Good morning, everyone and welcome to the VCA today May 21, 20-20. Appreciate everybody joining us this morning. We're very excited. We got a great presentation and store. I think really excited about our topic today that they will be covering some basics on farm business management. So we're fortunate to have Dr. Alix White who is an instructor through the dairy science department at Virginia Tech. >> Dr. White or we'll share some comments with us today. >> We'll go ahead and turn it over to Dr. White. We appreciate Dr. White join us this morning than Dr. White. >> This show is yours already. >> Thank you, Robbie. Appreciate it. Well, good morning, folks. Hope everyone's doing well. >> Hope you stay and safe. >> Hope you're not getting washed away with all this rain in Blackboard, we are still under a flood warning. There's an awful lot of water in the ground around here, on top of the ground at the moment. But really appreciate you asked me to come speak to you here today. We're going to try and just give you some general farm management and finance tips. Not going to get real deep into anything because there's so many different types of operations over in your area that we'll talk a little about. >> Crops, little bit livestock, Little bit about aquaculture possibly, but just kind of give you some tips, some things to be thinking about. >> Case 20-20 is not going to be a very good year for you. And that's going to depend on your, what your enterprise happens to be. >> So first piece of advice, just stick to your fundamentals. >> As farmers, as Egg Producers, you are already used to making decisions in uncertain times. You'd never know exactly what's going to happen with the markets, what's going to happen with the weather? So this is just an exaggerated case of the uncertain times. But if you just think about what's important to you, think about your core values. Think about your goals. What you will want to accomplish with your farm, with your operation, with your family, with your personal life, That's going to really help you make better decisions. >> Next thing like always have a plan. >> If you go into this situation with a plan, this is what I'm going to produce, this is how I'm going to sell it. This is when I'm going to sell it. This is how I'm going to protect my price and so on. That's going to just clarify things. It's gonna make your decisions a lot easier. But don't just have a plan. Always come up with a backup plan or a couple of backup plans. I preach to my kids in my classes and my kids I mean, mean that respectfully, but I preach still come up with three plans, everything have three alternative markets have three plans for reaching your goals in the future. That way, if your main plan doesn't work, you've already thought about one or two backup plans. So main thing I can tell you is revisit your goals, think about what's important to you and then base your decisions on that. That's going to just make it more grounded. It's going to make your decisions a whole lot more clear for you. >> So you're already used to doing this. >> Let's, let's hold the course. So when you're thinking about making some changes to your operation or planning for what you're gonna do for this fall or early next year. >> I just want to keep it simple and use what we call the partial budget framework >> And the thought process is really simple. It's, This is one of the economic rules I preach to my students. If something costs more than it's worth, don't do it. So a partial budget just looks at what are the added costs versus compares that to the added revenues. And if the, if it costs more than it's worth, you're going to reduce profits and that's probably not a good move and a lot of cases, so with the partial budget, hopefully you've seen this somewhere along the line. But what we're gonna do is focus on just the things that are going to change with your decision. For example, if you're thinking about storing your crop, but you're not going to sell it at harvest, but you're going to store it until March. We're going to think about the good side and bad side. The good side of the partial budget is going to be, what extra revenues are you expecting to earn by doing this? And reduced expenses are you going to have, excuse me in this case, if we're looking at storing a crop, we're not going to have reduced expenses. We're actually going to have increased expenses, but hopefully we will get a higher price for our crop when we sell it. So that'll be our added revenue. On the bad side of this decision, will we get reduced revenues? And will we have added expenses? So we need to think what's going to change if we store our crop for another 345 months, whatever it happens to be, well, if it's at if we're doing that, we're going to have added expenses and hopefully our revenues will not be reduced. >> We just need to think this through. >> So this framework, if you just slow down when everything to making any type of decision, just break it into the good side and bad side. And let's look at it. What are the added revenues and reduced expenses that I expect to get with this operator, with this change in the operation. And on the bad side, what's the reduced revenues are increased expenses. >> I'm going to have n. >> If the bad side is, comes out to be bigger than the good side, that means your profits should increase if all goes to plan. >> But we also need to think about other factors as well. >> So with your thought process, whatever decisions you're making, just try and break it down and keep it this simple. I think it'll help you clarify what you're actually or what's your possible actions are going to be? Now then sounds simple, but here's a couple of tricks there involved. We need to figure out what are the prices is going to be at the time of sale? If we're holding our cab, cabs a little bit longer, we're going to hold our crops a little bit longer. How do we know what the future prices are going to be? And you know, as well as I do, they're highly variable. They depend on an awful lot of factors out there, but we need to take our best guess. Another thing that's really impacting agriculture right now is what's the state of the processors that Mark It's now