About This Episode
Chris Patterson started farming near St. Ansgar in Mitchell County, north central Iowa, in 1991 at 19 with a farrow-to-finish hog operation because he had more time than money. Terry came in around 1994, and in 1995 they rented and bought a farm together. They built a 3,600 head finishing site in 1998 and formed an LLC, added a second hog site in 2006, and in 2016 were approached to sell. They 1031 exchanged out and still receive the manure.
From 2003 to 2020 they farmed the same acres, never losing any and never gaining any. Terry explains that growth ran through the hog operation and through making the acres they had better. They own roughly 60 percent of what they farm counting their parents, and they keep investing in tile. On the home 240 their dad bought in 1972, the tile they finished in 2014 cost more than he paid for the farm. Chris Barron presses them on land versus further improvement.
Roles sorted themselves out and then got deliberate. Chris plants, does the marketing and the books, and consults on accounting outside the farm; Terry runs operations and the grain system, which Chris calls the toughest job on the place. Neither jumps on the other's mistakes. Now roughly 48 and 50 with no children expected back, they have an equipment LLC, a trucking LLC, a separate grain entity, and individual farming entities so they can transition to each other or to an outside party.
“We feel that we have built too good an infrastructure in our operation just to get to the age we want to retire and just say, well, we're just going to rent it out to the neighbor.”
— Chris Patterson
Key Takeaways
Chris started farming in 1991 at 19; Terry joined about 1994, and they bought and rented their first farm together in 1995.
They built a 3,600 head finishing site in 1998 and a second site in 2006, then 1031 exchanged out of both in 2016 while keeping access to the manure.
Acres stayed flat from 2003 to 2020, so growth came from the hog operation and from tile, yield, and production improvements.
They own roughly 60 percent of what they farm, counting their parents' ground.
On the home 240 their dad bought in 1972, tile finished in 2014 cost more than the original purchase price of the farm.
Their structure is an equipment LLC, a trucking LLC, a grain entity, and separate farming entities for each brother, built in their late forties before they need it.
Full Transcript
Chris
Barron: 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. Welcome everybody to another episode of the Ag View Pitch, and today we're going to have an interesting episode that we're going to call Brothers in Business. And so we're fortunate enough here today, after a long day of working on, on business development and stuff, with Terry and Chris Patterson. How's it going today, guys? Good, going good, good, good. So, you know, I'm going to preface this with everybody. I was thinking, you know, we're going to put this on YouTube.
Well, if you go to YouTube to look for this, it does not exist because, uh, Chris here is basically saying that he's apparently good for radio but not good for TV. Is that right? That's the way I Yes. Okay, well, I thought you looked pretty sharp. You know, you got a golf shirt on and you're looking, looking pretty spiffy, but you just didn't want to show off, right?
Chris
Patterson: That's right. Only the best for you, Chris.
Chris
Barron: I appreciate that. So, so today was just another day of us kind of working together, what we always call working on the business instead of working in the business. So, you know, it's sometimes it's a lot more fun to be out mowing waterways and scouting fields and spraying fungicide and doing all that important stuff that needs to be done as well. But I think, you know, you guys have done a phenomenal job as brothers working on the business for the last few years. You've developed some business structure that's a huge accomplishment. You guys have done a really good job of working together as brothers, making sure roles and responsibilities are clearly defined, and just working together really well and efficiently, I must say, as a team, because you guys run fairly lean too with the two of you. Essentially taking care of the majority of the roles in the business.
So with that said, um, Chris, I'm going to pick on you first and we'll let Terry warm up as I ask this question. But what I want to do is just have you talk a little bit about the history of your operation and kind of how you guys got started farming together as, as brothers.
Chris
Patterson: Sure, um, I started farming 1991 with our dad Roger. Rented a couple farms, started my own farrow-to-finish hog operation on a very small scale because I had more time than money. Um, did that for about 3 years.
Chris
Barron: How old were you in '91? I didn't do the math and figure out how old you are now.
Chris
Patterson: Uh, well, I was, uh, 19.
Chris
Barron: 19, okay.
