how bad this weather has been. Of course, I grew up in Oklahoma, and the range of weather that they've had there through all these years would be a really poor place to have a base— bench line for global warming. But it shows that Mother Nature can be totally in charge and you're going to have to deal with her.

Chris

Barron: Well, and, and, uh, that's for sure, that's a true thing. And it looks like the weather's been pretty nice in Florida. It's the only state, it looks like, in, in the entire United States that, that's, uh, been a place that you could tolerate to live in for the last several weeks at the least.

Ken

Root: Yeah, we have a National Hate Florida Day, I think was last week.

Chris

Barron: Yep, yep. And I, I can understand that sort of, but Hey, uh, Ken, let's, um, what I wanted to do here today was just to tap into, you know, your 46 years of agribusiness experience and just be involved in this industry. And there's just been a lot of conversations on several topics that I kind of wanted to just have a conversation. We did a Dad's Wisdom, so if any of you did not hear the Dad's Wisdom, I did a Dad's Wisdom with Ken, oh, what was that, a couple of months ago.. And I think if you haven't listened to that, I'd recommend you go back and listen to that. And also today what we want to do though is just hit a few topics. And one of the first topics I wanted to touch on with you, Ken, is, you know, obviously we do now have a different administration. We are probably facing some, some different dynamics in the ag industry.

And I kind of wanted to get your perspective a little bit with with the years of experience and seeing the baton handed from one administration to another and how things change. Now that you've seen the Biden administration make some changes here, and quite a few of them right out of the chute, what's your thoughts so far and what are some of the things that you think that as farmers we should be paying attention to?

Ken

Root: Chris, I think farmers will be definitely a major factor in anything that has to do with climate, uh, anything that has to do with energy within this administration. I can't say that at this time what I believe the Biden administration wants will be enacted, nor how it will play out. I'm a reporter. I report what's happened. I'm not a prognosticator of what can happen, but But I'll take you through some scenarios through this time, if you wish, that may give you either a historical perspective or a potential to broaden your thinking. Trump is gone, and through all the bitterness that we have had of this, we have to get ourselves around the fact that this is a Democrat administration that always has a different agenda than a Republican administration. Democrats tend to want to favor social programs. They want to do what's right for the world.

I'm saying that in a loving manner because I have some friends that are Democrats. I wouldn't want my daughter to marry one, but I do believe that it's positive from a perspective of more than 50% of Americans to move a different direction. And in agriculture, we really benefited a great deal during the Trump term because every time that he decided he was going to move on China or something else, he remunerated agriculture rather handsomely. So hold that in your heart, but again, remember he's gone. Mm-hmm. The potential for this administration, I think, is to come up with a carbon credit. If I were to find two words about this administration, it's carbon credit. I don't know what it'll be.

Tom Vilsack's not even put in as the actual Secretary of Agriculture as of the date of this recording, but I believe it will be something that will parallel many of the things that farmers have looked at and embraced in the times past, and that is you're gonna get an offer for payment to sequester carbon. Now that we're moving into this type of trying to— of environment of trying to change and to reverse our global warming, it is going to be a hit-and-miss thing on what we try to do and whether it'll work or not. But really, I encourage farmers to look at more the bottom line for themselves than what they think the science may turn out to be. So, in order not to answer this question forever, I would say that farmers need to consider any program that the government puts in front of them that would pay them for doing many of the things they're already doing and potentially a few more.

Chris

Barron: Well, and, and that's a good thing. I, you know, I, I think, um, we want support in the ag industry, but on the other side, you know, you look at China and, um, the tariffs that Trump had, um, in place. The Biden administration has not removed any of those things yet, has not changed anything. As we look at China and we think of demand, you know, as farmers, we our preference is to get paid for the production side of things. And as we look at China being probably our biggest demand, especially for the grain side of things now, it looks like they're buying a tremendous amount of corn as they try to grow their livestock herd back again on the pork side of things. What's your thought as far as China is concerned and the relationship there?

Do you see any interesting bumps in the road from your experience over the years as administrations change, or do you think, you know, we're going to have some opportunities there, additional opportunities more than what we've even seen to this point?