and when you're planning to sell, in the case of the livestock industry, if you are looking at sending cabs at market today, there may not be space form, so we may have to hold onto them. >> So you need to start making decisions. >> Do I hold him back a little bit? >> Do I feed him is normal? >> So we need to get a good idea of what's the state of the processors or what's the state of the market going to be in your area at the time you're planning to sell. Next question, what's everybody else going to do in agriculture? You never know. People will tell you what they're gonna do and then do something else. But we need to sort of get a feel for if everyone else is going to plant corn. >> Do you want to plant corn or do you want to switch to a different enterprise? >> So we need to have a pretty good idea of what's going on in the overall market. What everybody's plans are next to on here, what's going to be the impact, the trade and politics? And your guess is as good as mine on that one. In agriculture, we are highly dependent on international trade. >> So we need to figure out what's going to be the state of international trade over the next year. >> So how's that going to impact consumer demand has an impact prices. So this is something that's a complete wildcard. >> Then we see wave two. >> In wave three of this coronavirus outbreak. Who knows what's going to happen with that and how that's going to impact that. But we need to have a plan set up. What's going to, what do we think is going to happen? What are the best case and worst case scenarios? And develop our plan from that standpoint. But the bottom point on this slide is one, I really want everyone to understand. It doesn't matter what type of enterprise you're running or what type of farm or what type of business you are. >> You need to know your cost of production. >> What does it cost you to produce a bushel of corn or an extra pound to gain on your calves, excuse me, an extra gallon of oysters, whatever it happens to be, you absolutely positively have to know your cost of production. This is going to help you make marketing decisions, can help you figure out planting decisions and input decisions. So we need to have a record system that accurately tells you what is your cost of production. Okay, so my first, and there's what's going to happen to prices over the future. I just picked some numbers off of the Mercantile Exchange, Chicago Mercantile Exchange. And with corn, if partners price looks to be somewhere around $3.32 cents, if we hold it till me, the price is going up about $0.13 a bushel. >> So that says, hey, maybe you want to think about store and your corn a little bit. >> If we can do it for less than $0.13 a bushel. >> Soybeans, November price, $8, 45. >> March price of $8.35. That's a pretty clear signal that storage is not going to be a profitable option. If prices remain at these levels for your feeder cattle will live cattle. I've adjusted these four slide because if we hold the calves longer, they're going to be heavier. So I put a couple extra 100 pair, couple 100 extra pounds on them so we can sort of take our best guess what's going to happen to our future prices out there, so on. >> So use your marketing specialists, use your websites, use the futures price is to get a good feel for what's going to happen to prices around sale time. >> Next thing, what's going to happen to the Ag Supply Chain right now? Meat, milk, vegetables, some of the areas of aquaculture has been disrupted pretty significantly, honestly, from the meat standpoint, I'm I'm expected No no sooner turnaround than a year to two till we can get recovery back to stump the normal. So what can we do over the next few years if your livestock producer to make make ends meet. Personally, I'm looking for large structural changes in the US. I would not be at all surprised to see a move towards supply control from the dairy standpoint, we're looking at going back to a quota system, but could this happen in other enterprises as well? I think that that's very much a possibility over the next 34 or five years. >> Another thing is they move away from the concentration of processing. >> Most of the processing is sort of, it's concentrated in what, three or four main firms around the United States. It's highly efficient, which means they can produce the, or get the product out the door a heck of a lot cheaper per unit. However, this we're seeing, what's the impact if one of these plants goes down or if several of them were shut down for any reason, just how disruptive that is to the market. So I would not be at all surprised if we've moved away from this concentration. We went to more local assessors. One thought I've had for several year, I guess last ten years or so is let's have concentrated kill stations, but then have individual breaking stations. Local or smaller breaking stations are processing stations around the state so that we can process the carcasses and keep that supply out there to the consumers. So I'm kinda thinking something like that's gonna pop up over the next couple of years. >> But again, it's going to be move away from efficiency. >> So it's gotta be decreased efficiency, which means we're probably going to see higher consumer prices. And then we always need to ask ourselves, what's going to be the impact on demand? Higher prices at the consumer level, is that going to significantly change the amount of livestock products or vegetables that they're going to purchase. And similarly for move away from the just-in-time inventory systems, we're giving up efficiency. But again, we'll be more resilient when some bad things happened, when these black swans raise their ugly heads. So I think for the meat industry, the livestock industry, I'm not looking for a real quick turn around me are fixed to the markets there. I think that's going to be a couple years down the road. And then trying to figure out what everybody else is gonna do. This is the cursor to the free markets. >> Think about this. >> What if you decide to cut production on your farm to try and reduce the overall supply, but nobody else does. Net effect is that there's been basically no impact on supply, no impact on price, but your revenues