Chris
Patterson: So I got married in the summer of '91. Actually, I turned 20 in '91. So, um, yeah, we started pretty young. Um, '94 I think it was, Terry came in and Dad just kind of slid over a little bit, and Terry started some acres with Dad. And then in '95 we rented a farm together and bought a farm together and Things just increased from there. In '98, we built our first hog confinement setup together and formed an LLC. We had 3,600 head for our finishing operation. We had gotten out of pigs on our own, and then in 2006, we built another hog site. And then in between there, we picked up some more ground. And then in about 2004, I think, our dad decided to kind of slide over more and rented us most of his ground. And he still farms with us today. He has some rented land of his own. Um, and we farmed the same amount of acres from 2003 to 2020.
And we, we never lost any and we never gained any, and we were pretty proud of that. We, we had other opportunities along the way that, uh, some collaboration opportunities at harvest that we did for a while. But with our hog operations, we were busy and we had a full-time hired man for probably 6 years. And then in 2016, we're approached to sell our hog sites, and by then we could see that we probably didn't have any children coming back to farm, or we, we don't think we do anyway. Um, so we 1031'd out of our hog sites, and we never planned on selling them, but it's probably been one of the best decisions that we've made in our career.
Chris
Barron: Yeah, why, why do you think that is? Is— was it more for being able to have time to focus, or what? Why would that be?
Chris
Patterson: I think family, you know, um, was a big part of it, and our bodies were starting to wear out. I, I mean, especially now. We, we built our first hog site when I was 27 and Terry would have been 25, and, um, so we got out of them 5 years ago. So when I was 45 and he was 43, and we did a lot of the work ourselves, um, we enjoyed the work. Wasn't that we didn't enjoy it, but a lot of people think there's a lot of value to the manure, but like our dad has said, you paid for it every day.
Chris
Barron: As an investment.
Chris
Patterson: As an investment. So, right, we still receive the manure. We worked out a deal that we still received the manure, so That's been a, that's been a good deal.
Chris
Barron: So, all right, cool. So, uh, I'm gonna pick on you now, Terry. Um, anything he left out? No. So, you know, so I gotta preface everybody listening this. So, um, I would say probably Chris, you're the one that probably maybe, uh, does more of the speaking and, and talking. And then, and then we got Terry here that's sits and analyzes. But the one thing I would say, having meetings with you guys, uh, when, when Terry starts to speak, you better listen because there's probably going to be some, some pretty good wisdom. And so I guess, not to put you on the spot here, Terry, but, you know, um, I'm going to ask you this question and then I'll have Chris follow up. And then if he, if he wants to take it first, he can. But from 2003 to 2020, if I heard you right, you guys farm the same amount of acres.
One of the things that we always ask our clients is, you know, how do you define growth? You know, and so, you know, some operators will look at that and say, well, you know, how are you growing if you, you know, if you went that many years and didn't increase acres, what happened? Well, I'm gonna throw a couple of things out there. It's okay to grow with family, it's okay to grow in profitability, and a whole bunch of things. But what I want to do is ask you, Terry, What do you think was the definition of growth for you guys during that time frame? Because you guys have been extremely successful.
Terry
Patterson: Well, we did grow, but we grew on the hog operation. We realized that we were not finding land easily accessible. It was, it's very competitive to get more land, and we grew on the hog operation to help our bottom line, and it did. And we also decided, you know, we can't expand our acres, so let's make the most of the acres that we have. And we've really tried to fine-tune that, and we're still working on that. You know, there's— we've, we've, uh, just 3 years ago went through some major changes on our row crop operation that we feel have definitely made huge impacts on our bottom line.
Chris
Barron: Anything to add to that, Chris?
Chris
Patterson: I think that speaks exactly what we did. We really focused on making what we had better. Not that the farms that we have, the land that we farm, is extremely productive, and, and we're very proud of where we live and feel very fortunate to farm the land that we do. Um, we, we own probably 60% of what we farm. We got a really good base, and when I say we, I mean between Terry and myself and our parents. And, um, that has been a huge advantage to us. Um, we have that to fall back on. And yeah, we, we just, we've really made big strides in, in, uh, yield and production too.
Chris
Barron: So One thing I, I failed to say at the beginning of the podcast, tell everybody where you're specifically located. That has a lot to do with it, and so I messed up not asking.
