Business and Birthdays

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Partners & Friends,

Last week, Marcus, Phyllis, and I attended the AgView Executive Business Conference in St Pete, Florida. We find it a good strategy to step outside the business, get some external perspectives, review, and plan personal and business goals. There were several speakers who challenged our future personal and business plans. We met some great people at the conference as well.

For full transparency, here are some of the notes and bullets we brought home: 

  • We need to keep better track of our corn and bean break-evens as the year progresses and see different yield scenarios play out 

  • We need to shock test our balance sheets with different black swan scenarios in order to see how our financials react, and how we then should adjust our business to compensate

  • We should take a 2-hour break from technology every day to reduce stress and help maintain our personal perspectives

  • The most important pieces of equipment on the farm are our bodies—we must do our best to maintain physical and mental health

  • Nobody knows where commodity markets are headed

  • Success is measured in money and capital, while significance is measured by what you give back

  • $8 of every $10 we spend in agriculture is related to energy

  • We cannot flip a switch to convert to green energy, it is going to take much time, technology, and funding

  • Cost of labor is not coming back down

  • Soy diesel is the new green fuel star

  • What is DALL.E.2?

  • Life is short—family comes first. Your legacy are the memories you want to leave

The Hess Family Farm team is busy shipping grain, crunching input numbers, ordering chemicals, working on life goals, and relaxing. After stepping back and gathering all this new information, we now need to be diligent about setting new goals, and then find accountability to ensure we actually implement them.  

Brazil is harvesting beans. It appears there is a large crop and an abundance of acres to harvest. There will also be another 3-4% more acreage next year. Brazil surpassed the US in soybean production about 8 years ago, and now their production and exports are more significant than ours. Interest rates, at these levels, have changed several global economic plays. Current rates are far more historically normal, and we must take interest and energy prices into account throughout all of our planning.

January is birthday season, so there are cards to send and celebrations to participate in. We celebrated Marcus and Phyllis' birthdays on January 25th while still in St. Pete. There is nothing miniscule about the wonder and significance of creation and life!

Fall Prices:

Corn—5.66

Soybeans—13.45

Steve

Legacy

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Partners & Friends,

As I believe most are aware, my parents, Charles and Wilma, passed away on January 7th and 8th (respectively), a day and half apart. This is just as they would have wanted it—still together after 69 years of marriage. The outpouring of condolences has been so uplifting, and we are overwhelmed by the memories shared and lives they touched. It has truly brought to mind how careful we must be in our everyday lives regarding what and how we share with others; we never know what the takeaway will be for those we interact with. I am so thankful for the positive impact Charles and Wilma left on their earthly journey. They will be long remembered by family and friends. We are planning a celebration of life on July 15th—more details to come.

The Hess Family Farm team is keeping busy this winter with plenty of off-season projects. We’ve gotten some good days in with the tile plow—that task will be in the wings for several years as we continue to improve the fields. We are shipping corn to TriOak feed mill to take advantage of the strong basis. Next week, we will also deliver one of the soybean seed varieties we raised this year—there will be many trips to El Paso involved with that. It is the season of meetings as well. The Precision Planting meeting is this week to announce new products and past season agronomic data. And as a cherry on top, tax preparation season is upon us, with plenty of accounting details to attend to.🙃 

On a global standpoint, things seem very unsettled. The varying weather from cold, to warm, and back again equals energy price volatility. Congress, with its latest members, is preparing to address a new farm bill this year. Ukraine and Russia continue to trade blows and threaten grain exports. On a local standpoint, there is still adamant opposition to CO2 pipelines. La Nina seems to be fading from the weather influence.

School for our grandchildren is back in full motion. Ali is preparing for her last quarter at UChicago. More goat shows are coming up quickly.

Fall Prices:

Corn—5.77

Soybeans—13.39

Let us know what your thoughts, questions, or any other comments are.🙂

Steve

What We Do Right

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Partners & Friends,

This is the time of year where we reflect on what choices we made are paying off. Not everything we do gives us the returns we expect; we will share some of that later. But first, here are some of the main takeaways from 2022 that helped deliver the successful year it turned out to be:

  • Early Planting—we strive to take planters to the field as early as April 4th, as field conditions are fit (soil conditions almost always trump weather forecast)

  • Multiple Nitrogen Applications—with the high cost and low availability of our main fertilizer (nitrogen), efficiency and timeliness of application are huge cost savers and allow us to be more environmentally friendly

  • Crop Consultant—we cannot do everything, and seeking help in areas we are weakest in or lack time for is often necessary

  • Lender Relationship—it is vital to have a strong relationship with our lender to be nimble and take advantage of opportunities presented

  • Flex Rents—the sharing of risk with an open upside to benefit from price strength and good yields is beneficial for landowners and tenants

  • Equipment Capacity—we must be able to get crop planted, tended to, and harvested in weather windows, hence the upgrading of our planters, sprayer, combine, and trucks

  • Technology—we are constantly upgrading and adopting new technology to deal with one of our greatest challenges, labor

  • Work Hard, Play Hard—time away with family is refreshing, rejuvenating, and provides better perspective on who we are and what we do

The Hess Family Farm team is busy selecting and purchasing inputs (seed, chemicals, fertilizer, and equipment) for this next crop year. Higher interest rates are adding a new dimension to this and other marketing decisions. Energy is still one of the biggest uncontrollable factors we deal with. The world economy is slowing, which will affect demand for our commodities. I recently heard that chip manufacturing is now in a surplus! It is funny and ironic how we overcompensate to find new balance.🤔 The crop in South America is looking to be a big one. The fluctuating dollar is just another item for us to monitor in regard to marketing decisions.

