On this episode of the Maine Farmcast, we sit down with JJ Jones to discuss business planning for farms. An often overlooked aspect of farming is the business. JJ discusses how you can set yourself up for success with business planning. He discusses the key aspects of a business plan, and we talk about the reasons for owning a farm.
JJ Jones is an Area Agricultural Economics Specialist for twenty-six counties in south-central Oklahoma and serves as the Agriculture and Natural Resource Program Leader for the Southeast District with the Oklahoma State University Cooperative Extension Service. With 30 years of experience in extension, JJ is dedicated to providing education in farm management, budgeting, marketing, farm taxes, and estate planning. Additionally, JJ leads the Oklahoma Meat Goat Education Team, which offers meat goat and sheep education to producers in Oklahoma and across the United States. One notable program is the OSU Meat Goat Boot Camp, a three-day workshop that teaches producers the fundamentals of meat goat production.
In complying with the letter and spirit of applicable laws and pursuing its own goals of diversity, the University of Maine System does not discriminate on the grounds of race, color, religion, sex, sexual orientation, transgender status, gender, gender identity or expression, ethnicity, national origin, citizenship status, familial status, ancestry, age, disability physical or mental, genetic information, or veterans or military status in employment, education, and all other programs and activities. The University provides reasonable accommodations to qualified individuals with disabilities upon request. The following person has been designated to handle inquiries regarding non-discrimination policies: Director of Equal Opportunity, 5713 Chadbourne Hall, Room 412, University of Maine, Orono, ME 04469-5713, 207.581.1226, TTY 711 (Maine Relay System).
Chapters
On this episode of the Maine Farmcast, we sit down with JJ Jones to discuss business planning for farms. An often overlooked aspect of farming is the business. JJ discusses how you can set yourself up for success with business planning. He discusses the key aspects of a business plan, and we talk about the reasons for owning a farm.
JJ Jones is an Area Agricultural Economics Specialist for twenty-six counties in south-central Oklahoma and serves as the Agriculture and Natural Resource Program Leader for the Southeast District with the Oklahoma State University Cooperative Extension Service. With 30 years of experience in extension, JJ is dedicated to providing education in farm management, budgeting, marketing, farm taxes, and estate planning. Additionally, JJ leads the Oklahoma Meat Goat Education Team, which offers meat goat and sheep education to producers in Oklahoma and across the United States. One notable program is the OSU Meat Goat Boot Camp, a three-day workshop that teaches producers the fundamentals of meat goat production.
In complying with the letter and spirit of applicable laws and pursuing its own goals of diversity, the University of Maine System does not discriminate on the grounds of race, color, religion, sex, sexual orientation, transgender status, gender, gender identity or expression, ethnicity, national origin, citizenship status, familial status, ancestry, age, disability physical or mental, genetic information, or veterans or military status in employment, education, and all other programs and activities. The University provides reasonable accommodations to qualified individuals with disabilities upon request. The following person has been designated to handle inquiries regarding non-discrimination policies: Director of Equal Opportunity, 5713 Chadbourne Hall, Room 412, University of Maine, Orono, ME 04469-5713, 207.581.1226, TTY 711 (Maine Relay System).
Creators & Guests
Host
Colt Knight
Colt grew up in a coal mining family in West Virginia where they also operated a small family farm and show horse stable. During academic breaks and between schools, he worked in strip mines across the country. Colt earned his B.S. in Animal Science at the University of Kentucky, M.S. in Animal Science at Angelo State University, and his Ph.D. in Animal Science at the University of Arizona in 2006, 2012, and 2016, respectively. In the fall of 2016, he worked on a postdoc with Dr. Derek Bailey at New Mexico State University. Since 2017, Colt W. Knight works as an Assistant Professor of Extension for the University of Maine where he serves as the State Livestock Specialist. He teaches Introduction to Animal Science (AVS 145) and runs the Maine Grazing Behavior Lab. The core focus of the Grazing Behavior lab revolves around designing and manufacturing livestock tracking collars, engaging in applied grazing behavior research, and assisting other researchers with technology to interpret animal behavior. Dr. Knightโs research is broadly focused on selecting animals uniquely adapted to landscapes and promoting sustainable agriculture. Colt is the current chair for the Society of Range Management Livestock Foraging Behavior Committee, as well as, the North East Region Chair for the National Association of County Agricultural Agentโs Teaching and Educational Technology Committee. He also serves as an Associate Editor for the journal Ecological Processes. Colt is actively engaged in outreach and has delivered over 150 seminars on livestock production since starting his career at the University of Maine.