Chris
Patterson: Yeah, we farm near St. Ansgar in north central Iowa in Mitchell County, and we live right next to this— I live a mile south of Iowa-Minnesota border, and we have almost all of our land in Iowa except one farm in Minnesota. Drainage is priority, has to be, and that, and our, our, the generations before us started that trend.
Chris
Barron: Yep, tile's big. Any other comments to that?
Terry
Patterson: No, just, you know, that's one where, one place where we've really added to our acres over the years is we've, Chris and I have invested a lot of money in tile, and we're, we're continually doing that. You know, we're, we're trying to get our acres the best that they possibly can be.
Chris
Patterson: I would say that, um, well, I'll just give an example. Our home, 240, that Dad purchased in 1972, Terri and I finished tiling it in 2014, and we spent more money in tile than Dad paid for the farm.
Chris
Barron: Wow, that's a That says a lot about inflation over time, right?
Chris
Patterson: I don't think Dad believed me when I told him.
Chris
Barron: Wow.
Chris
Patterson: But that's just what we did. It's just, uh, it's made it so much better. And we, we try to identify certain farms and, and just try to— and not only is just the tile we're putting in, but we're in an area that it's farmers, neighbors go together and group mains And we've had to update those systems over the years. Yeah, that's very expensive.
Chris
Barron: Yep. Well, and, and the other thing, you know, we talked about today in our, in our meeting that we were having with you guys on business development and looking at, you know, does it make sense to buy more land or does it make sense to improve what you have? And when you look at profitability on a per acre basis, you know, if you can increase yield by virtue of either, you know, water management either on the on getting rid of it side of things with tile or with irrigation or whatever. Are there some next steps that you guys are looking at? Is it more land? Is it, you know, continuing to improve what you have? Or what do you guys think, you know, something that farmers need to be thinking about as we look to growth?
Chris
Patterson: I thought that was very interesting what you were talking about with irrigation today. You know, I'm not saying we're done tiling because we're not. We've identified a couple places that we would like to update, but it takes time and this isn't the year to put tile in. It's went crazy with prices. But yeah, as far as us and adding land at this stage of our life, who knows? I mean, with no kids coming back, does it make sense to stick your neck out for the next 20 25 years, we don't know. I mean, just depends.
Chris
Barron: Any comments?
Terry
Patterson: No, I would agree with everything he said.
Chris
Barron: Okay, so what I want to ask you guys is, is we're going to talk about roles here first, then I want to get to transition a little bit. But, you know, you guys have done a really good job of identifying who does what. And so, you know, Chris, you spend a lot of time, you do some, some business consulting on the side as well, you know, on, on accounting and financial decision-making and those kind of things with some, some of your own clients, plus work on the farm and spend a lot of time in the office. And then Terry does kind of heads up the operations and runs that, you know. Talk— can you guys talk just a little bit about how you guys identified the roles and responsibilities and how you guys get along in that way?
Because I know a lot of, a lot of people listening to this that farm with brothers or cousins or whatever, it's like sometimes it's a pretty good tug of war of, you know, who's doing what. You know, I get— I'm gonna run the combine. No, I'm not. You're gonna— or, you know, vice versa, back and forth. So how do you guys work through that?
Chris
Patterson: Well, I think back in the early days when we first kind of started, that was maybe what kind of pushed us to this direction, um, because we could see that it wasn't efficient and it wasn't really working. Like you said, if— well, who runs the combine today, or who, who gets to plant corn today, or whatever. And I don't know if it was just by default or how we really came up with this, but I started planting when I was 15 years old. Dad turned me loose, and that's how we learned. Dad was a great teacher, just didn't realize it. Um, but I, I've always planted, even when I started farming. I've always enjoyed it, and I probably didn't give Terry the— probably didn't give him the opportunity, the steering wheel, man.
Chris
Barron: And so he probably didn't start yelling about it or say anything.
Chris
Patterson: Well, we probably did, but that was probably when we figured out that it wasn't going to work that way. But, um, you know, I don't know that my strength has always been the book work and I like that stuff. And Terry probably would tell you he doesn't. I don't know.
Terry
Patterson: Yeah, that's what I would tell you.
