Farm buying toolbox with Grant Wiese: Farm 640

Shay: Welcome back everyone to another episode of the Ag View Pitch. Today you have Shay Foulk with Grant Weezy. Grant, thank you so much for hopping on. It is the beginning of September here, a lot going on. I know people are thinking about headed to the field. How are things looking out your way in Nebraska?

Grant

Wiese: They're looking really nice. We've gotten some fortunate rains here that have been pretty consistent throughout the year. I know guys are out chopping right now. And we have Husker Harvest Days coming up next week, the second week of September. And then it seems like once we get past that Farm Progress Show, we are hopping into soybeans pretty quick.

Shay: Yeah, I imagine on the lending side, you start hearing from farmers less and less this time of year. Is that accurate?

Grant

Wiese: It is until they run their line of credit over. So those budget notes, it's, it's always the irrigation expenses and that last insurance bill that seems to get people, and line of credits are about maxed out this time of year. We're a month away from starting to see some income proceeds to pay those down. So, uh, you have some emergencies that need taken care of this time of year.

Shay: Yeah, I, um, for those of you that don't know, um, I I enjoy following you on X, formerly known as Twitter, and I like the tweet that you had put out of don't wait until your line of credit's ready to run out to call your lender, have that conversation, or be cognizant of what you're spending to include that vacation that you're planning on. So I think both pretty pertinent notes right now.

Grant

Wiese: Yeah, no one wants to stop the combine to sign papers, so just take care of it beforehand and then you can focus on what you need to focus on.

Shay: Yeah, well, I think that's pretty pertinent advice. I think what would be good here— today's conversation is specifically on farm buying toolbox that you're putting out that I think is going to be a phenomenal resource for so many of the people that listen to this podcast. And I want to, I want to dive into the nuts and bolts of this. I'd like if you would please, Grant, just give a couple-minute overview of kind of where you're located, what you currently do in your background and maybe why you're so passionate about, uh, in particular lending side, but also what you're bringing to the table here on the farm buying thing.

Grant

Wiese: Yeah, absolutely. I grew up on a row crop and livestock operation in northeast Nebraska, so we were dryland irrigated corn, soybeans. We had a small feedlot and then a farrow-to-finish swine operation for a few years as well before we switched to ISO-ween. So grew up on that side of things within the operation. Got my ag business degree and was fortunate enough to get hired on by a lending company outside, out of college, where I was able to spend actually the first half of my career with that company in the underwriting side. So when you talk about understanding financials, I learned more about financials with my career in underwriting than I did on the farm. You know, farmers Notoriously don't talk about the numbers, don't talk about the finances that much.

And so it was great to be in underwriting and reviewing thousands of financial statements, both balance sheets and tax returns in that 2011 through 2016 timeframe. As you could see where, you know, poor marketing really impacted balance sheets. We, we had a downturn in the commodity market, just really valuable to have an understanding of what that looked like and how individual balance sheets were impacted. And then I took that, moved over into a lending role to where I could use the coaching and the learnings that I had from my underwriting years into working with producers. And we had some tough years in '17, '18, and '19 as well before it kind of hopped out, had an upturn, and now it looks like we're going to be in a down cycle again. But having those— the experience of working as an underwriter and then now as a lender, just really neat.

You know, the farmer inspires me because there are, there are great producers in their 20s and their 30s and their 40s and their 50s. Every decade generation that's out there, there's some really inspiring individuals who frankly are way better farmers, know their numbers way better than I do. And I, I just, I'm in a unique position where I get to be raised from a farm, know the underwriting, and work with some outstanding individuals. And I just want to pass that on to others because I think that anyone with the right mindset can grow their operation to be whatever they want it to be if they're taking the right steps and have the know-how.

Shay: So I know my sister-in-law occasionally listens to this and she's involved with the underwriting, and I don't want her to get too big of a head, but I do know how much value there is in that underwriting process and the details that go into it. But more importantly, the thousands, like you said, the thousands of cases that you saw there's so much value in that repetition with any, any sport, any, you know, educational background or any practice that you have in a career to include farming. You know, some of the wisest people are those that have had so many years of experience in production agriculture. I can see how after seeing a lot of the patterns and understanding what successful people are repeatedly doing, and on the flip side, what people that are struggling are doing consistently, from a consulting standpoint of wanting to step in and say, all right, here's the problem.