are going to be significantly lower. So we need to think of the old production phrase and farm management is walk when everyone else runs. So we need to think if everyone else's plant and corn, maybe I don't want to be planting corn right now. So we need to think about that one and what happens if you switch enterprises? You say, okay, I'm going to plant beans instead of corn this year for whatever reason, and everyone else makes that same decision. Well, guess what? Now you going to have a large supply of beans, which leads to lower prices, which leads to financial hardships out there. So we need to take your best guess as far as what's going to happen to the Planting intentions out there to make sure that, you know, we're, we're diversifying ourselves from the overall market. Okay? So a couple of quick decisions or quick examples here about decisions you might be making. What if you want to store your crops and until March rather thans element at harvest, let's just look at the main added cost to see what's the bad side of, of doing this. Okay? And remember, the bad side is added costs are reduced revenues. Well, we're going to have added storage costs. This will be your rental cost, your electric costs, whatever it happens to be. There might be shrink, there might be quality deterioration which could hurt your price as well. >> Think about this. >> When you store your crop, that's means you're not receiving your revenues until 34 or five months into the future. So can you repay your operating line? And if not, you're going to have additional interest on that operating line. So we need to take that into account. And then if you're going to be looking at putting new facilities up, new storage facilities that gives you more flexibility with what you can do with your crop. Don't forget to include the overhead costs, okay? These things are going to depreciate. >> That's an economic cost to you. >> You're going to have interests in those facilities. So we need to make sure we're repaying ourselves for that there maybe, Excuse me, I'm property taxes or insurance on this thing. A rough rule of thumb I use for storage facilities or buildings. I'll take the purchase price of that thing and multiply it by ten to 15%. And I'll use that as an estimate of the annual overhead cost. And again, that'll be your depreciation, your interest, your property taxes, insurance premiums, those sorts of things. So there's going to be on your bad side, on your good side, well, hopefully we're going to get added, returned. By doing this, we're going to have higher price after storage, which from the merch numbers yet, we're expecting $0.13 higher price for corn. We're looking at a $0.10 per bushel decrease in soybeans. So we really need to take into consideration what's going to happen to our price. And again, we need to adjust for any shrank or quality loss you might have out there. So in this case, bottom line, if we're looking at storing our corn from now until March, Can we do that for less than roughly $0.13 a bushel. That's roughly $0.03 a bushel per month. >> And that's going to be pretty tight. >> I'm not sure you can do that, but again, it depends on your, on your individual situation. But the process here, let's look at the good side, look at the bedside. And if the bads, excuse me, if the good side is, is bigger than the bad side, we should increase your profits. >> You should be making a good decision from a livestock standpoint, say you've got the 550 pound wean calves and you're thinking hold onto them, put another 200 pounds again on him before you get rid of or maybe because of lack of processing in your area, were sort of forced to do this. >> I'm not gonna go through all the assumptions I have on here. Basically we're put in 200 pounds again on what? We're looking at, the current price of about a $134.100 way versus a future price January about a $120 per 100 weight. And that's my adjusted that for slide because we have higher >> Heavier weights calves. >> So with that, looked at the feed equivalence and so on. And when we look at this situation, if we sell that wean calf today, she'll bring in, or they'll bring in revenue of about $737 with the 750 pound calf. Even though we have a lower price per 100 weight, we're going to have a higher total revenue, but we also have a $108 more of cos, $93 of extra feed and about $15 extra for grain and vet than labor and whatever else you might have. So by doing this, we're looking at the change in returned to your labor of $28 per head. >> So in this case, it looks like it makes economic sense to hold onto those cabs under the assumptions that I made. >> But the nice thing about this is now then when we have this, these price projections, now we can calculate a break-even price. So if we look at the information here, I calculated the break-even price and again, I adjusted for death loss and shrink getting those caves the market. So as long as that break, that selling price is above a $116.100 weight at harvest, or actually me at sale. >> We will be better off by holding these camps. >> Not the way to look at this is what's the, what's it cost you to put a pound to gain on your calves? In this case, if it's going to cost you more than $0.68 a pound for every pound of gain you put on. It's probably not worth it to hold these calves. You probably want to get rid of them a little bit sooner. So again, we're just looking at what's the good side? What's the bad side of making, of making this decision? >> I get a lot of questions. >> These they should I, since I'm expecting lower prices, should I use less inputs? >> And again, we just need to use that same thought process. What am I giving up by doing this and what am I going to get in return? >> Examples might be, let's put less fertilizer down and retire less labor on the livestock side, maybe we'll reduce our herd size. But again, that again, depends on do you have a market for those calves trying to get rid of those co, cows and coal heifers did it. But same process here. The bad side of the decision, if you cut back on your inputs, will you get lower yields are lower production, which means you should have lower revenues coming into your operation. Another thing we