Chris
Patterson: Yeah. But I've always just kind of gravitated that way. I think that's probably the reason that we get along so well is because we do know he does things very well that I do not and vice versa. So I think we just realized and We sit down and we talk about stuff all the time. And when we had an employee, we had Monday morning meetings or whenever chores were done. And that I'm a big believer in.
Chris
Barron: Yeah, one of the things I think that you commented on that's a big deal that I think a lot of operations struggle with is the element of trust. Yeah. You know, is, you know, I think Terry, and you can speak to this, but You know, if he's doing the books, you don't have to worry about it. And when he shows you what's going on, it's not a question, right?
Terry
Patterson: No, it works very well for us. And I don't really know— I mean, he does things that I don't like to do, and I do things that he doesn't like to do. And I trust that he's doing them well to the best of his abilities. And he trusts me that I'm doing them to the to the best of my abilities, you know. And we all make mistakes, you know. If he makes a mistake, I'm not going to jump down his throat for it because I'm not perfect either.
Chris
Patterson: We went— so he— I believe Terry has the toughest job on our farm, and that's the same job you do on your farm, and that's run our, run our grain system. I feel that that's probably one of the most important jobs, um, you know. A lot of the stuff that I do is I mean, planting and combining. I mean, I know I keep up with it. I know how to operate the stuff and the bookwork and the marketing. I do all the marketing, um, and I've made plenty of mistakes, especially this year. But he's— we've talked about it and he says, no, you know, there's been other years it's been great. So it's just the way it goes.
Chris
Barron: There's probably value not having that marketing decision thing on your shoulders, right, Terry?
Terry
Patterson: Absolutely.
Chris
Patterson: Yeah, I was wishing I didn't have one this year, right?
Chris
Barron: That's I think a lot of times, you know, being able to pass on some roles and responsibilities that you think you need to have or you think you should have sometimes is a weight off your shoulders if somebody else is willing to take it, isn't it?
Chris
Patterson: Yes, very much so.
Chris
Barron: So another thing I want to get to with you guys is transition. Your dad, and I'm hoping to get him on a Dad's Wisdom, he actually happens to be in the room watching us record this, so we're trying to warm him up here, but Um, as we talk to you guys a little bit, your dad did a phenomenal job of transitioning over to you guys. Now, he had two sons to transition over to. You guys are in, you know, close to 50. Um, it's somebody's birthday today, Terry. I'm not sure who's, but I think it's your birthday today, so happy birthday. Um, you're, you're what, 48? And Chris, you're what, 50. And so, you know, what, what's really frustrating to Shay and I is when people call us and they're 70 years old and they want to start thinking about transition. What's really awesome is when people are 50-something, and, and 60-something is okay too, but to start thinking about transition.
You guys have done a phenomenal job of business structure. You've put together an equipment LLC, a trucking LLC, you've got your grain system in its own business and it's an operating entity. And then you each have your own farming operating entities. And so that structure has set you guys up so that you could transition over to one another, or you could bring someone in, or you could transition over to another person. What, what do you guys see in terms of value to that, and, and what kind of peace of mind does that give you, and what other things do you think you need to be paying attention to? I'm going to start with you, Terry.
Terry
Patterson: You asked a lot of questions.
Chris
Barron: I know, I know. And Shay always yells at me like, how many questions are you going to ask?
Terry
Patterson: Yeah, I don't know which, which one do you want me to answer first?
Chris
Barron: Uh, well, I guess start with the one on transition. You know, what, what you guys have set everything up, you know, what, what's this look like moving forward? Because, you know, do you guys have any kids? You both are telling me that, you know, probably don't have any kids that want to take over the farm. So what, what, what are some steps you need, you guys think you need to be thinking about?
Terry
Patterson: You know, that's why we hired you. Um, no, you know, we don't know what that looks like for sure yet, and, and that's why we started working on it when we did, when we're as young as we are, so that we have time to figure it out. You know, we feel the right person or, or the right people will come, come along when they're supposed to, and, uh, we should be able to get things worked out from there. And if not, then we'll have to take further steps on our own to try and figure it out. That's as far as I can go with it.