Host
Glenda Pereira
As the University of Maine Cooperative Extension Dairy Specialist, Dr. Pereira conducts applied research and develops educational programs for dairy and livestock producers across the state of Maine and New England. While the Holstein breed is near and dear to her heart, Dr. Pereira admires the Normande breed and her favorite dairy products are sour cream and ice cream.
Host
Rachel White
Rachel is a Sustainable Agriculture and Livestock Educator based out of Hancock county. Her objectives include education, research, and programming about agriculture in Washington and Hancock counties and with small ruminants and poultry across the state. She is currently a PhD candidate at the University of Maine researching risk of parasite transmission from wildlife to small ruminants and risk reduction methods, including pastured poultry. Her social science work looks at farmer and veterinarian knowledge, attitude, and practice for small ruminant health management and the challenges they encounter with this topic. Rachel is also involved with the Universityโs One Health and the Environment NRT program. She is plans to include a One Health framework into her programming to address human-animal-environmental health challenges in Maineโs agricultural community. On her farm, Rachel has Finn sheep, laying chickens, seasonal broilers, pigeons, horses, and various fruits.
What is Maine Farmcast?
The Maine Farmcast features weekly conversations with experts from across the country sharing insights and advice for both new and seasoned farmers running operations of any size. Hosted by three livestock specialists from the University of Maine Cooperative Extension, the show brings you world-class expertise paired with practical advice about how to apply cutting-edge research to improve the efficiency and sustainability of your farming operation.
Colt Knight:
Welcome to the Maine Farmcast. I am your host, Dr. Colt Knight, associate extension professor and state livestock specialist for the University of Maine Cooperative Extension. And today, I am joined by Mr. JJ Jones of Oklahoma State University. He is an area econ specialist in southeast Oklahoma.
JJ Jones:
Yep.
Colt Knight:
Southeast Oklahoma. JJ has an extensive background in goat production, a little bit of sheep production, grew up showing hogs, and but went to school for ag economics. And I thought it would be really nice to have JJ here, to talk a little bit about business planning because successful farms run farms as a business. Right?
JJ Jones:
That is correct. Yeah. So thanks for having me here today. Appreciate it.
Colt Knight:
Yeah. Thanks for coming. So just a little bit about yourself. Could you tell us about your background in agriculture and how you became the Ag Econ specialist for Oklahoma?
JJ Jones:
It's kind of a long story. I've been working in extension for 30 years, but it kinda started out I grew up in a small farm in Southwest Oklahoma, you know, where we raised like every other producer, we cattle and and and forages and stuff. And then I had to actually raise some pigs too at the same time. And then went to school to be a veterinarian, and, of course, wasn't smart enough to be one of those.
JJ Jones:
And and so, actually, I have a BS degree in animal science. And then while I was there, I figured out I had I had a kind of a talent for doing numbers, and and in the business side of things. So then I went and got my master's degree in ag economics, started working in extension. April 1, 1994, April Fools' Day. I'm still trying to figure out who got fooled on that day.
Colt Knight:
At the University of Tennessee?
JJ Jones:
At the University of Tennessee Extension Service. Worked there for about 10 years, then moved back to Oklahoma and have been the area ag econ specialist there for about the last 20 years in Southeast Oklahoma. Again, specialize I'm pretty much a livestock economist. My all my areas that I've worked in have pretty much been livestock related. Generally, cow, calf, and forages.
JJ Jones:
But about 15 years ago, got into the goat, you know, education business, and and so I've been doing that for about the last 15 years, kinda in charge of the good educational programming there at Oklahoma State. So
Colt Knight:
Excellent. Well, something that that makes a really great podcast, I think, is just talking about these business plans and just treating your farm as a business in general. I think we both worked with with new farmers or existing farmers that that think that farming is just a just a a right, you know. And then if you farm, then someone should just pay you a living wage. And that is a mistake.
Colt Knight:
Correct. You should you should treat your farm like a business. You should plan out your business like any other business. And I think what's the the statistic on small businesses is like what 80 or 90% fail within the 1st couple years. Right.