We know what the problem is. It's well defined. Now, how do we help people with that process? And so I commend you not only for recognizing that and putting together all the tools and resources that you have here that we're going to talk about, but the fact that you are inspired by the agricultural community and want to have an impact in that way, I think is pretty cool. Particularly from an impact of just wanting to make it a better place and provide that education. Are you currently— do you currently farm, Grant?

Grant

Wiese: I do. Yep, I farm back home on the family farming operation. I apologize, I do lending in south central Nebraska and the farming operations up in northeast Nebraska. So I've been farming— this will be my 5th year back within the operation doing the farming side of things.

Shay: And still row crop on the livestock side as well?

Grant

Wiese: I'm not touching the livestock. Okay, we got out of the feedlot in 2010. We still have the iso-wien to finish operation there. I have a brother back home that takes care of that full-time. I, I provide the financial advising, and then I've been buying some ground. I've done a couple purchases, 1031, and just trying to help the family acquire more acres as we bring the next generation back as well, because I have several brothers that are, are back or interested in coming back. And so we're trying to grow as well, just like everyone else, we're trying to bring the next generation back. And it's just, it's fun being able to work with producers doing that with my own family and then helping others. Because we know that consolidation is happening. And we want to have the tools and resources to help the fifth, the farm stay in the family.

Shay: One thing that I have harped on here for the last few years is The speed of consolidation doesn't care whether you're ready or not, and those that need to be prepared should really take the opportunity to do so and formalize what that looks like. One thing that came up when you were giving your background, especially on the, on the lending side there, is how balance sheets change due to good marketing, poor marketing, good financial decisions— those who kind of have their ducks in a row, if you will. Before we dive into specifics, I'd like to know maybe just the top couple things that you see on balance sheets that farm operations get wrong that would be pertinent to the audience that's listening.

So even the sizable progressive farm operations, or just those who are doing it really well, what's something that you see as maybe a common misunderstanding or lack of planning from a strategic standpoint that people don't take into consideration as they evaluate their balance sheet long term?

Grant

Wiese: Yeah. So when you're working with a lender, they're going to be notifying you of really two things on the top part of your balance sheet. They're going to give you your working capital number and also your current ratio, which working capital is just your current assets minus your current liabilities. Current ratio is taking those current assets divided by current liabilities, and those numbers can be misleading. I don't like using those numbers. We use them for our risk analysis. But really, it's the working capital per acre that I want to be paying attention to, because you can have a 100-acre operation, and if you have, let's say, $50,000 of working capital on your balance sheet, great, you're in a safe position. But if you have that same $50,000 of working capital and you're farming 1,000 acres, you're about bankrupt.

So I like comparing that working capital number to the acres that you're farming, and then track that year over year. So what we saw in 2023 was you might have went into the year with $500 working capital per acre, but you lost half of that in that year from, you know, commodity prices decreasing, and then also just upgrading your equipment line. And so if you lost half of that in one year, and if we have a 3-year downtrend, or down cycle right now, you really got to be monitoring that working capital per acre and try to at least maintain or grow that number. Just I think comparing it to your acre base is really important. It gives you more substantial number to bite into and work with as opposed to a very generic working capital figure.

Shay: I think that's a great point. One thing that we surveyed the people that attended our conference last year on was how their working capital position had changed. And it's very regional, you know, operations that had good yields and did a good job marketing Sometimes, sometimes there's areas that did a poor job marketing and ended up with poor yields. And so it was this wide array of people that had 25+ percent working capital increase and 25% minus. But at the beginning of 2024 here, when we had our last conference, the majority of people were 25+ percent working capital decrease. And as we worked with clients, I think that number was probably closer to 35 or 40% of their working capital was wiped out. And that was before we moved into this 2024 new crop, where a lot of people had their balance sheets way overstated and unfortunately still do as we head into harvest here.

So I think, you know, you probably have some thoughts on that. But it's just, it's really interesting how the last 2 years have impacted that outlook, I guess.

Grant

Wiese: Yep, it absolutely has. And I saw that too. Most of our balance sheets are updated in January, and the high new crop '24 price was January 1. So we have every balance sheet overstated from a commodity standpoint.

