Bulletproofing Your Farm: Financial and Technological Strategies with Aaron Wilson

[00:00:07.850] - Chris Griffin
Welcome to Back to your Roots, a podcast that provides insight into all things farming, financing, and farm life, guiding you back to your roots. Thanks for joining us today. I'm your host, Chris Griffin.

[00:00:20.310] - Jordan Turnage
And I'm Jordan Turnage. Thanks for listening to us. Today, we've got Mr. Aaron Wilson. He's from my part of the world, Ballard County, Kentucky. He's a farmer and a board director here at River Valley AgCredit. Mr. Aaron, thank you so much for coming in. We appreciate you.

[00:00:32.800] - Chris Griffin
Yeah, thanks.

[00:00:33.150] - Aaron Wilson
Thank you all for having me. It's an honor to be on here, and hopefully, I can share some wisdom with the listeners out there.

[00:00:41.070] - Chris Griffin
We know you pretty well, but for the listeners, that may not be as familiar with you, can you go into your farming operation? How many acres you farm, what commodities you farm, area, things like that?

[00:00:53.490] - Aaron Wilson
I am what we call a row crop producer, so that's mostly corn, soybeans, and wheat. I I'm mostly in Ballard County. We've produced a little bit in the edge of McCracken County, so Western McCracken, Eastern Ballard County. I'm about a 3,000 acre producer, generational family. My father-in-law is part of what we do. My father is part of what we do. It's something that's been passed around from generations on down. I started farming in middle way through the '90s. When I was in college, we grew up as a tobacco-producing family. Family. I got out of that in the late 2000s, 2008 or so as the markets changed and as my grain crops began to increase and my family started somewhat stepping away in retiring, passing for one generation to the next. I increased those acres, got away from tobacco. And so now we're just traditional corn, soybeans, wheat. And we have some beef cattle, too, to offset some things and give us a little diversity, and utilize some acres that are not as easily row crop production.

[00:02:02.930] - Chris Griffin
Okay.

[00:02:05.020] - Jordan Turnage
Well, the theme for this episode that we're going to aim for today is facing challenges and how, as producers working along with us as lenders, how we face those challenges and how we try to overcome them. We just want to start first off. We'll get the 800-pound gorilla out of the room and go ahead and talk about interest rates and just how you've been able to see the rises of what we had to deal with in the past two years versus the lows of, say, of like 2020, how things started with you in the '90s. We'll just get your thoughts on that.

[00:02:41.360] - Aaron Wilson
Jordan, when I started farming, interest rates rose to about 9 to 10 % on variable rates. Obviously, there, I think I'm sitting about eight and three quarters right now. Covid years were good, 2020 to 2022, we were looking at four and a half to five % variable rates. I bought my last big tract of land in 2022, and I fixed that rate at 4.55 with a patronage rebate. And so the markets and the indicators and the people that we were trusting were telling us that interest rates were going to rise. We see it coming. And so we had the ability to come in and lock in a pretty good track at that rate and we felt very blessed. Typically, when I've bought something like that, I would always pay extra at the end of the year. Done that my whole life. But now, where I'm sitting here at a variable rate of 875 versus a 455, I don't. I'm going to ride that as long as I can. Pay what I need to pay and go on and use my excess dollars to bulletproof myself, to hold, to pay down inputs and things like that.

[00:03:57.970] - Aaron Wilson
That 855 This 875 interest rate is something that... It's just a cost of doing business. In the economy we're in, it could be much higher. Like I said, when I started, nine and a half, 10%. I'm a child of my parents going through the '80s. I was young and I remember that, but that changed our dynamics in our area. I see a lot of farms where you drove past. Those people went out in '85, '86, and It was dry weather and interest rates, rising cost. What do we have now? We have variable weather, we have rising interest rates, we have variable cost. Same thing. We're trying to do the smart thing and not get crazy, not get carried away, but manage those interest rates the best we can by fixing them when we can, when that opportunity rises, and when we can't to hold our excess and to pay down on debt or to hold some cash available to where we don't have to pull as much from our operating lines.