Colt Knight:
Right. The same thing happens at farming if if you neglect the numbers.
JJ Jones:
Right. Right.
Colt Knight:
And you have an excellent perspective on this because you've been working with producers doing this for 30 years. And one of the things that that you said to me earlier today is the ultimate goal of the business is and and you said, is it profit or lifestyle? And there's a lot of us that get into it just for lifestyle. So the kids have show animals or
JJ Jones:
Right.
Colt Knight:
We just wanna have pigs at the house or we wanna have goats at the house.
JJ Jones:
We wanna be called that cowboy. You know? That that in Oklahoma, we wanna be the cowboy. So it's yeah. I always talk to people when I get to them.
JJ Jones:
You know, when we talk about business planning, You know, what is your the main goal of this? Is it a business? Is it a profit center? Are you actually needing to make a profit to make things work, cash flow and stuff? Or is again, is this a lifestyle?
JJ Jones:
Is do we have cows just because we want cows? Or do we have goats or, you know, whatever we have? Or even the homesteading option, you know, why why do we have this? What's our overall goal in this? Is it to produce a product that is cheaper than we can go buy it?
JJ Jones:
Or, you know, or is it something that we're trying to, you know, sell to the general public? And so because, again, if it's a lifestyle, the decision process the the the choices we have are wide open because the checkbook is not a concern. And so, you know, for overall profit loss margin is not a concern. So it it's a lot easier to do those business plans when it is a true profit loss business. And this is where some producers don't like me, and I'm counting every dime and every penny that they're spending and even stuff they don't wanna count.
Colt Knight:
Yeah. You
JJ Jones:
know, I'm counting that stuff and and showing that to them and showing them, you know, they're they have expenses that they don't need. And
Colt Knight:
The true cost of production.
JJ Jones:
Yeah. You know, so the one big thing, you know, the side by side, the utility vehicle. Everybody we're farmers. We have to have that. No, we don't.
JJ Jones:
And so but if you do, that is a cost, you know, in in to the operation. And so can it pay for that side by side? And generally, small farms, it won't pay for itself. So it's you know, again, if you don't wanna count as a farm expense, that's fine. It's a play toy.
Colt Knight:
There's this whole need versus want
JJ Jones:
Yeah.
Colt Knight:
Aspect of it. Exactly. And if you're doing it as a lifestyle choice because you wanna have a farm and you wanna go take care of your livestock and maybe you sell them to offset that cost a little bit, you know, that side by side or brand new 3 quarter ton pickup and
JJ Jones:
Just so you can set it to coffee shop and say I'm a a livestock producer. I'm a cattleman. You know, it's so you can wear you feel good about wearing that cowboy hat. You know?
Colt Knight:
Yeah. So And I can't say anything. I'm wearing my my 4 and a half inch brim hat today.
JJ Jones:
Yeah. It like I said, it it and and there's and I also do realize there's things that's hard to put a monetary figure to, you know, the lifestyle. You know, I and and I do understand that that there's there's sometimes the lifestyle is more more than monetary. It's you know, there's Mental health. Aspect of things.
JJ Jones:
And so and, again, I tell people that's important. I can't put a monetary dollar figure to that. Mhmm. That's something you have to do yourself, and so that's really tough for me to do that. So I'll let you I I can run the numbers for you, but I can't put the mental health or the those other figures for you.
JJ Jones:
So it's but, again, that's important. I mean, I do realize that myself, you know, my little operation, I always tell people, the only reason I grew a garden was for stress relief so I could come home and actually go out in the garden and work for a couple hours and just forget about what I did during the daytime.
Colt Knight:
You know, every single year, I plant a garden, and every single year, something goes horribly wrong with my garden. The 1st year I did a garden when I moved to Maine, I planted a bunch of tomatoes and they just all went gangbusters. And I and I had more tomatoes than I knew what to do with. So I went out and I bought this grinder attachment that makes tomato sauce. Yeah.
Colt Knight:
You stick the tomatoes in.
JJ Jones:
Right. And
Colt Knight:
I was like, oh, man. From here on out, I'm gonna have fresh tomato sauce all year round. The next year, we had a late frost killed every one of my tomato plants in, like, the 1st week of June. And I was so disheartened I didn't garden the rest of the year. The next year, I was like, oh, I'm gonna grow these tomatoes again.