need to think about, what are the impacts on next year's production if we cut back on, on fertilizer today, how's that going to impact soil quality? If we start cutting back on feed or that expenses, what's going to happen to the reproductive efficiency? Heard what's going to happen to your market? Say we're vegetable producer or outward shellfish industry. What if we cut back on production? >> Can we still meet what our market needs? >> And are we risking losing that market because we can't meet their, their demand on the good side, what am I getting in return? You need to think about your cutting back on your input cost. So those should be lower. Ands, if that's lower, we'll need less operating capital. So our operating loans are operating lines, and the interest on that will be a little bit lower. >> Well, and then we can just compare the good side to the bads. >> So that's sort of your thought process to get through anything. Keep it simple, stick to your fundamentals, understand your goals, and that will help you make better decisions from a basic financial standpoint. I got about four or five tips for you here. Number one, develop and improve your recordkeeping system. This is one of the biggest problems in agriculture ag producers do not keep good records, and the records they do have probably aren't very useful for making decisions. So what I would very strongly recommend you do with your extension agent, work with your accountant, and develop enterprise accounting for your farm. >> This way you know what each enterprise is going to cost. >> Yep, so we can calculate our cost of production, we can calculate our break evens. So enterprises accounting, I think is crucial if all you're only record system is your schedule F. Well, that lumps all your expenses together for all of your enterprises. So we don't know what our true cost of production is. Next piece advice on your record keeping system. Set it up so that you're getting accrual or accrual adjusted statements. This washes out the tax moves that you might be making if you're increasing or Europe making prepayments on your feet or your fertilizer that skews your cost of production. So we need to be able to match things up. And accrual adjustment or accrual basis accounting does that for us. >> So for your cost of production, get good cops are bad cops here. >> Good cost of production, you good cops are based on a cruel, adjusted or accrual-based enterprise accounts. Bad cost of production. If you're just using your cash-based schedule F, you're probably making not there, you're not making good decisions. >> You don't have good information to deal with. >> So we need to work on this, develop and improve recordkeeping system. It will help you make tremendously better decisions. Next thing, develop a monthly cash flow statement, cash budget. And what this is, it's a list of all of the cash incomes and all the cash outflows for the farm and your household. So this shows though, when cash is coming in, when cash is going out, where it's going, it's a very powerful tool. So this is just the basic cashflow statement. This one's quarterly. I'd recommend doing it monthly, but in this case, for each quarter or unless the source of all cash inflows from the farm and from non-farm sources, we will know where all the cash is coming in to your household. On the cash outflow section, I've tried to set this up so it matches your schedule f. It should be in roughly the same order so we can list out what our cash expenses are. It does not include depreciation, so that's going to be a different from your Schedule F. So it's got all your farm related expenses. But down here we've got any capital purchases, anything we purchased outside or we pay cash for it. We've got our principal and interest payments on our term debt. We've got our family living expenses, and we're going to throw your income and payroll taxes in there as well. So that should be all of your cash flows or cash outflows for each quarter And then the fun starts. >> The bottom part, the bottom third of this spreadsheet says, Okay, here's my net cash flow for each quarter. >> And in finance, red is bad. So you can see three of the four quarters here, we have more cash leaving the household or leaving the business than we have coming in. Overall for the year, we have more cash coming in than going out. So that's a good sign. But we need to think about how are we gotta meet this cash deficit during these three quarters? So we can use this to talk with their lender and figure out how much operating line of credit we might need it. We can use it to figure out when we should schedule payments. If we're looking at getting new term debt, we can look at when we'll have cash available to make a down payment or capital purchase for the operation will know when we have money to set aside for savings, are set aside for retirement and so on. So this is one of the most powerful management tools you have available to you. So there we go with your cashflow statement. >> This is extremely powerful. >> If you walk into your lender and you have a cash flow statement, this is going to dramatically improve the communication and it's going to help you make better decisions throughout. The next stub tip for you is maintain open communication with your lender. >> 2020 in 2021 are going to be bad years as far as market prices. >> And whether at this point you need to think about your operating loan needs or your operating capital needs. So talk with your lender, let them know I'm going to need this much to meet my operating needs. I can pay it back at this point in time. So these are, again, we can do this from the cashflow statement to get a good estimate of how much operating capital we're going to need. We can show the lender when we think we can pay it off. So we just maintain constant open communication with your lender. It's kind of natural for a lot of folks to stick their head in the sand and run and hide during bad times. Folks, I'll tell you right now, your lender doesn't want that. They would rather know that you're expecting to have problems rather than being surprised by it. So maintain that constant open communication and your lender will thank you. They'll