Our family is doing well. Grandchild #13 is due in April! We all had an opportunity to gather for a Christmas reunion this past week in Monmouth, IL. A visit to sing carols to Oma and Opa was made and enjoyed. We survived the extreme cold and have all waterers operational again. The multitude of animals, even new babies, made it through the cold quite well also.

 Fall Prices:

Corn—5.86

Soybean—13.92

Keep in touch,

Steve

Just Kidding

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Partners and Friends,

It has been some exciting and rewarding times around here. The goat project is exploding in size. Last summer's vigorous AI breeding schedule has resulted in some great birthing experiences. We had 2 sets in October and 2 sets the week of Thanksgiving. All are healthy and doing terrific! 2 more sets are due the week of Christmas. What fun it is to watch the exuberance of youth and wonder of creation. The pens are getting full and decisions now need to be made who gets to stay around for show season.

We were occupied last week installing 80 acres of tile before the weather turned wet. The team and I hope to do another 160 acres this winter, weather permitting. If our land base stayed stable, we probably wouldn’t run out of tiling projects for the next 7 years. We have a list of priority fields and hope to eliminate replanting wet spots soon. The price of material has softened a bit, but is still 50% higher than a few years ago. The tile supply situation is a perfect example of supply logistics recalibrating. We have also completed all NH3 applications. The plan for 2023 is for more corn acres than beans, due to economics and some strategic field reorganization. Time spent in the office has been at a premium over the last several weeks while figuring and analyzing past years’ outcomes and changing some practices for the future—more on that soon. 

The world is still full of black swans. The Ukraine situation remains in a state of turmoil and probably will for a long time. Note this chart; the world energy situation has some resetting to undergo that will not be comfortable for some. We in the United States are truly blessed with natural resources. 

The family is staying quite busy during this holiday season. The Trinity "White Christmas" program is this weekend. The 2022 Hess Family Farm Team Christmas party is also now in the books! Pop question: what year was our farm founded? We are truly celebrating the reason for the season and reflecting on our abundant blessings.

Here is an update on the Ukraine situation from MCAgronomics:

“The situation in Ukraine is continuing in much the same pattern. The Russians are failing on the battlefield in most locations but doing great damage to the electrical grid, natural gas distribution, and drinking water systems. Since the Russians have not been able to gain or hold ground on the battlefield, they are focusing on freezing/starving the civilian population. The will of the Ukrainians appears strong and the ongoing discoveries of murder, torture and other war crimes strengthens their conviction. The Russian population appears to be becoming more and more displeased with Putin’s war making but who knows where that will lead.

The “mud season” is ending and the ground is freezing which will allow a return to battlefield mobility and will favor the Ukraine tactic of bypassing established Russian defensive positions to attack supply lines in the rear.”

2023 Fall Prices:

Corn—5.68

Soybeans—13.74

Soak up this wonderful season!

Steve

What Others Say

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Partners & Friends,

We have spent several days attending meeting focused on marketing and management for ag producers. We are always looking for ways to improve or enhance our operation to become more profitable and efficient.

Here are a few bullets from what we heard.

Marketing

--World commodity supplies are ample and this is a global market we are competing in

--Weaker US dollar should give us a competitive edge

--Watch for and take advantage of basis opportunities

--China Phase 1-not bullish but does calm the water

--China Phase 1 good for meat sales

--Macro markets (stocks) are off to the races

--Pork production in US is up 25% in last 6 years

Weather

--Summer temps are ALWAYS higher than normal after warmer than normal winter

--Corn belt weather has changed to wetter because of the way we raise corn

--Warm February temps usually mean cool wet spring and hot summer

--3 day forecast is usually 97% accurate

--10 day forecast usually 50% accurate

--Climate (change) is the average of 30 year weather and is always changing

Management

--Orlando is the safest zip code in America

--Management is doing. Leadership is being.

--Interest rate does not matter to government spending

--By 2040 60,000 farms will produce 75% of US ag output

--Younger generation is resentful of supporting large retiring group

--We need to produce what the consumer wants!!!!

—There will be more change in agriculture during the next 10 years than during the past 70

--Success in growing a business will be about alignment between production and consumption

--Millennials care more about what has been done on the farm for generations than who has owned it

--Oil is becoming a global commodity-less volatile

--We can be low cost or high quality producers

We are sharing current thinking with our partners so you can have an idea of how we are positioning ourselves to move forward. One thing for sure in our industry is that things are constantly changing.  The way our farm has survived for 150 years is to adapt, hopefully early, to new ideas and technology and implement them. Farming today looks so different than when Phillip Doll came to Bushnell IL and chose the farm we live on today. But all generations have been progressive and forward thinking, which is why this business still stands today. As we age  it is harder to move toward different ways of doing things but necessary for survival. 

Some things do remain constant throughout the ages. Honesty, hard work, ethics, family values, sustainability and the culture we create are still the foundation for what we do. To care for and leave this environment a better place than what we inherited is the goal.

Fall Prices:

Corn 3.69

Soybeans 8.86

Keep in touch. Comments appreciated!

Steve