Colt Knight:
I built a little little greenhouse type thing to keep them from the frost, and then I planted a bunch of herbs like basil and stuff. I was like, I'm gonna make my own spaghetti sauce.
JJ Jones:
Right.
Colt Knight:
You know? And then I'm raising my own pigs, so I'm gonna have pork for the spaghetti sauce. I was like, this is gonna be the best thing ever. Well, the chickens scratched out all of my herb plants. And I had that and a bunch of cabbages, and my pigs got out one day and just ate all my cabbages and uprooted all my tomato plants.
Colt Knight:
The next year, I tried to till a garden instead of doing raised beds. I was tired of watering them so much, and nothing grew in my raised bed or my tilled garden. The next year, I did the tilled garden again and weeds grew up in it, and I couldn't I travel so much for work. I couldn't out there hoe it every day.
JJ Jones:
Oh, I always told people, don't don't look at my garden. Do as I say, not as I do. Because, again, it's I'm like, you'd you know, I've traveled so much or do so much work or get in it late at night. And so my the weeding part of my garden was never very good. But and and if I again, as an economist, I put a pencil to it.
JJ Jones:
I could go buy somebody's tomatoes cheaper than what because, again, if you have replanted 3 times because something's happened.
Colt Knight:
You know, so I don't think the gardening gives me any relief at all mental health wise, but but raising the pigs and the chickens does. I I get a tremendous amount of satisfaction with my piglets, raising them up, consuming the meat. You know, of course, I can go to the grocery store and buy pork for 50, 75ยข a pound. Sometimes I joke with my wife, we have to sell our our pork at an elevated price to make it profitable. And I was like, we can't afford our own pork.
Colt Knight:
Right.
JJ Jones:
Oh, I tell when I do my direct to consumer presentations, I always talk to folks that you're not marketing to me Yeah. Because I'm too cheap to go buy what you need for it to make a profit. And so and and, again, that's going to the marketing talk, you know, identify your market and who you're trying to sell to because and chances are you're not selling your product as much as you are selling your story.
Colt Knight:
Yeah. And you're no longer competing with the commodity. You are a separate entity.
JJ Jones:
Yeah. I always tell people don't try to compete with Walmart. Yeah. So it's, you know, Walmart is not your competition because they can always under undercut you. So
Colt Knight:
Yeah. So now that we've had that discussion and we wanna start a new business
JJ Jones:
Okay.
Colt Knight:
Or start a new aspect to our farm business, how do we go about doing that?
JJ Jones:
So I was I always tell people there are 6 steps or 6 parts to a business plan, a a whole business plan. And so and generally, steps 1 through 5 people skip over. And and I think that they're maybe not as important, but they are an important part, to that. And and so those 6 parts, you know, the first one is a mission statement. And I'll just say all 6 of them, then I'll kinda talk about each one of them.
JJ Jones:
So the first part is a mission statement, second part is goals, your third is your organizational management, 4th is being your planning assumptions. 5th is your marketing plan, and then 6th, and which is one is an economist I spend the most time dealing with producers with is the financial plan. Steps 1 through well, 1 through 4, generally, again, are are skipped over and we'll talk about why a little bit. Let's talk about, the mission statement. And anybody who has ever worked for an organization that has a mission statement, and, Colt, you've probably read the University of Maine's mission statement.
JJ Jones:
I always tell people Oklahoma State's is will cure insomnia. It'll put you to sleep. And and it's also got those great big 12 syllable words that we don't understand in it. It doesn't have to be that way. A mission statement is quite frankly, it's real simple.
JJ Jones:
It's what your operation what you want your operation to be and what you want people when they see your operation, what they want what you want them to see. And it kind of lays out the the the direction that your farm or your operation is gonna go. The best one I've ever seen was about 3 quarters of a page long, and it's real point blank and to the point. And then, basically, he said this guy was wanting to be the bull producer, the commercial man's bull producer for the county he lived in and the 5 counties that surrounded him. And he was a purebred Angus breeder.
JJ Jones:
And it pretty much I mean, I paraphrased it, of course. But in that 3 quarter page, I told it told me exactly what he was trying to accomplish. And because it used the words like commercial bull producer, he knew his market was those guys who were not willing to spend the extra dollars for the purebred full blood bulls. They wanted a commercial type bull because, you know, they were all, pretty economical. So he knew where his price point was and so he knew what he where he needed to be.