have more options available to work with. >> Yet another piece of advice here is have a Tax Management Plan. >> So many farmers are averse to paying income taxes. And because of that, they make decisions that don't make a whole lot of economic sense in my mind anyway. >> So we need to have a tax management plan. And my goal is not to minimize my taxes. My goal is to have more money left over after I pay my taxes. So I would rather have more cash available and pay a little bit in taxes than spend a whole lot more to avoid taxes completely. So when you look at the self-employment taxes and income taxes for most farms were probably in the 25-35 percent marginal tax range, which says for if we're 35% for every dollar of taxable income, you're going to say every extra dollar of taxable income, you're going to pay $0.35 in taxes. Well, if we use these numbers in order to save $1 in taxes, you need to spend three to $4. So this make capital purchases are pre-paying your feeds or your fertilizers You need to spend three or $4 to save $1 and taxes. I guess my thought is what if you paid the $1 and taxes and use that remaining 32 to $3 to build up your savings. So you have a little bit more flexibility during bad times, or we use that money to pay down your debts paid and you're operating loans. So it buys you more breathing space to make operate or to be able to make your payments during bad times? Or how about this one? We use that money to spend it on the family. Let's take them on a vacation every now and again OR replace some household equipment rather than buying things on the farm that we don't really need. So just habit tax management plan, paying taxes is not a bad thing. >> You don't want to pay any more than you have to. >> But I would rather have more money left after I pay my taxes than have no taxes at all. So one example, there's prepaying your expenses. When you do this, realize you need an exit plan. I'll give you an example of that here in a second. >> And remember, when you make pre-paid your prepay and some of your expenses, that's an unsecured transaction. >> If you pay a $100 thousand to your local supply store and if they go bankrupt, guess what? You stand in line behind all their other creditors. This is an unsecured transaction, so we need to make sure whoever making these prepayments do is in pretty good financial condition. And then nothing we can do is if we do have a tax loss, let's talk with our accountant and see if we can use the carry back or the carry forward of those losses to manage our taxes, we can go back two years of tax records or we can carrying forward until we've used up that tax loss from this year. So here's a quick example on prepaying your expenses last year. Let's assume you paid $50 thousand for your feet or your fertilizer in December trying to reduce your taxable income. If we're in a 30% marginal tax bracket doing this safety, you $15 thousand in taxes. >> Okay? >> So we paid $50 thousand, prepaid 50 thousand. We saved ourselves 15 thousand. >> But again, look at that. >> We had to spend a little bit more than $3 to save one in taxes. >> But assume this year is a bad year. >> We're not gonna have good yield. >> We're not going to have a low wherever we are going to have a low price now then the might not have a whole lot of cash available and you might not because it's been a bad year two, you might not be able to get a line of credit from your lender to make prepayment. And this December, well, we've already expense that $50 thousand of feet or fertilizer last year. And we have nothing left to offset our revenues for this year. >> So at a minimum, if we don't if we don't make a prepayment this year, your taxable income is going to be $50 thousand higher, even though it's a bad year. >> So you might be faced with a paying taxes even though you've had a really bad cash flow year as far as prices concern. So have a plan. Prepaying your expenses makes sense, but just be sure that once you start doing this, you have an exit plan so that for a bad year, how are we going to manage that? Situation. If we can't make a prepayment. Another one, grumpy farmer down here in the corner. Why paid money to the government? Again, you need to spend 30 to $40 thousand to save $10 thousand in taxes. >> If you're going to make a tax move at the end of the year. >> If your accountant says, hey, you're going to have profits this year, you go buy something. If you buy something that is going to make you more efficient or make you more profitable. >> It's probably a decent move. >> I'm not going to argue that, but if you're just going to go out and buy something you don't really need. You're going to buy something simply to write it off on taxes. But it's not going to increase your prop Europe efficiency or your profitability. You spent $3 or three to $4 to save one, which means you have a lot less cash available for other uses. By doing this, you've hurt your liquidity. >> You don't have any money or didn't have as much money sitting in savings. >> We've heard our profitability because now we have more assets on our balance sheet. So your rate of return on assets is going to look a lot lower. And we've heard our financial efficiency or capital turnover ratio is going to be a lot lower because we have unused or very little used equipment sitting around. If we borrow money to make this part just now, we've compounded things. We've heard our liquidity, profitability, and efficiency, but we've also heard our solvency and our repayment ability. And just real quick, guess what? Ekg lenders used to evaluate your financial condition. >> They look at liquidity, solvency, repayment ability, profitability, and financial efficiency. >> So by making this tax moved to buy something again that you don't need. >> This is not a good use of money in my opinion. >> I would rather pay the taxes and have more money left over so I have more flexibility in the future. >> So that's that's me on my soap box about the tax moves, buying something that you don't actually need. >> And then finish up here. >> We've got the same old, same old. You always hear me preach and build your liquidity, build your emergency savings from both the household and the