[00:04:59.590] - Chris Griffin
That's such a good point because you're talking about bulletproofing yourself. You and I were having a conversation where I came in here, and my wife owns a business. I think when you run a business and you're looking at numbers, I hear her all the time talking at our house. She's always looking at the next year, and she's already planning for next year, and it's always like, I want to have this amount in my bank account, and all these different things. It's like you said, because you don't know. Covid could hit again and shut my wife's business down. Or just like for you guys, we could have a drought, and we could have a tornado that tears crops down. You have to file an insurance claim or whatever that is. When you're looking at that, and I think the biggest thing is, obviously, inflation has been a big thing over the last few years. So obviously, equipment itself has gone up, input costs from chemical seed to fuel. How has that played in and how have you hedged that a little bit and planned for that moving forward?

[00:05:56.330] - Aaron Wilson
Chris, that's one of our biggest challenges right now is rising cost. Today, I sit here and my cost of corn production on an eight-year average is $4.83 a bushel. That's my break-even cost. I look at yesterday's market, my point of delivery is $3.89. That's a dollar spread right there. So how do I manage that? How do I manage that? Rising input cost. We've done some things such as putting in storage, fuel storage. Used to, we didn't have enough fuel storage. So in season, and I say in season, which would be during harvest or planting, we may not have enough fuel bought, didn't have enough storage for it. So when you needed extra, you just called the fuel company and said, Hey, bring me a load. Well, you got hit with a higher price because you didn't have the ability to manage those rising costs. So now we've come in and we've put in enough fuel storage so that we can hold everything we need for harvest or for springtime. And so now we come in and we come in in the winter, January, February, and say, Hey, what's cost of a load of fuel or fuel up all of our tanks?

[00:07:02.590] - Aaron Wilson
If it's not where you want it to be, you don't have to buy it that day. But in that in-season time, you have no choice. You don't stop everybody and say, We're not working today because we don't have enough fuel. Same thing with our fertility. We've moved from a dry fertility product for our corn and moving that way in our soybeans as well to where we're moving to a liquid product that we put down with our planners in season. And with that, we're putting in liquid storage to hold enough so that we can buy out of season. Cost is a little bit cheaper. You can look and say, Where's the better deal? You buy it when you need it. In season, you don't have that option. That's one way we're managing those input cost. And so watching and do the best we can. Pennies make dollars. I don't care if it's $100 or $1,000 or $10,000. If you watch every little cost the best you can and manage the best you can, that's where that adds up in the end.

[00:07:56.290] - Chris Griffin
I always joke. We're talking about my wife owning a business. She'll get hats at her gym. I'm like, Hey, can I get one of those hats? She's like, Yeah, you can pay for it. I'm her husband. I'm like, I can't get it for free. She's like, I can't lose money on that. There's no freebies in this room. No, I'm like, I'll probably pay the upcharge. They probably charges me extra. That's right. One thing- There's two more. Oh, yeah, for sure. One thing you were talking about on input, and we were having this conversation before we started the podcast, was you talked about the drone, you talked about some automation in the future, which obviously would help with some of those costs, like your overhead with labor and different things. Can you go on that a little bit and talk about how that helps you right now, where you see that going in the future?

[00:08:37.750] - Aaron Wilson
Just here in the last two weeks, we've bought a drone. We're spraying our corn with it, and it is a late-season application. We're doing fungicide, a little bit of micro-fertility, and some management. We had a nice rain come out of the south, and basically, hurricane Burryl come in in the last few days. With that, a lot of times, it will bring some Southern issues with it. Southern rust, that's generally where that comes from, and it rides in on there. Bless by the rain. We couldn't be more happy with that, but we want to protect the last six weeks of growing season, that last eight weeks of growing season for our corn. And so we bought a drone and we're applying with those products with it. At about a $5 an acre cost is what our application cost is. We also don't have any tracks in the field from a ground sprayer. If we were to do that, we've done that in the past.