Shay: Yeah. On that though, in the meantime, most farm operations are still looking at land. They're looking at growth, as you mentioned, they're looking at how do we purchase, how do we do it strategically. And I think, you know, your target audience that you and I have talked about offline is kind of that 25 to 35 year old that's maybe looking to make their first purchase or second purchase, or just the you know, whether age is as relevant, but even people that are maybe looking at making an initial purchase to improve their current land base. And so I'd like to dive into that a little bit. And I'd maybe give you a minute here just to talk through the Farm Buying Toolbox. You know, when did you have this idea? How did it come to fruition? And I know you've put a lot of work into it for, for quite a while now. So can you maybe talk about that and segue, segue here?

Grant

Wiese: Yeah, well, it started with myself. I was sending a weekly email to my customers because there's so much happening from a finance side of things and interest rates. And so it started with just an email to my customers, but I, I realized that, you know, maybe, maybe some more people would have an interest in that. And so just leaving that, uh, that very specific email to my customers, I made it more generic and public. From a weekly newsletter standpoint, and I took it from about 40 people to over 650 in the last year. So obviously, you know, there's some interest in that. But what I'm looking to do is just provide generic value— not generic value, it's very specific value for your operation, but things that you need to be aware of that the bankers are paying attention to, your— maybe your CPA, just other ag experts that are out there, you need to be aware of those things as well.

So trying to provide some of that insight that you're not thinking about on a daily basis, but it's know-how that you need to have if you're going to buy ground. And that's really where the focus has been. It's, you know, what are the 30 things that you should be doing to prepare for a land auction, both from a financial standpoint, a risk standpoint, attorney standpoint. I deal with, you know, individuals all the time as they're preparing for ground, and these are the steps that individuals are taking to determine how much they should bid and if they're even going to bid on the ground. You know, we're looking at just a lot of different case studies from individuals. So most people, they just prepare to buy ground on auction, and there's— they think there's one way to do it.

There are dozens and hundreds of ways that you can buy ground, and it's not, you know, some of the best farmers that I deal with, they don't go about it in a straightforward manner. They're buying ground 2 counties away, doing land swaps and 1031s and finding ways to acquire ground that most individuals don't think of. So anyone that's following me or keeping track, I'm just trying to arm with those— arm those farmers with resources to help them buy ground any way that they can and make it work financially.

Shay: I want to make sure that we put a plug in for that because it's a really good email. And I know for the folks that listen to this, they would definitely be interested in receiving that. How, how is the best way for them to get signed up for that weekly email grant?

Grant

Wiese: Yeah, that weekly email, it's, you can just go to www.farm640.com, so that's farm640.com, and it'll take you right up to sign up. You just enter your email address and I send that out every Tuesday morning at 7 o'clock in the morning. That goes out. And yeah, that's the, that's the newsletter. And then as far as the Farm Buying Toolbox, if you go to that same website, there's a sign up for this week. But honestly, it's, it'll be available for just a couple days on September 10th. We'll have it available and out there, and then I'm going to pull it back for a little bit because I've got to take care of my own harvest and get my customers squared away as we're entering auction season. But you can sign up, be notified when the Farm Buying Toolbox is available again, because I'll probably run it and make it available again to producers sometime before year end as well.

So want to make that available, but don't have time monitoring it 24/7.

Shay: Yeah, there's a lot that goes into that. Typically around harvest time, I start to shut off a lot of the free tools and stuff that we provide to people as well, because just you get, you get a few hundred emails on stuff and it becomes pretty time-consuming. So yeah, that, that's great. So you, it sounds like maybe you took that newsletter and realized, hey, there's, there's a lot of similar content that I'm doing, it's valuable to the general public. You started compiling a lot of those ideas how did you, you know, was it just mostly experience and pulling from the lending background and the underwriting of saying, here's what I've seen that people aren't, aren't maybe doing as well as they could be, or maybe are just not aware of, and that's how you started building it out? Or did you know, how did you kind of decide what was pertinent for the toolbox?

Grant

Wiese: Well, the toolbox is geared specifically towards buying ground, so I've got, you know, some videos out there to walk you through building an accurate balance sheet, which is extremely important. And a lot of individuals coming out of college don't how to build that. So I've got videos to explain how to build the correct balance sheet and then explaining what the ratios mean, what you should be looking for on that balance sheet once you put it together. And I provided these spreadsheets for that information as well. So I've got spreadsheet for building your balance sheet, running purchase scenarios so you can see how your balance sheet is impacted once you buy, because you have to bring a lot of cash forward in most instances. But then also that 10-year balance sheet trend. So you can track your working capital changes year over year and your net worth changes year over year.