business. And a good number to use is somewhere between 36 months worth of normal expenses. From a lending standpoint, if you're working capital to expenses ratio, working capital is nothing more than current assets minus current liabilities. Divide that by your total expenses for the year. We would like that number to be greater than 25%, which says you have enough money in savings or in available working capital to cover roughly three months worth of normal business expenses. So if we have this, it's going to help you get through the downtimes a little bit easier. This is sort of like a shock absorber on your business. It gets you through those minor potholes. >> Next thing, have a clear defined marketing plan. >> Don't go in there trying to get the absolute highest price. Chances are you're not going to do it, but know what your cost of production is. Such a break-even prices, or know you put your break-even prices are and set your marketing plan up so that we are at least covering those cash expenses. So I'd rather make a little bit of money every year than the chance of making a lot one year, but losing a lot the next year. So we need to have good price protection out there through a clear defined marketing plan and stick to your fundamentals. Don't get greedy and don't get too emotional with your decisions. You need to stick to your fundamentals. And then last, the main thing, just have a risk management plan on hand. Have backup markets, backup suppliers, backup Input Processor, Jimmy processors for you. Think about what your liability insurance needs are, how you might be affected by a lawsuit. And then think about in this state or a transition plan just in case something happens to somebody in the operation. Did we have a somebody leave the operation because of death or disability or family fight or whatever or better opportunity. >> So have a transition plan, start working on that one. >> And this is the, it's called the farm business transmission and that transition workbook, BI, Farm Credit university. It's a great way to get started on setting up your operation or your transition plan. It consolidates a lot of information that your heirs or URL successors you're going to need in case something happens to you. And best of all, it's free. So I would definitely think about doing that. Use some of the time this summer to start thinking about your state plan, your transition plan, and how we're going to move into the future. >> So with that, Robbie, everybody, I'm pretty much done. >> Do you have any questions for me? Thank you, Dr. White, We really appreciate all all that great information. You taking the time to join us this morning. >> I think it was an excellent presentation. >> I guess we'll start. >> I noticed we had a couple of comments or questions there in the chat box. >> If the first question, taylor Clark, one of our agents, he asked, what are the regulatory challenges to decentralizing meat processing? And I think that was a little bit of a conversation going on there between him and Rachel, handily, another agent. And I guess they would just ask and maybe for some of your comments or thoughts on that for decentralizing the meat market here in Virginia. Yeah, that's the regulatory. >> Tonight is going to be about a big challenge to overcome. But I think that with the government seeing that we are very vulnerable should something happen to just a couple of players in the beat processing that supply chain there. I think we'll start to see some, see that loosening up a little bit. >> I think we'll start to see a little bit more creativity or entrepreneurship on the, on the regulatory side. >> And another example, this is pharmaceuticals. I think I've read in the Economist magazine that 90% of us pharmaceuticals come from China. So when that supply was, was impacted last fall and the spring, that's a massive impact on the country. So I think there are, I think we're going to move away from this strict efficiency, trying to get as efficient as possible to be a little bit more resilient, a little bit more able to handle disruptions in the supply chain. And that's going to require some regulatory changes out there. >> So I'm, I think that's going to happen. >> How quickly again is that going to happen? I don't know. There's a lot of lobbyists involved and a lot of politicians involved, but I think there will be changes in that to make it more More economically efficient or more, or how about this? Just better for the country if we do have a less concentrated meat supply chain in there, I could say if I guess some of my thought process and that if you're not sure what I'm thinking about in the old days, back when I was a kid, we had you had when you went to any grocery store, they had a butcher in the back of the store or your small town markets? They all had a butcher. They were buying carcasses from a federally inspected operation and then they were breaking them down to so they could supply there in their local markets. I think we're gonna see a lot more of that in the future or at least the the availability of that. >> I think the big issue there is just being safe from a food safety standpoint, getting the carcass from the kill station to the breaking station? >> Other than that, I think most irregular with most your regulations at the breaking station are going to be similar to what they are today. So I'm Rachel taylor. >> Yeah. No, I think it's great. >> I'm putting the continents, lakes and in our local smaller producers of crime. >> And talking about this for quite awhile, like even how to cooperatively go together. >> It's even have like a freezer track they can all use because they don't have the supply large enough that would warrant one or two or three of them going in together to try to go into an investment such as putting their own facility together. >> But I love the idea of kind of separating the Slaughter from the carcass. >> Break did not. >> And funny and had a conversation with my soon to be her grandfather. >> Had a store, small store and you can in all the butcher but your stuff, they had that at the at the store and so on to break down. >> So I was like, That is so cool. >> I want to see it. >> And I remember one