[00:09:32.690] - Chris Griffin
I didn't think about that. I didn't think about that because with the weather-

[00:09:37.870] - Aaron Wilson
There's a loss to that.

[00:09:38.390] - Aaron Wilson
When you're turning and everything like that, you're going to drive over something.

[00:09:40.990] - Chris Griffin
I didn't think about it.

[00:09:42.210] - Aaron Wilson
We are at this point, so you don't want to knock it down anymore.

[00:09:43.850] - Chris Griffin
That's a good point. That's something I never thought about.

[00:09:46.090] - Aaron Wilson
We've used airplanes in the past.

[00:09:50.140] - Aaron Wilson
We've used helicopters in the past. Both of those are great technologies that work. In our area of the world, airplanes aren't as efficient because of our field size and power lines and field borders and things like that, it doesn't work quite as good. Helicopters work great. But this is something we can do ourselves. We can't own a helicopter, but we can own a drone. This is a utilization of labor. The drone technology works great in the fact that it has a really good downforce. And so when you're putting a small volume of chemical or solution out there, it's blowing it into that crop canopy as that drone passes over and everything like that.

[00:10:27.080] - Jordan Turnage
And you're able to adjust droplet size.

[00:10:29.170] - Aaron Wilson
We're adjusting the droplet size. That's something we adjust throughout the day as the wind gets a little bit or this morning, we try to start about 5:30 or 6:00 in the morning when it's cool. It's easier for people out there doing it. Not as much wind. And then as the day progresses and the humidity and heat comes up, we address that droplet size We didn't change that on the go and everything like that. But that's a technology that we're currently using. It has its hiccups. There's some things, some learning curves and everything like that. We hit a power line the other day or a fiber optic line, didn't tear up the line, but we broke some propellers, it went down everything like that. We set it on the bench, we put it back together, and we go again, nobody's hurt. It's a low cost input piece of equipment that is something that is applicable to a thousand acre producer, whereas the 10,000 plus acre producer, they're the only ones that can own an airplane or a helicopter and things like that. This is something that we're trying to do to protect yourself and protect our yield going forward.

[00:11:24.620] - Jordan Turnage
It increases your precision agriculture. Absolutely. Because you're able to control when and when you're ready to go up with this. Whereas farmer Joe down the road, he's having to call XYZ supplier to see when they can get that out there as quick as they can.

[00:11:38.740] - Aaron Wilson
You're competing with other farmers that are wanting that done at that same time. There's only a certain amount of custom application equipment out there. But this is something that we have our own. We can go do it. It rained three inches on us yesterday, the day before, over the last 48 hours. We started five o'clock this morning. You can't walk out in the field.

[00:11:57.610] - Jordan Turnage
It's too wet. No need to worry about this.

[00:11:59.430] - Aaron Wilson
We were spraying strawberries with our ground rig. I probably maybe start back in two days, but our old drone, she's out there working right now and hopefully hasn't had any issues today.

[00:12:08.970] - Chris Griffin
I never thought. That's a great point. That's what I was saying earlier. I never thought about that about, Hey, we're going to have to wait till it dries up. It could go anytime. Keep trucking on and saying- Last week it rained and it quit, and then 30 minutes the sun came out, we started right after the drone.

[00:12:24.800] - Jordan Turnage
I mean, everything right now, as far as your chemicals now, is rain fast within 30 minutes or right on top of it. So you're just ready to sit on and go.

[00:12:32.430] - Aaron Wilson
The technology with this drone, it was really impressive for us. The controller, the mapping capabilities and things like that. It's really impressive what it can do. But it's a learning curve. We're learning with it and adjusting and going on.

[00:12:47.320] - Jordan Turnage
I think what's really interesting to me when it comes to crop protection is having to worry about droplet size. I mentioned it a little bit ago. And you guys are able to just adjust on the fly, from what I understand on those drone technologies where everything Everything else was like a run on a T-jet technology, and they had to worry about those fine droplets. It's a little bit better chance to keep your chemical in your field. I think this is something that we'll definitely see moving forward. This is just going to become more of a common place thing. I don't think it's the way of the future. I think this is the future, and we're in it.