Chris
Patterson: Yeah, I think we just wanted to start early. We feel that we have built too good an infrastructure in our operation just to get to the age we want to retire and just say, well, we're just going to rent it out to the neighbor. That's not really what we're looking for. And mainly because who's going to be left in, you know, 15, 20 years? We don't know the number, but we want to be able to step aside gradually, probably. And who knows, one of us maybe decide to quit sooner than the other. You know, life, life happens. Things change as we go on. But we just wanted to be flexible enough in our structure to be able to do that.
Chris
Barron: Awesome. So, you know, I think, I think that's a key point I just wanted to bring up because, you know, a lot of times people are blessed with family members that are jumping up and down to take over, and sometimes you think they are and maybe they're not the right ones for that as well. And so be planning and thinking about, you know, what's, what's 10 years down the road look like, and, and what can we put in place now to make sure that 10 years down the road we're not struggling to try to figure things out.
Chris
Patterson: 10 years is a long time because I think back 10, 20, and 30 years and I think of how much has changed, right? And things that have changed in the last 10 years, I would have never guessed 10 years ago. So that's— we just need to be flexible.
Chris
Barron: Yeah. And, and I think again, the message I wanted to get out is the attribute to you guys as brothers seeing that and putting the structure together so that you guys can be flexible and go any, pretty much any direction you want to. And you think maybe there's no kids that want to be involved in agriculture, and you know, that could change too. You know, anything can really happen in life, and you want to be ready for any of those variables that may come your way. And so, so I think that's really good. And again, a tribute to you guys putting this the business structure together you did. And we work with a lot of people that struggle with, you know, what are the next steps? And really the first step is to get organized now so that you can go to a next step. So with that said, the last thing I want to finish up with is a little bit of light-heartedness here.
And I kind of forewarned you guys a little bit, you know, you guys get along really good right now, you know, you got roles and responsibilities, everything's all perfect and everything. I'm sure you guys, when you were, what, 10, 12, 13, 14, got along perfectly then as well. I'm sure worked together all the time. Was there ever any instances where maybe things didn't quite go as smooth as it appears they go now?
Terry
Patterson: Yeah, there always was. I remember the last physical fight that we had, and our dad pulled us aside and said, I'm tired of this. I'm taking the winner next time. That was it.
Chris
Patterson: I don't remember that. I do remember Terry throwing an empty pop bottle at me in the house. We were— he was chasing me around, and, uh, we probably weren't even that old, and that was not good. It was one of them 16-ounce Pepsi bottles.
Chris
Barron: Did you duck?
Chris
Patterson: I don't remember what happened, but I—
Terry
Patterson: yeah.
Chris
Barron: Do you remember that, Terry?
Terry
Patterson: I don't, but what the younger people have to know is We didn't have plastic bottles then. They were glass.
Chris
Barron: And they were pretty heavy. That's a 16-ounce one. That had a little weight behind it. You got a little thrust behind that. You would have remembered it probably if it would have hit you.
Chris
Patterson: Yeah, I'm pretty— it didn't hit me, but it probably came close. I wasn't very quick, so.
Chris
Barron: Yep, yep. So any other good ones like that? Apparently there was no bloodshed or anything, so that's good.
Chris
Patterson: We had plenty of bloodshed. It just was usually dumb stuff. And we had minibikes and 3-wheelers back then. We had a few accidents.
Chris
Barron: So, well, those three-wheelers are supposed to be really good, right? Yeah, they're not dangerous or anything. So, all right, well, hey guys, I really appreciate the conversation. I think this was a good discussion about brothers in business, and it's a testament to you guys what you've put together as a business. I still go back to that, you know, going from 2003 to 2020 and saying, hey, we had the same acres But I can sit here and watch how your balance sheet grew during that time, and you did have hogs, but you were able to capitalize on that, you know, and transition out of that 2016 and really focus on your crop operation and growing the business. So congratulations on the success and wish you a lot of success in the future.
Chris
Patterson: Thanks a lot, Chris. We've enjoyed working with you guys and continue to look forward to working with you in the future.
Chris
Barron: Sounds good, and we look forward to working with you. Thanks, Terry.
Terry
Patterson: Thank you.
Chris
Barron: You bet. And, uh, everybody, uh, have a good rest of the day, and we appreciate you listening to us, and we will catch you again next time on the Ag View Pitch.