Jim Rice, an outfielder for the Boston Red Sox, was finally voted into the Baseball Hall of Fame today.

I was in high school in the mid to late 70’s when Jim Rice was playing for the Red Sox and he was by far my favorite baseball player of that era. He retired almost 20 years ago and it took him 15 years to make it into the Hall of Fame. This year was his last eligible year to be voted in by the writers.

I got married in 1982 and my wife knew I was a Red Sox and Jim Rice fan and the very first dog that we got during our first year of marriage she named Boston for me.

This has nothing to do with farming, but just wanted to say congratulations to a childhood hero of mine.

The Department of Agriculture released many crop reports today. As a result, corn, soybeans and wheat prices were sharply lower on the cash and futures markets. In many cases, the drop was 10% or more. 

Prices has steadily risen over the last few weeks and there were many chances to lock in a profit on the new crop. Many times, farmers want to wait for the high of the market to lock in prices and what usually happens is that they get a much lower price than if they simply sell 1/12 of their crop each month.

Every farmer should have a marketing plan (in conjunction with the appropriate help from marketing consultants, if needed). When you can lock in an adequate profit for the crop year, do it! 

Usually you will be much better off than trying to go for the highest price. 

Every farmer should have a marketing plan (in conjunction with the appropriate help from marketing consultants, if needed). When you can lock in an adequate profit for the crop year, do it! 

Usually you will be much better off than trying to go for the highest price.

I have given many financial seminars where I start out with the story of two employees.. Each employee is giving the option of receiving $1,000 per day in wages for 28 days or starting with a penny and having their wage double each day.

Most people assume the $1,000 per day will be a much higher number, but lets review the numbers

• After week one, employee # 1 have $7,000 in wages, employee # 2 will have a $1.27
• At the end of week 2, employee # 1 is up to $14,000 in total wages, employee # 2 has $163.83
• After three weeks, the two employees are almost equal. # 1 has $21,000, # 2 has $20,971.51
• At the end, employee # 1 has earned $28,000. Not bad wages for a less than a month. However, # 2 has earned a total of $2,684,354.55.

Like the mustard seed that starts as a very small seed and grows into a large plant at maturity, the power of interest compounding starts small and over time becomes very powerful.

The Super Bowl of Football is coming up in about two weeks. I have always thought that the game of football has many similarities to the business of farming.

During the off and pre-season, the team is acquiring talent based upon their needs and goals for the upcoming season. As farmers, during this off-season, we need to acquire our own talent. This talent could be a new CPA for estate and tax planning, a new attorney for business entity selection, a new insurance agent for asset protection and liquidity. It could be reviewing new types of seed or fertilizer options for the upcoming season.

After the pre-season is done, the early football season gets started. This involves playing games and seeing how the team is playing against the competition. If they are playing well, then small tweaks may be made. If they are playing bad, then major changes need to be made. With farming, after the crop is planted, you need to check how it emerges, how your application of nutrients is working. If pests or weeds are rampant, appropriate applications of herbicides and pesticides are made. If you are an organic farmer, then natural applications are made.

The season goes for about 17 weeks. There are ups and downs and if the team has prepared and executed well, they make the playoffs. If a farmer executes well during the growing season, it will make it to harvest.

In the playoffs, the regular season no longer means anything. You either win each week, or the team goes home. With farming, as you harvest, you have immediate feedback as to whether you had a winning season or not. If the crop exceeds your average for previous year or you exceed what your neighbors are doing, then you had a good regular season and a successful playoff (harvest). If not, you lost for that week or season.

Only one teams wins the Super Bowl and the other 31 teams go home “loser”. Even if you do not win your Super Bowl harvest, you are like all 32 football teams since there will be a new season for everyone to start over and win again.

May your favorite team win the Super Bowl and if not, remember they can win next year.

During several of meetings with clients during each year, a client will ask me a question about how much money they will have in a number of years. Sometimes, for fun, I will try do this in my head and I will generally be very close.

For example, they will state they have $100,000 to start with and they expect to earn 6% and have the funds for about 25 years. About as fast as they say this, I will state that they will have a slightly more than $400,000. They are always surprised how fast I can give the answer. There two simple reasons why I can do it. Reason number 1 is my mother was very good at doing math in her head and passed it down to me. Reason number 2 is the rule of 72.

This rule states that your money will double in years based upon what your expected interest rate will be divided into 72.

For example, if you expect to earn 6% on your money, it will take about 12 years to double. If you earn 8%, it will take 9 years and so on.

For the example shown above, if we start with $100,000 at 6%, it will take about 12 years to double to $200,000 then another 12 years to double again to $400,000. Compounding it at 6% for another year will total about $425,000.

Try this on your farmer friends and guarantee that many will know the rule of 72 already.

This time of year for most farmers is a period of down time. There may some crops that are planted, but dormant. Some farmers spend time maintaining their equipment for the new year.

I think this time is what I call “Go Time.” This is the time to:

• Prepare and review your operating budget for the new year. Some farmers treat this as a necessary evil for strictly for the bankers to give them a loan. I believe this is the road map that you need to have a successful year for the new crop year. By properly budgeting your production, revenues and expenses, you have a several clues where to change crop mix, cut expenses, or obtain adequate capital.
• Partner up with your banker. A banker wants you to succeed as much or more than you do. If you succeed, his bank has a loan that gets paid off and he gets rewarded by his peers and bosses. I believe the lender relationship should be a partnership. As a partner, you need to communicate your problems sooner than your successes. A good banker is always interested in helping you solve yours problems. This is the time to spend energy and effort with your banker.
• Review your retirement plans. Check the allocations to make sure the returns are what your expected for the year. Update your retirement projections to reflect any changes to expected future income, changes in assets and changes in retirement age considerations.
• Check your insurance needs. This includes:
  • Health insurance – Look at a health savings account
  • Life insurance – Are you providing adequate funds for your spouse and children?
  • Crop insurance – Check out all available options and run the numbers
  • Liability insurance – Is your protection adequate?
• Review your estate plan. When was the last time you read your will or living trust. If more than two years, do it now!

There are many other things that can be done this time of year to make the new year a success. The key is to do them (you will still have time to take a trip where it is warm and play golf).

The old saying in real estate is that the only three things that matter are location, location, and location. To me, the three things that matter most in succession planning is communicate, communicate, and communicate.

Verbal communication between each of the generations involved is the important first step. What does the generation passing on the farm want to accomplish with the transfer. The generation receiving the farm needs to communicate their desires, goals and wants.  During this back and forth verbal communication ………….

Non-verbal communication needs to be observed and dealt with. Many times, one generation will communicate to the other in words and not realize by the non-verbal communication (facial expressions, posture, etc.) received that what they are communicating is either not being received properly or is being ignored. After all parties have given and dealt with their verbal and non-verbal communication, then ……

Written communication puts it into writing. These documents are generally prepared with the help of appropriate counsel and/or consultants.  However, many times, this is where it ends. To be effective, this written communication needs to be given to each party verbally including the interpretation of non-verbal communication. If all goes well, the plan will be implemented correctly and a good base will be laid to continue the plan for all generations.