[00:13:22.830] - Aaron Wilson
Jordan, we related to a Roomba. A lot of us are familiar with that. That thing works very much like a Roomba. It goes and does its thing, and we're there managing, watching it, controlling it. If it hits a little hiccup or something like that, but it's low cost, low environmental impact. We're not spraying anything that's damaging the others around. We notify our neighbors what we're doing, but we're trying to get it. We're in the case where we don't want to spend anymore, and we have to. So we're not wanting to spend something that's way over application or anything like that. Trying to put it exactly where it needs and exactly where it needs to be and utilize it in a smart way.

[00:13:56.140] - Jordan Turnage
Because I'm with you. The fungicides are going to be imperative this year with just the Well, we saw it in this year with wheat. I mean, there wasn't much guys could have done with the fungicide application, but to handle these wet, semi-warm days that In the spring, when wheat was trying to put heads on, and now we're having to see these guys lose tens of thousands of dollars to test weight and vomitoxin issues, this is something that you can help mitigate as yourself as a precaution with these drones going forward with corn production.

[00:14:33.460] - Aaron Wilson
In our area of the world, where I'm at right now, we have as good of a production going as we've had in five plus years. And so we're just trying to protect that, capitalize on what's out there, and saying we want to protect as much as possible, increase what little ability we have from here on out, and hopefully make a profitable year.

[00:14:56.760] - Chris Griffin
One thing, and since I've been here, I've always It's been interested in learning about it. But when a farmer looks at weather patterns, and you obviously can't... I mean, meteorologists have the greatest job in the world. They tell you it's going to do something, and they're right about, I don't know, maybe 10% of the time, I feel like. I know it's got to be difficult. But when you're trying to predict that, trying to look for, trying to plan for, Hey, it looks like it's going to rain. It looks like Hurricane Burles coming up here, and it's going to rain X amount or whatever, you're looking at maybe recent weather patterns over the last couple How do you plan for that at the beginning of the year? How do you... Some of it, Hey, it's just from past experiences. Is it from, are you doing research on it? Because I know you're a pretty analytical guy, so I know you're probably doing more than just following your gut. If I had a feeling.

[00:15:48.890] - Aaron Wilson
One thing we start with is a good crop insurance program. Okay. That protects us up to... Generally, we purchase up to the level of our input cost. Now, it doesn't protect us for a profit, but it protects us from going backwards. We don't want to obviously work one year, spend everything we've got, and then go backwards. 2012 was a fine example. It was a drought year for most of the purchase area, a large section of the country. If it wouldn't have been for our crop insurance proceeds, we would have had a negative year. But fortunately, due to that, it allowed us to have a slightly above profitable year, and so we were able to manage that. When we start the year out, We look at our crop insurance and we say, Okay, this is something we want to be sure that's enacted, work with an individual that we feel comfortable with, that makes sure it has all the things entered that we need to so that everything's covered. That's when we do it. It seems like our weather is more extreme than it used to be.

[00:16:51.180] - Chris Griffin
Yeah, I agree.

[00:16:52.640] - Aaron Wilson
We all have short memories. We all like to remember what we see today, not what we saw 20 years. I'm sure it was like eons and generations and decades ago and stuff like that. But it seems like our weather is pretty extreme. So we start out a cycle and we say, Oh, my gosh, it's too wet, it's too dry, it's too cold, it's too hot. But it's hard to completely prepare for that. But the best thing that we can do is when the opportunity comes, we do what we need to do. We have faith that the weather is going to work out, that the averages are truly going to be there, that it may not rain for a certain amount of time, but then again, it does. It's sometimes. We utilize what we know how to do and go to work when we need to go to work and pray and have faith that the day is going to- For sure. Oh, you can do. Each day is going to end with a blessed day.