Ken

Root: Well, I followed China ever since I went there in 1981, and then again in 2008, and then again in 2013. And I was an ag reporter, and I got as much information as I could secondhand that I tried to connect the dots. China is a huge market. China can't grow as much food as they want for an upwardly mobile population to eat. They want our pork, they want our beef, they want our raw materials as well. I was interested to note several years ago that I talked with the state statistician in Iowa, and he said the number one export from Iowa to China is soybeans. "Okay, we all knew that." He said, "What's number 2?" I said, "I have no idea." He said, "Scrap copper." And it kind of hit me that the amount of raw materials or recycling materials that they are sourcing from all over the world shows the power of that economy.

So I believe that China is a strong influence I would much prefer to keep them as a trading partner than as an enemy. And I would hope that we have the capability to access them in a free, fair market to be able to produce their needs. There's a number of other countries that want to do the same thing: Brazil, Argentina, um, Australia, New Zealand. You can just line up all the countries that are exporting— countries around the world. And know that those countries are going to do their best to be able to supply China. But I think that we have a number of advantages, that American farmers can produce a crop every year, our quality is high, and that we can benefit greatly in the total value of our product by selling to China. If you lost China as a market, you have to consider that you are needing to back down your supply. And American farmers are terrible at reducing supply voluntarily.

Mother Nature has to take it down. So I really think China is a key market and will remain a key market for as long as I can see.

Chris

Barron: That's good. And that, and that kind of does lead me into some additional questions. You know, we— you've, you've been through a lot of agricultural cycles economically where we've seen good times and bad times. And one of the things I learned a long time ago from a mentor and that I've observed working with producers is occasionally as farmers sometimes we'll make, you know, we make bad decisions during good times and sometimes we make good decisions during bad times. And so, you know, just thinking about that as far as right now we've got pretty strong commodity prices and You know, we've had, we've, we're coming off about 5 years of kind of really, uh, struggle in, in what we've seen with just farms not really being able to make money very well and, and just trying to hold things together. So I guess what's your, what's your thought as we move forward?

We've got probably a really good year coming on here right now. I've heard some comments that, you know, well, maybe there shouldn't be any assistance for farmers, or maybe farmers are going to be in really good shape now that we've had a good year. Well, in my experience, it takes more than one good year following five bad years in the economy. So any topics or comments on things that farmers should be paying attention to as it relates to both the external and internal components of the economy?

Ken

Root: Chris, I think you're right in your earlier statement that people tend to make bad decisions in good times and good decisions in bad times. And I think the reason for that, if I may cite the 1970s and 1980s, is it's not what you said, but it's that decisions made in good times turn out to be bad decisions when the times change. And historically, we saw an incredible shift in American agriculture from the 1970s to the 1980s. We saw our first uptick really since World War II when the Soviet Union came in and put China in their place today, buying a huge amount of agricultural products beginning in 1972. And then we saw a change of administration in 1981 that the Reagan administration said, we're going to cut these— this inflation rate and we're gonna raise interest rates. And also thrown in there was Jimmy Carter's grain embargo.

So what happened was that all the decisions people made in the 1970s to buy farmland at a higher price, bring their children back into the farming operation, was deemed a bad decision in the period of the 1980s all the way through 1988 by the fact that many of those people had to really, really cut back, lose their farms in some cases, and their children go back to their own lives and jobs. There's a period there that I regret a great deal in that people in agriculture in the bad times, 1981 through 1988 for example, they said to their children who were getting ready to go to college, you're not going to major in agriculture. It's a dead industry. You are not going to be subjected to what we have, and you're not going to do it. Then in 1988, we saw an equilibrium. We didn't know it till we looked back, but there it was. And from that point on, agriculture has actually thrived.

It's had better times in a few years, 1996, and of course those go-go years from 19 2008 to 2014. And people flocked back to the universities with their children to get agricultural degrees. And it just shows how wrong we can be in our decision-making. But it doesn't mean that you shouldn't continue to try to figure out where the world is going and anticipate that rather than react to where the world is and have to suffer from it. So I see that we are potentially on an uptick and that it hasn't been very long, about as long as the University of Kansas wound up a major player in football. I think from September to December, to December one year. It's a matter that you have an opportunity here to determine whether you're gonna push hard and benefit from it or whether you're gonna hold back and try not to lose if it runs out too quickly. And it's hard to say.

My gut feeling says we're in for a 3 to 5 year decent period, if not good period. But Chris, I really can't predict that any better than anybody else.