JJ Jones:
And and so and again, when as I worked with him, he actually grew up in both past those 5 counties. But that's where his mission statement started. And then then we go to the goals and the goals of operation. Everybody should have goals and and there's monetary and non monetary goals. But the goals have to they have we have to have those to let us know which how we're making progress in our plan.
JJ Jones:
You know, if we don't have goals, I kinda relate goes to like a road map. And so as we go down our road map, our business plan, and we reach certain milestones, we know we're making progress to our end get our end point. And so the same way with the road map, you know, is I'm traveling as I make it to a town. I know I'm getting closer to where I needed to be. And so that's what goals are.
JJ Jones:
And goals, they're they're again, monetary goals. I'm an economist. They take my union card away from me if I don't mention money. But they don't all have to be related to money. And so and and and they have to be now the goal part of things part of things also is they need to be, you know, focused toward the operation.
JJ Jones:
I call about SMART goals. And SMART is just an acronym for specific, measurable, action oriented, reasonable, and time related. And so, you know, that's what we try to get to is those type of goals, you know. And and I really liked the the reasonable part of it when that goes. I'm one of these ones.
JJ Jones:
I like to have those goals that are maybe on the outside friends are reasonable because I like to push myself, to maybe some things. But and and then time orientated, our time, you know, sensitive top goals because I'm also a world class procrastinator as we've already talked about today. And so, and again, if you tell me that I have 2 weeks to do something, I'm a wait 13 days before I start doing it. And so that's the reason why I like to put time frame on my goals because if I don't ever put a time frame on on, I won't ever work towards them. But so anyway, those are the important part.
Colt Knight:
And I don't feel bad now for asking you to do this podcast 5 minutes before we walked into this room. Yeah. Because you wouldn't have prepared it.
JJ Jones:
I wouldn't have prepared for it either either way. So it's, you know, and then and then we get to the organizational management. And and there's usually 2 parts to it. The tax side of things, how you're gonna organize it for tax purposes, and I won't bore you to death with that kind of talk. But the one thing that I think is important is organizational management of the of the chart of the operation.
JJ Jones:
And I'll use my own family as an example because I have 3 boys. And so everyone of them knew what their role was in the operation. And and you could come to my house and they were allowed to show you any of the animals that were for sale. They were not allowed to price anything. Mhmm.
JJ Jones:
And, you know, because they would price it way too cheap. They didn't know the cost behind everything. But they knew as much about the animals as far as to tell you production wise as anything. So they could, they could show you anything they wanted to show you and stuff. And so and then I always joked about people.
JJ Jones:
My job my role in the organizational management was I wrote the checks and, you know, and helped unload the feed truck. So, so, that's very important to let everybody know what their role is and so on how the hierarchy works. The planning assumptions, again, I I I I told you before we all was taught what the word assume means, and and and I don't like to assume, but I learned really quick in my Aggie Con career. If I don't make assumptions, I I can't solve the problem. And so we have to assume certain things like how much management ability you have, you know.
JJ Jones:
Because you're gonna try to do this, we're gonna assume you know what you're doing and or you're gonna learn what you're gonna know to do. The other assumption is is that you have a market for what you're going to raise. We're also gonna, you know, production. We're gonna assume certain production milestones and stuff like that. And again, assumptions can help certain assumptions can help you predict problem areas.
JJ Jones:
And so, again, I'll use mine as an example. I lived in Tennessee. Always told people that my goal was when I retired from extension, I was gonna have a 100 cows, you know, and that was gonna be my retirement was a 100 cow operation. I owned 15 acres. Do you see a problem with that assumption there?
JJ Jones:
So so, you know, again, so I I have a problem and I was working to and my solution to that problem was as I was gonna get the neighbor guy who owned about 6 or 700 acres around me. He had no children. I was trying to get adopted. When that didn't work out, I moved back home. And so no.
JJ Jones:
So I know that's kind of a long winded or, you know, not farcical.
Colt Knight:
But assumptions are a two way street. Right? You need to make the assumption so that you can plan. Right.
JJ Jones:
But a
Colt Knight:
lot of times people make the assumption that they're gonna get the highest price or Oh, yeah. Feed is not gonna change prices or forage production is gonna remain constant from year to year.