[00:17:48.320] - Chris Griffin
You were talking about it is funny because I feel like the last couple of springs have been really wet and they were like, Oh, it just needs to quit raining. It needs to quit raining. Then it's like, Oh, my gosh, now it needs to rain. It's always just a constant cycle. It's too cold, now it's too hot, it's too wet, now it's too dry.

[00:18:03.840] - Jordan Turnage
Well, to get three or four inches of rain in the first week of July, that's not what it was. It's been- At least we get two feet like we did last year.

[00:18:13.040] - Aaron Wilson
Last year, on the 19th, we had 12 inches of rain in just a 24th period and stuff like that. But it turned out that we had some minor destruction. I know some people had some severe destruction for where we were at. We ended up with a pretty good late-season bean crop, and that really helped It did. That's part of it. Just adjust to those weather extremes and go forward.

[00:18:38.370] - Jordan Turnage
And I feel like that's one of the things, the silver lining, maybe in this year's wheat crop, where guys were able to plant where wheat didn't go exactly how they wanted it to. Hopefully, we'll see a good harvest with that going on in this fall. So we'll piggyback off that and talk about commodity pricing. And we know that is a huge component to farmers in their daily operation. What can you do yourself to help give yourself the best success when it comes to pricing your grain?

[00:19:11.040] - Aaron Wilson
In 2018, Jordan, we started putting up a good amount of grain storage. I had some smaller storage at that time, but I made it a priority for me. Started a little bit before then and planting things out. We really started digging footers and pouring concrete at that point. It grew from there.  In 19, we put up more, 20, we put in dryers, 21 we put in bins, and things like that. We have enough grain storage to hold an above average yield on our corn and store everything. That gives us the opportunity to not price or sell grain during harvest, or at least corn. I've always looked at that as a mantra is, I don't want to sell anything in that late September, early October time frame, because it seems like the price is going to.. The markets are going to make you pay for it. If you don't have storage for it, if you're going to dump it on the market, you're going to pay for it. So we try to store every bit of our corn. We have enough storage for about half of our soybeans, so we try to, on the counter, sell ahead, market ahead, some of our soybeans.

[00:20:17.460] - Aaron Wilson
That's what I was checking the markets this morning. Is there an opportunity there? Is it below my cost of production? If it's above my cost of production, we got a beneficial rain, let's sell some more. Let's go forward and see where we're at. And It's just about hitting base hits. It's not about trying to hit a home run and say, we sold the top of the market. If you do that, the next day it's going to come down and we didn't sell the top of the market.

[00:20:39.520] - Jordan Turnage
Law of averages.

[00:20:40.540] - Aaron Wilson
Know your cost of production. Do those figures at the end of the year, early in the air, know where you're at, and then look at the markets and say, Are we there? If we do, we make some sales and go forward and manage these low cycles that we're in right now.

[00:20:56.830] - Jordan Turnage
Because I feel like it's having, I think, one thing that we've talked on in every aspect that we've talked about as far as challenges is trust. Trust and faith. You have to have an open communication and trust your loan officer, which I hope you do. Then trust your crop insurance agent. Trust the person that's up there helping you with your commodities. It's just for the listeners out there, this isn't just something that it's a lot more than just turning a steering wheel on a tractor. And I think I've said that in previous podcasts, but there's a lot to this. All of these farms that you drive past, they're corporations, their facilities, their operations. These aren't just the old picture of the Maul and Paul, the Paul standing there with the pitch fork. These are multimillion dollar operations that we're driving past and working with day in and day out. And it's all about having open communication as much as we can, trusting in one another, and not to get too far out there on folks to get too preachy, but it takes a lot of faith to do what you do.

[00:22:22.850] - Aaron Wilson
Jordan, you said it right. Honesty and trust. I look at the people I do business with, you, my loan officer, my input suppliers, my equipment suppliers, as part of my team. Do I want those people on my team? If I have trust and feel like they're honest, I want them on my team so that when they're making a decision that I may not completely be able to understand or not completely know all the details, are they going to make the right decision that it benefits me and them, which is a mutual relationship. They have to benefit themselves as well. But are they going to look and trust my interest as well? I look at the people I do business with and say, I want them on my team. If I have that honesty and trust with them, then I want them on my team and feel like it's a team effort, it's not just me making all the decisions. There's others that I look to and I say, I don't know that I have the expertise to make this decision, but what do you I think. I have to trust in their opinion. If I don't, that's maybe not somebody I want on my team, and I have to look and manage and go somewhere else.