So you can identify quickly if you need to really batten down the hatches and, you know, stop spending money or if you're in a buying position. So we've got spreadsheets, we've got the, the videos, and then just a ton of resources around helping individuals buy ground. And that's, you know, more details around the 5 C's of credit and what those ratios should look like. It's, you know, what those ratios should look like within a purchase. So when you're deciding how much to bid, you don't want your ratios to drop below certain percentages. Otherwise, you might need to go back to the drawing table, finance more, use more cash, vice versa. You know, it's a big balance between that working capital and cash flow.

Shay: The comment that you made about balance sheet trend analysis over time, especially if there's any young farmers listening to that, being part of the consulting that we do, I can't stress enough the amount of value that is in that. And even if you're a more seasoned farm operation, what we highly encourage you to do is go back over your last 8 to 10 years, take your assets, liabilities position from any of your returns, your historical data, and map out how that working capital has changed over time from a balance sheet. We, we do it on a market value balance sheet. I don't know what your thoughts are on that, but it is, it is so impressive, uh, to look, especially in highly successful operations that have just climbed exponentially over the last 6 years, how that working capital position has changed.

But you can easily identify when they did batten down the hatches and poised themselves for growth And then when the opportunities came, it was the snowball that is really still in effect and has them set up in these good working capital per acre positions right now to be able to take advantage of the downturns in the industry to include a potential softening in the land market that some areas are seeing. But also with equipment prices getting smoked right now. You know, I saw online, I think it was Clint Fisher, who we both follow and have had some engagement with. He said, you know, there's some people out there that have working capital positions that are commenting this is a once in a lifetime opportunity to purchase equipment right now. But they know that because they've tracked that working capital position. They've looked at their trendline analysis of their balance sheet.

And those are the people that are having that repeatable success. So, a lot of word vomit there, but I just, I really, I can't stress enough that balance sheet trend line. Anything else you want to add to that, Grant?

Grant

Wiese: Yeah, that's, that's a great insight. The balance sheet trend tells the story of your operation year over year. So I can look at a solid balance sheet trend and we can have discussions on, okay, something obviously went wrong this year. Did you have crop failure? Was it prices? Was it expenses out of line, or did you really ratchet down the expenses as well? So it tells a wonderful story, but maybe we can kind of take this into another topic. While it tells a story, you can also tell when they started paying attention, preparing for the future, when they had their eyes on, you know, the future for the operation, whether it's a 5-year goal, a 10-year goal, when they started to prepare themselves. To grow and, and, you know, prepare themselves to hit a certain, you know, another level within the operation.

Shay: Yeah, that's huge. What else do we need to know about the Farm Buying Toolbox that you, you know, that you want to make sure that you're sharing not only with our listeners, but anybody that you share this podcast with? What's, what's really crucial for them to think about as they're thinking about signing up for it and taking advantage of the tools you've created here, Grant?

Grant

Wiese: Well, the number one thing is just paying real close attention to your own financials. So you've got to make sure your financials are in line. You've got to be responsible with your cash flow. You've got to know, have the proper capital in place, and then you've got to be willing to work. So, I mean, the operations that do the best financially know their numbers the best. So that's, that's absolutely the number one thing to do before you can start growing. You've got to get your numbers squared away. You've got to know your breakevens. You've got to know how much capital you need for purchase. And we address that in the Farm Buying Toolbox. So that's, that's 101. That's the starter right there. Until you get that nailed down, you don't really want to get into anything else.

But I do have the next steps when you are ready to buy to help you, you know, what to look for in a purchase agreement, land, you know, landlord letters for absentee landlords if you're looking to grow that way, just a lot of different advice and suggestions to find different ways, alternative ways to get ground in your name. But start with the finances. Yeah, no, you're not.

Shay: With the financial piece, uh, there's, there's a lot of different ways that I use this term, but I think it really drives the point home, is if you're not focusing on the financials in your operation, who is? And, and maybe you have a CFO, maybe you have someone that outsources it, or, you know, a CPA that you work with, but if you're not doing it, no one is. And you're the leader in your organization, you're the one that's striving for the, you know, the growth and the family business and You know, I'm generalizing here to the listeners, but I think everybody can kind of relate to that. If you have this sense of, man, I really don't understand my business as well as I should or want to, that should be a sign for you to take advantage of something like this. Put in the hours, put in the work to understand it.