JJ Jones:
Or just even production levels. So we'll just take cattle, for example, you know, everybody assumes I got 10 cows. I'm gonna have 10 calves.
Colt Knight:
Mhmm.
JJ Jones:
You know, biology doesn't work that way. You know, you know, history shows us that, you know, 80 percent, 80, 85 percent is gonna be yours. So you're gonna sell 8 cows. Well, there's 2 cows you're paying for that don't produce you any income. And, you know, you gotta count that.
JJ Jones:
It's, you know, that's you know, goats are even better. You know, They have twins. Right? So we'll have 200%. You know, when you asked me last night what my kidding rate was.
JJ Jones:
Well, you know, I go, you want kidding rate or winning rate because, you know, I can have 1 year I had 250% kid rate, but only had a 150% sell rate because of the half of those died on me because I kidded in the wrong time of year. So it's so it's, you know, there's certain and you when you make those assumptions again, I we can look at them and see what is reasonable, what is unobtainable type deal. So and then then the the one thing in it and we've mentioned this while ago to you in marketing. I think livestock people are the world's worst at marketing because they had the what I call the field of dream syndrome. You know, they build it and they will, you know, they will come.
JJ Jones:
It's not that simple, Colt. You know, it's you know, you again, you've got Walmart. You've got grocery stores, out there that are selling the same product out there. Why should they come to you? You have to market your, if you're gonna sell directly consumers.
JJ Jones:
And then if you're gonna sell live animals, where are you gonna sell them to? You know, you've told me that Maine's not like Oklahoma. In Oklahoma, we can't swing a dead cat and not hit a livestock barn auction barn. Here in you said Maine, they're just not available to you. And so so if you're gonna raise these animals, where are you gonna sell them?
Colt Knight:
Yeah. And we're mostly direct sales. You got some folks that are marketing to stores or or whatnot, but most folks are direct marketing. And with that, because our cost of production is so high, we're we're some kind of niche. Right?
Colt Knight:
Grass fed, organic, all natural, heritage breed, meat quality. You know, we've got to fill some kind of niche so that we can charge that higher price to make the cost of production worth it.
JJ Jones:
Yeah. Again, you're not just selling your meat. You're selling your story. Yeah. You you you it's there's a there's a a feel good reason or, you know, some of the reason why the customer's buying your product.
Colt Knight:
Individuals like us, we're cheap. Right. So we're used to buying things at a lower price. And then now that now that we're selling our goats or we're selling our pigs, we can't be in that same mindset. We are marketing to people that care more about how the animals are raised and the story than they are the price.
Colt Knight:
And sometimes, breaking that habit of being a cheapskate is really tough when you're marketing. Right?
JJ Jones:
Really tough. Really. It breaks the mold and you're you go you just you have to change mindsets and it's really tough, especially when you have, you know, years years, decades of doing it this way. Mhmm. And then you've got a good change your mindset.
JJ Jones:
And the other thing that I think most people don't realize if, again, if you're gonna go through a storefront or try to sell it to a store, you have to sell wholesale. Mhmm. What they sell for is retail. They have their markup, and so, wholesale prices are not retail prices. And so, again, to get those retail prices, you have to sell directly to the consumer.
JJ Jones:
And and because, again, you sell to a store. Again, I've dealt with producers that wanna sell to Walmart, you know, for whatever purpose, and they don't realize that Walmart's gonna buy it at a severely discounted rate than what they sell it at.
Colt Knight:
And you have to supply a lot of product. If your if your goal is to supply to a grocery store
JJ Jones:
Oh, yeah.
Colt Knight:
They are gonna allot a 6 foot space in a freezer or a in a meat cooler to sell your product. And if you can't keep that shelf space full all the time, then they can't buy from you because empty space is not allowable in a grocery store.
JJ Jones:
That's they're losing money if they have an empty space. Yes. And so, yes, that's they and I worked in a grocery store funny enough in you know, for 9 years. And so, yeah, that retail space is calculated. They know how many dollars per square inch
Colt Knight:
Mhmm.
JJ Jones:
Those spaces are worth to them, so they don't want it empty at all. So
Colt Knight:
So are you large enough to market to that kind of group? And then in most cases, the answer is no. Right. And so that brings us to that direct marketing, and there's a lot of ways to do that. Right?
Colt Knight:
Oh. There's roadside stands, Oh. Friends and family, neighbors.