[00:23:22.480] - Aaron Wilson
But that's how I look at it. When you say trust and honesty, that's how I look at it as well.

[00:23:27.640] - Jordan Turnage
I was raised This is my philosophy. This is Jordan's philosophy on things. When I was in retail, and now that being in lending, my goal has always been to be a supporting member of the clients that I serve, the farms that I serve. I want to be a helping hand, and I want to be a part of that success form. I want to be part of their team. I don't want to be just a transactional situation with folks. That's just not who I personally, but I like to... I don't get the opportunity to farm. So the next best thing I know that I can do personally is to help those people that get to farm. It's the reason I wake up every morning. It's the drive that I have. It's what makes me want to work, is to see folks like you and all of my clients in this area, in this region, be successful and be able to handle Those good times and bad times. I've been in lending for four and a half years now, and we had it pretty good starting in 2020, jamming out all those note bonds and having those 4% interest rates for folks.

[00:24:43.830] - Jordan Turnage
But then Looking at it from '23 on now with the double in the interest rates for operating. The goal for us as lenders at River Valley Ag Credit, and I hope that everyone understands that, is that we want to be that support in good times and bad, the way you know you've got a good teammate with you when you go out there, when you're getting ready to set that planner and put that seed in the ground, you know we've got your back. And that's what I love working here, and that's what I love about working with clients like you. And so that's my soapbox on that. And I I want to get before we wrap up, I think it would be great, and I think you've written some notes down to on this, if we just get some pearls of wisdom, some insights, some last tidbits to help close out the show.

[00:25:42.380] - Aaron Wilson
One thing I look at on a seasonal perspective, or maybe not daily, but when you come in and the day's been long or things didn't work out exactly like you want, you have to remember and have focus and remember who you are and what you do. One thing that I've always referred to when I drive past what we own or where we work or our home or where we live is, is we as individuals, as farmers, individuals, we don't own anything. We are simply caretakers. There's been someone ahead of us that has passed it down to us, that has entrusted us to say, this is yours to hold, possess, grow, maintain for the next generation. And so I focus on that when the times are tough or at the end of the year, or when you finish up a really nice harvest, or you make a really good decision that's benefited the next generation and say, how can I protect that or hold that, maintain it till the next generation, pass it on to that next generation, and say, here, here's something that is vital for you, that you can provide for your family, maintain, grow, and produce.

[00:26:59.980] - Aaron Wilson
And that's what farming is about. That is a measure of success for me. If I can do that, it's not about who's farming X number of thousand acres or who hit the top yield. Yeah, that's a benchmark. But success for me is if I can hold and maintain what the generations before me gave me and pass to the next generation and have them understand where it came from and see a value in it and see something that they can maintain and pass on to the future generations. That is a parting wisdom for me.

[00:27:30.710] - Jordan Turnage
That's incredible. Thank you so much for coming in. And thank you for your guidance and your leadership as a director, and your time that you invested in the River Valley Ag Credit over the years. I love having both your dad and your father-in-law come in the office, it's always a hoot to talk to them. And we just thank you so much for coming in today. So with that, we'll close out this episode. Thank you for joining us on the Back to your Roots podcast. For Chris, I'm Jordan. Thanks for listening.

[00:28:00.990] - Chris Griffin
Thanks for tuning in to Back to your Roots, where we dish the dirt on all things AG. Be sure to never miss an episode by following and subscribing. While there, leave us a review about what you want to hear next. Stay in the know between episodes by following us on Facebook, Instagram, Twitter, LinkedIn, and TikTok. For more resources, go to our website at rivervalleyagcredit. Com.