And I know there's people out there that are going to listen to this and they're going to be nervous. They're going to be scared, right? There's a, uh, there's a certain comfort in not knowing how bad it is. And I'm sure you see that in other people's side all the time. It's way easier to, uh, be ignorant and blind to the situation. But that's something that I think people should, should really take into consideration there as well. Um, I think outside of that, you know, The toolbox is definitely something that operations need to take into consideration. Is there, is there anything else that you want to make sure that we're highlighting about that or that you think would provide value to the listeners here that we haven't discussed, Grant?

Grant

Wiese: Yeah, just going back to kind of your, your end goal and preparing yourself. You know, I think it's really important to have an eye on the direction you want the operation to go. So are you going to go start a seed business on the side for some additional income? Are you focused on adding ground? Or is there something else that you're focused on? You need to know which direction you're taking this operation. And then every decision you make, you need to be balancing your working capital versus your cash flow. So if there's finance involved, if there's purchases involved, you need to know, you know, have, have, have a good idea of which direction you're heading so that you You can say, well, we need to finance this particular purchase this much because I need the cash for something 3 years down the road.

I mean, all of those things impact you long term, how you finance, what the structure looks like, and how much you're buying. So you can make decisions today that could ruin your direction or growth for the next 5, 10 years. It's, uh, you know, if you go and just bid and buy ground and don't put any thought into whether or not it fits your operation, that can hamstring you for a long time. So have that, that picture for your operation in place and then make sure you're taking the right steps and making the right decisions with every purchase along the way, every single day. Otherwise, you're not going to get there. You'll be just roaming around without any direction.

Shay: What one area that we see people take that approach of just kind of randomly stumbling through it is equipment purchasing. And one of the best things that we do when we work with clients on, on the cost of production side is map out a 5-year equipment replacement plan, even out to 7 years. And what I've started doing with a lot of people is mapping out improvements to include land purchase, grain bin upgrades, shops, tile, and you put that capital replacement plan out 5 or 7 years and you start adding up, well, I'm going to trade the combine this year and I need to replace that tractor and buy this tillage. And then of course, you always have the other stuff that comes up. You know, you accidentally have to buy a backhoe or something like that.

And you look at those numbers at the bottom and it's like, holy cow, there's a lot of consideration that I need to take in just as a cash outlay. But then when you start looking at what it's going to take to cash flow that portion of the operation, it's pretty eye-opening. So I like what you say about, you know, having a goal in mind, a 5 to 10 years.

I would say even longer too, uh, if you're a progressive or more established operation that's listening to this, you know, if you take and look 40 years to the end of your farming career and you say, I want to own 1,000 acres of land, and maybe now you own 500, or the, the operation is 500, okay, well, if it's 500 acres over the next 4 decades, that's 125 acres a decade, that's 10 acres a year, you know, break it down in somewhat of a feasible manner, but then also look at the cost, the opportunity cost, or the potential cost analysis of how much more expensive is it going to be 20 years from now versus what it is today. And, you know, it— you and I are young enough, Grant, that we've seen these pictures out there that's like, yeah, look at me being all dumb in 2002 going to school when I should have been buying farm ground, you know.

And, uh, I think a lot of young people can relate to that, but that's likely going to hold true for a long time. So I think having that end goal in mind, having that target, and then really backing into, okay, what does it take to get there? You know, how do we put plan into, uh, plan into place now? Get that initial purchase out there, get some equity into these positions, start, you know, using some of these creative strategies that, uh, you know, you're the, you're the expert in of talking through people on this and what you've seen a lot, and just say, hey, let's, let's get started and let's get this thing rolling. Is that, is that fair?

Grant

Wiese: Absolutely.

Shay: Well put. Yeah. Grant, I, you know, I really appreciate the time. I want to reiterate, so it's farm640.com for the newsletter, and then that's also where the Farm Buying Toolbox will be located as well for sign up. Correct. Okay. Any parting thoughts on heading into harvest here, or the people that are going to be listening to this podcast, anything you want to leave them with, Grant?

Grant

Wiese: If you're in a position to buy, always be prepared because I know plenty of properties that were privately listed and sold within an hour. And if they are on your section and you're not prepared and you're not the first one making that call and you have to check with your lender before you make that call, then you weren't prepared. So just if you're, you're in buy mode, make sure you're ready.

Shay: That's great advice. Good place to leave it. Grant Weezy in Nebraska, thank you so much for taking the time. I really appreciate it.

Grant

Wiese: Thanks, Shay.

Shay: And thank you everyone for listening to another episode of the Ag View Pitch. We will catch you next time.