JJ Jones:
So so, again, you know, roadside stands, farmer's markets, big thing in Oklahoma, farmer's market. So now you have changed hatch. You are not a producer anymore. You are marketing. You're a salesman.
JJ Jones:
And now you have to go spend your time. How much is your time worth to spend all day on Saturday at a farmer's market selling to your product, to your producers? Because you have to value your time, you know, because it's worth something, You know? Yeah. Absolutely.
JJ Jones:
You could be doing something else. And so, again, that's something that most producers don't think about. You know? And and one of my shortcomings when as far as my livestock production goes is I found out I was not a marketing person. I can talk to you all day long.
JJ Jones:
I can but I can't sell you anything because I don't want to sell you anything.
Colt Knight:
And and I don't like that aspect of the business either. And so majority of my sales, I've got a deal with a neighbor that has an online retail business, and he markets most of my
JJ Jones:
sales. I sell directly to the meat processor.
Colt Knight:
Mhmm.
JJ Jones:
So, I mean, I I drop them off. He weighs them. He cuts me a check. I get paid based on weight and quality. Yep.
JJ Jones:
So I don't have to I don't have to sell him on anything.
Colt Knight:
Now I could make a lot more money if I wanted to hustle and be the direct market.
JJ Jones:
Exactly. But but then all my free time would be gone. What little there is would be gone.
Colt Knight:
Yeah. Like I said, it's a lifestyle choice for me. I'm I'm raising pigs for my mental health, but my background won't allow me to do it at a loss. But at the same time, I just wanna raise pigs. I don't wanna
JJ Jones:
Right.
Colt Knight:
I don't wanna be on Facebook marketing constantly or putting out flyers or sitting at the farmer's market.
JJ Jones:
Well, you know, I told you we got in the goat business because of my kids. We're always raising their show projects Mhmm. And thought we could raise show animals for other people. And so now I am strictly in the meat business, which as my animal science background, that's what I love is is the meat business. I actually get to keep records that mean something now.
JJ Jones:
So and so the last part that and what I usually spend the most time working with producers with is the financial side of things. And, you know, basically, we're talking about building budgets. Okay? First, you know, there's some other parts to your initial financial requirements of what you need, you know. People think, well, once I just buy the breeding animals, I'm done.
JJ Jones:
Right? You know, breeding females. Well, we're not in immaculate conception, so we need a male. We need, you know, other things. Last time I checked, the farm stores, supply stores don't sell the feed troughs for free or the water troughs or the fencing or anything like
Colt Knight:
that. Electricity.
JJ Jones:
Electricity.
Colt Knight:
The water. You got city water or It's well water.
JJ Jones:
So there's other little things. You you got you know, we talked about a truck and a trailer, you know, how you're gonna get your animals to where they need to be. You if you have a brother-in-law that has one, they're only gonna let you borrow it so many times before they're gonna ask you to get your own.
Colt Knight:
You know?
JJ Jones:
So it you know, there's things like that that are a requirement. But once we get that's not a hard thing to figure out. It's usually people usually underestimate that.
Colt Knight:
So what about the one cost? And as many farmers as I've worked with, no one has ever put this in their their budget. It's labor. Because they're all planning to do the labor themselves, but you really should pay yourself.
JJ Jones:
Yeah. See and that's where me and other Aggie comes, we kinda disagree a little bit because, again, nobody I've worked with whoever wants to put labor in there. No one. So instead of having that argument or that discussion or me trying to talk about it, so when I do build a budget, that last line is returns to land, labor, and management. So so I just I go, okay.
JJ Jones:
This is your return to your land your labor cost. But now if you're doing custom work, like custom hay baling was really big in Oklahoma, I always say you need to put a labor charge in there because you even I'm talking about even the 2 hours it takes you to trailer your equipment to the place or road your equipment. You need to put that in there because that's time you could spend doing something else. But most of your livestock producers don't wanna put that in there. It's tough to calculate, to be honest with you.
JJ Jones:
I mean, when you spend hour every day feeding, maybe, you know, and there's certain like you said, there's certain times of years more labor when your pigs are having pigs. Yep. When my goats are having goats, we're not, you know, we're not living with them, but, you know, pretty spending a lot of time out there. But now this time of the year, I don't spend a lot of time. You know, it's just making sure everybody's alive and well, basically, is all we have to do.