that was International. >> And we're sheets now sets that used to have that in the back. >> And it's, yeah, advocates will see some return to that Alice sent because it just shows how fragile our system is. >> I think some people have probably seen some good articles going around talking about how now you can see the system, how fragile it is when you have something like this. >> And it's very common that this would happen all the time. >> But from a biosecurity standpoint, terrorism really talked about that. >> Sometimes it shows where we're weak and we can definitely work on ways to kind of be in the middle ground and not be the most efficient and cost-effective, but still be able to be resilient a little better through hard times. >> Da, da. To talk more about Alice, ABB always assume that part of the reason for the consolidation on a lot of businesses do it in a lodge pod is due to the the ability to efficiently manage regulatory calls. >> Compliance. >> That that that was the reason for my question is, you know, we see that with stuff that we work with producers every day is that, you know, we have a new, new requirement for Purdue to the, to, to comply with that has cost of doing it. >> And they really don't have the revenue from what they're doing. >> And to make it it, it becomes a big part of that enterprise bug. One example is, you know, have in full with tobacco produces a use soul fumigants. >> They they have to have two people along the Pfam fit tested annually. >> We often a program they call saddened if I'd alos to to do that. A person plus the cost of maintaining the respirator and all. >> So that ends up being two or $3 an ACO, an average produce up to to to meet that require. >> So, you know, I think that has a has an impact. >> Yes, I would agree with that. A lot of this centralization or concentration is strictly due to the, the cost of the regulation that's been imposed. But I can, I think we can start to get around that if we get creative with these smaller breakings stations set up around, I'm starting to hear a lot more talk of localities putting together smaller processing stations that can be, they can meet the demand if there's enough supply in the area from local producers to do that. But again, I've had a lot of conversations over the years with meat processors and almost to a person, they say, you can't open a brand spanking new meat processing plant today due to the cost that primarily written up by the regulation. >> So so yeah, it's it's not funny story. >> Do you see part of this then? >> I always get back to labor. Labor. >> Labor and being like a big issue in, in not only just like labor, but also like some of it is skilled labor. >> I know we've congregate, mechanize, but you know, I know we still have the Meat Science, Food Science, but it's not extremely large and grooming as in other states. >> Do you think that links them? >> That is going to be a challenge. A note like Allegheny meets a struggled to like keep manager and something that could be pay structure were just business. >> You know, the amount of supply that's come in through there. >> But is think that's going to be an issue. >> Yes, definitely. >> This supply labor supply or skilled labor are trained labor for something like meat processing industry is extremely short supply. >> But you know what? >> I think we can train people and get them up and running pretty quickly in that field. >> Virginia Tech is talked about hosting some training workshops or schools. I don't know what the status that is, but I would love to see it happen. Heck, I'd go through and I think it would be interesting, but yeah, on the labor standpoint, there's, you know, it's it's not the most glamorous career out there probably, but it can be a good career. So I think there's possibility out there for someone with good work ethic, someone that is trainable. I think, you know, if we can find a way to supply food to the US population. I think that gives us an awful lot of job security. So on the processing side, yes, there is labor issue. Any other questions or anything else I can help you with? >> Alex, this is Sally Pharaoh. I'm the 4H agent and Craig, but I'm also covering the Ag and I just move back from main. >> Whereas 4H agent, an agent. >> And we did a lot, we did some schools on there with meat cutting and we had a lot of processors that we're interested in it. And our livestock specialist worked with on some processing plant and they did a lot of the people came in and they kinda be hogs in lamps. And it was a whole week long school that they did. >> And I thought maybe we might have some interest in doing that. >> I would bet there's lot interests. Sally, and welcome back if you're just just right next door to me here, but yeah, I think there can be a lot of interest in that, if nothing else. >> Also during deer season or some of the other hunting seasons, it gives people something to do another stream of income and another way to basically spread out the fixed costs of those of all the equipment facilities. >> They need to be whatever their processing plant is. So I think there's, I think there's a pent-up demand. >> I think we can get a decent audience available for something like that. >> Any other questions? Anything else? >> I can the white Mike brought us here. >> Yes. >> Two questions. >> And again, thank you for showing up and working with us on this. >> The first question I'll take the general feel on get in front of me. Here is the next to you is might be a little rough price-wise, x_k, Rick, I would think so. >> Where there has been such an upheaval, such a disruption in the marketing chain, so on things it's just not equitable at the moment. So I think the marketing I think a little bit a while to straighten themselves out from again, from the livestock industry. The calf prices, the finished calf prices you're getting are, I haven't driven very low, but because there is a meet shortage, retail prices are high. So the retailers and the processors are doing well, but the actual livestock producers aren't. >> I think that's got to change, but it's not going to happen overnight. >> So I am looking for probably at least two years of uncertain, relatively