Chris

Barron: Yeah, the one thing that I think we can predict is, you know, volatility in agriculture and the economy. We're gonna have to be able to survive, you know, when, when there's tight times. And we need to be able to try to make some of those good decisions when times are good, and just to kind of be careful as we manage the business and just recognize that we are going to see the ebb and flow of the, of the economy. I mean, it's, it's always been there and it probably always will be, won't it?

Ken

Root: Well, in agriculture and everybody else, When you gain wealth, you tend to spend it, and you tend to increase your standard of living. And then when it comes time for you to have a lower income, you don't want to give up the standard of living that you had. Can you relate to this?

Chris

Barron: Oh yeah, definitely. I think we all can.

Ken

Root: And as a result of that, you know, we wind up just continuing to ramp up our cost of living. And I will tell you one quick story. There was an ag chem dealer in Georgia who happened to be the president of an association I work for, and he said, Ken, we had a period in the 1980s when we had farmers who did not make a soybean crop. So me and my owner of my company decided we were going to loan them money to live through the winter.

And he said, "These people had done pretty well before, and I went into their house and would sit down at their table." And he said, "In more than one case, the wife cried when I told them this is all the money I was going to be able to give them to make it through the winter." And he said, "Then we loaned them money to plant the crop again." But he said, "It was a better year the next year, and they were able to make a profit and pay us back." And he said at the end of that, my boss said, Sonny— or his boss said, Jake, his boss' name was Sonny— we ain't never doing this again. His boss was Sonny Perdue, and they were fertilizer dealers in Georgia who went through this situation. And I thought, you know, Sonny Perdue has as good an experience as anybody I've ever heard of.

To be able to be Secretary of Agriculture, to understand what it's like for farmers to face the cyclical nature of their business.

Chris

Barron: Well, and that's exactly right. I mean, that's the thing that we all deal with is, you know, every year. And this has been an interesting year, you know, right before we started recording this podcast, I just had another meeting with another producer getting ready for looking into 2021. And he was getting ready to leave, and I told him, I said, you know, again, I said, this, uh, you have black ink on the bottom of your cash flow projections. It looks like you're going to have a good year, and you are additional to my 100%. So as of right now, every single operation that we've worked with, that we've put cash flows together in our tool that we use called Profit Manager We see black ink on the bottom of every single projection to this point so far, and this is the first time in 6 years that I've seen that where, you know, we can look at a profitable opportunity.

So it's, it's finally nice to see that, but at the same time, I think we're going to have to be careful and pay attention to markets and, and pay attention to the things that we need to work on for sure.

Ken

Root: When you're an independent business person, I think you have only two states of mind. One is that you're nervous, and the other one is you're scared to death. And you just have to deal with the fact that you don't know what's coming next. So pay attention. Don't do things that are, you know, from the hip. Make sure you've got support within your family and all those who farm with you before you take a step. But then, you know, once you set a course, hold it. This is a cyclical business. No matter what anybody else says, we're going to have good times, we're going to have bad times, and how you react is whether or not you pass that on to the next generation.

Chris

Barron: Well said. Well said. You know, one of the last things I wanted to touch on with you here is a phone call that we get a lot of, which is, you know, sometimes it's dad, sometimes it's a son or daughter or the next generation. Generation that calls and says, um, uh, we are in the midst of a transition, or we need to be in the midst of a transition, but we're not sure economically how we can handle it. Junior needs to come into the farm, or Junior is already here, and the dad's trying to figure out how to unwind, how to manage the tax situation. Sometimes there's get along, sometimes there's not getting along as far as the communication within the operation as all of that occurs.

And in this current climate, and we start to see, you know, this administration with some tax changes, with, you know, all kinds of different things, with stepped-up basis to, you know, to inheritance tax changes and those kind of things. So it's enhanced the nervousness, I think, and the urgency of transition. So with all that said, and again, with your 46 years of experience, any, anything that you would recommend that farmers, you know, now that they're awake and they're starting to look at this, and like I said, we get calls about every week on this topic, any advice or any thoughts or perspective on transition to the next generation that you think is important at this point?

Ken

Root: Well, human nature continues to be the same, and family businesses in many cases don't think of themselves as much of a business as they think of themselves as a family. But my advice is to get professional planning, not help after the fact, but planning before. And there's a lot of people that are yelling loudly now that if we have a change in the basis and it's not stepped up to the next generation, it's going to create far greater liability for the average farmer than what the inheritance tax would be. So you really need to be prepared for it. Rich people have always dealt with this. So just consider yourself rich and go get somebody to help you keep your wealth within your family.

And try your best to be able to understand that these laws could change You can lobby to keep them from changing personally and by donations to your congressman, or you can also just try to get out ahead of it as much as you can. And, and don't let the issues of the family or the, the proprietary situation of so many farms of one person being in charge get in the way. It'll always be a problem, but it's one you can, you can defend against. You can't solve it, but you can defend against it and be ready for that situation when it happens.

Chris

Barron: Yeah, and I think typically too, we see different generations looking at the same thing from a pretty different perspective. And I think one of the key things that we've learned as we've worked with a lot of operations as they begin to develop their business structure and consider transition is the importance of communication between the two of them. And I like your comment on a third party because sometimes they're saying the same thing to each other, but they're not listening to each other and they need to work together as they, you know, work toward managing the transition process. Any comments on that and the need to, you know, you're on the same team, but you also need to listen to each other and kind of work together as a team.

Ken

Root: Well, there's a lady by the name of Jolene Brown that does a lot of mediation in families who are in transition, and I read some of her work. And of course, from my past, I had Dr. Val Farmer. I was able to spend 7 years with a psychologist every Monday when I was doing AgriTalk, and he talked about this all the time. And it's, it's a challenge because you've got multiple children in a family, some farm, some don't. You've got probably a strong parent involved, maybe two, who don't want to make changes. You also have other people who are never going to die. And as my father always said, and this was one of the worst things I thought, he said, "I'm going to die and your mother's going to divide things up." Well, my mother died, and then 4 years later, after he had been a 4-year-old with a checkbook for 4 years, we divided up what was left. So it's— it can be ugly.

And as children, you only have a certain amount of control. As the parent, you have a narrower perspective. And many of them are not easy. You know, you meet families every once in a while that say, oh yeah, we worked this out. 20 years ago we split all this up and everything is just fine. You just hate those people because they're just not very many of them. Most of them have a real crisis before they get this done.

Chris

Barron: Yeah, and, and that's very true. One of the things we, we ask people is, you know, when's the last time you updated your will? And if— and we haven't done this, but it would be interesting, you know, I bet you that the average is probably, you know, 10 years or so. And it— and time does fly, and, and you think, well, I just did that a couple years ago, and before you know it, a couple years ago was 10 years ago. And And things change and we always use the term evergreen. Are you keeping your, you can set up a transition plan and have it all done, but 2 years later things change. And so you do need to go back and review kind of what that plan is and definitely keep it, as we call it, evergreen. But this has been a great conversation.

We're getting close to time here, but I just, is there any other perspective, anything I didn't ask, anything that you think's hot on the press that, you know, I didn't bring up or something that's, you know, farmers in the next season as we get closer and closer, hopefully we're praying to God this spring planting season and some warmer weather will be in front of us here. Any other final comments or thoughts or ideas for the producers listening?

Ken

Root: Well, I want to wish everybody a good 2021. And I don't know what the weather will be this spring and whether it'll be highly variable across the Plains and the Midwest. But I do think that if you're going to be able to keep your farming operation intact, you're going to have to be able to know real facts. And I think in the last 4 years, a lot of people got away from the facts and got into the hyperbole and weren't really sorting things out very well. Now that we have a new administration that I would say most farmers did not vote for, There's a lot that's going to potentially change, and you need to get good information to be able to make good decisions. Let me leave it at that.

Chris

Barron: That's great advice, and I, and I think that that echoes what we always say. It's all about dialing in your numbers and, and making sure you have perspective and keeping your eyes wide open. So that was a Really good conversation. I think, uh, it dovetails, uh, the, the Dad's Wisdom that we did with you a few months ago. Like I said, if anybody didn't listen to that, go on back and, and take a listen to that as well. And Ken, we really appreciate your time. This was a great conversation just for perspective, is what we try to do at the Ag View Pitch is bring some things out that people can think about and throw some nuggets information out there. Really appreciate it, Ken. Thank you.

Ken

Root: Chris, glad to do it. Take care, have a good spring.

Chris

Barron: You bet, you too, and enjoy Florida in the heat and bring some of that back when you come with, with you if you would. Again, that was Ken Root, retired farm broadcaster, 46 years of experience in the industry, and we really appreciate the conversation. And again, everybody, thanks for listening, and we'll catch you again next time on the Ag View Pitch.