uncertain prices. >> Yes, sir. >> I've got some great moments, he and Caroline that are thought and hyperventilate, thinking that cones not going to get up close to $4 a gainful. >> Wow, so I'm listening to you when you got to be more efficient. The second question was you mentioned prepaying cost for crop or Aflac. Her Cal for fee offer loud recede. And most of the, most of the farmers that really have their act together seem to do that normally. And what they'll do is get halfway through the harvest and at that point, the decisions is made. >> Okay, now do you need a new combat? Or maybe I don't need a comma. You saying this coming year, not necessarily. >> Think like it. >> The whole goal into prepaying bird laser, the'd are feed for mixing some concepts in there for the prepaying of your inputs. >> A lot of times that does make sense because if your livestock operation, you're going to need feed. >> You know, that and it's going to, it's, it's, it's necessary. Same thing with your fertilizer and seed and chemicals and so on. >> So begin my point there is in that one year that you don't make a prepayment, you're facing a significant tax hit. >> So if it's a bad year, you still might have to pay taxes as far as buying equipment. This is where I start to again, I get kinda riled on this one. If you're buying something that is, you know, if you're combines worn out def, it's older technology. If you can be more productive, more efficient by purchasing the new combine, an attractor, whatever that makes sense to me. >> If you're just buying it because you'd you'd want to reduce taxes. To me, that makes no sense at all. >> And if you're in the middle ground there, well, I might need it in the future. I've got the cash now, should I do it? That can make some, make some economic sense to me, but I tend to be relatively conservative over the next couple of years. >> I would be thinking I would rather put more money in my checking and savings account rather than having a new piece of equipment out there. >> That's especially if it's not going to make me significantly more productive, more efficient, I would much rather have cached sitting on hand. >> And here's where the, the top producers that are the top financial folks sorta get upset. >> They'll say, oh, that money's not earn me anything. >> It's not doing me any good. >> Sit in their savings account. Well, guess what? I'd I'd agree in a normal situation, but when bad times come around, you have cash available and other people don't, and that gives you a lot more opportunities. It gives you the opportunity to take the advantage of the 210 net 30 type by cash discounts you can get. So in bad times that cash comes in really handy. So again, like we were talking about with the meat processing to be more profitable. Heck, yeah, let's put that money that's invested in something that's going to be earning for me. But to help get through the bad times, I would rather have cached sitting in the checking account rather than having a piece of equipment and then the bill in the barn. Because remember, if we write off that piece of equipment on our taxes, it's tax basis is going to be 0. So if you have to sell that thing to generate cash, 100% of that's going to be subject to your capital gains. So, Mike, it's kind of a double-edged sword there for your operating needs. >> It probably makes sense if you want to make your prepayments on that. >> But again, just habit, you need an exit plan for what happens in that one year. You don't make that pre-payment. But if you're just buying something for the sake of producing taxes, I think you're throwing your throw in three or $4 out the window that have much better use. Thank you, sir. >> Certainly. >> And the other question, anything else I can help you out with or any other ideas for topics that people need to be hearing or would like more information on. >> Thank you. >> Certainly glad to help Rachel and let me know what I can do on your market research, your your meat processing deal. >> I think I think we're on to something there. >> I'm insane. >> Ever ten years just haven't done anything about it then mean either the a down time. >> I will not Han anymore questions. We'd just like to take a few seconds and thank you again, Dr. White, for joining us this morning. We appreciate all your time and expertise as great presentation. Hopefully our clients and produces some benefit with that. So thank you. Thank you for joining us. >> Certainly probably appreciate you guys asking me. And again, when you're helping your when you're working with your clients out there or if you're a producer, just keep it simple. Think through that partial budget for Met and stick to your fundamentals like you've been doing. >> You'll you'll make it through. >> I have faith that the thank you, Dr. White. >> We appreciate that encouragement. >> The other point I'll make grow quick. >> Two more quick announcements before we finish up this morning. >> You could see on your screen a few moments ago, we ought we have developed an evaluation for this program. So if you join us as as an agent or or faculty within DCE or produce or just anyone that's on the line with us this morning. If you would just take a couple of minutes to fill out that evaluation, go to that link is just a row short evaluation to ask some questions to help us better be able to help you and provide the information that you need there in these times. So please please take the opportunity to do that if you could. Force will also be posting that that link for the evaluation with the recordings of this presentation and presentations we've had before. Finally, I'd just like to thank everyone again for joining us this morning. I'd like to thank the team of agents that I'm working with, my colleagues, Trent Jones and North dominant in Lancaster County, laura maxi Ne in Hanover, Stephanie Rommel, check in Westmoreland, and Mike broadest, and Caroline and King George. So thank you to those agents for making this possible. And thank you again, Dr. White, for joining us this morning. >> We really appreciate that. >> So hope everyone stay safe and thank you all again for joining us this morning and we look forward to seeing you all next week.