JJ Jones:
And so I don't I don't like putting labor charges in there, but I do make people aware that that's in a cost that they should look into. Because what is also tell them, don't don't figure it up on a dollar per hour because you're gonna get disappointed when it comes up to $5 an hour is what you could be making. So it's but but so that's the initial thing you go through is is those requirements and then you get to the budget. And and budget I usually I'd hate to call it budget because everybody hates that word. You know, you get the deer in the headlight if, you know, anybody's ever took a budgeting class, they they hated it.
JJ Jones:
More likely, you have to be kind of a warped mind to like that kind of things. I guess I have that warped mind because it I like doing that stuff. But in a budget, it's pretty simple. It's not rocket science. It's just three things.
JJ Jones:
It's your money coming in, your revenue, and then your cost, and your cost are broke down into 2 things. You have your, what we call your cash cost, your yearly expenses, the things that you, you know, spend in a in a, say, a year's time of production cycle. Yeah. It's your that's your feed, your fertilizer, your seeds, your medical, vaccines, and stuff like that. And those are the easy ones to calculate.
JJ Jones:
The fixed expenses are the tough ones. And the fixed expenses are those those things that you purchase that last longer than a year for so the easiest example is your breeding animals. So you buy a breeding animal. Let's just I'm gonna make the math simple. Let's say you pay $1,000 for a cow and she's gonna last you 5 years.
JJ Jones:
She cost you in fixed expenses $200 a year is what she's costing you. And so she needs to make that $200 above her cash expenses a year to pay for herself because when you go to replace her if you go to replace her and she hasn't paid for herself, then you, you know, you replace her, but you don't the money is not in the bank to replace her. You have to pull that money from somewhere else because that money is not in the bank because you didn't cover those costs. And so, you know, there's those kind of things. And usually, most producers are very happy if they cover cash expenses.
JJ Jones:
And I'm satisfied if they're satisfied. But just realize that, you know, when it comes time to replace some of those fixed assets, you're gonna have to pull that money from your personal bank account to do it Mhmm. Because the money's not there. So and that's basically a budget. And it it's real simple to put together.
JJ Jones:
There's several spreadsheets out there. You know, universities are all the time coming up with, you know, spreadsheets. And even at Oklahoma State, we have our own set of spreadsheets that you can download for free over varying different enterprises. We have a cow calf. We have a stalker calf.
JJ Jones:
We have a meat goat. We have a stalker goat. We actually even have a backyard chicken poultry, budget. And, you know, so if you want to figure out how much it's costing you to raise that dozen of eggs. We even have a honeybee budget.
JJ Jones:
Honeys are honeybees are considered livestock. You just in case you didn't know didn't know that.
Colt Knight:
They are considered livestock here in Maine too.
JJ Jones:
Well, USDA considers them livestock. So it's it's they're part of the, livestock disasters programs. So, you know, we have those budgets you can download for free and you can put your own numbers because I always tell people I can build you a budget, but if I'm not using your numbers, it doesn't mean anything to you. Mhmm. And we we create state average budgets all the time.
JJ Jones:
But, again, that's state average. You need to use your own numbers. If you don't have your numbers, do your best to estimate and and estimate those and come out with them. But anyway, that budget gives you an idea. And again, we go back to the, you know, make money versus lifestyle.
JJ Jones:
So a budget can kinda tell you if you're gonna make this, you know, if this operation is gonna make you some money. And then because if it won't work out on paper, it'll never work in real life. Now working out but, you know, so but now just because it worked on paper don't mean it works in real life. But if it's negative to begin with, you'll never make it worse. Never
Colt Knight:
work. Right? You can't offset that.
JJ Jones:
Yeah. So and and so that's what kinda what you do and you go from there and and build that and build that plan. And then we can also go from there about cash flowing because then and we really haven't talked about, you know, you know, we talked about buying stuff and then and making payments. This is cash flow enough to make those payments. And so and I realize and we've talked about land prices here in Maine.
JJ Jones:
In Oklahoma, we have the same issue. It's almost impossible to buy land and use a livestock enterprise like cattle to pay for the land. I want the cattle to pay for themselves. My extension job pays for my land payment. So, you know, and that's what we gotta decide what's paying for what.
JJ Jones:
So Mhmm. Don't expect too much from your ag enterprise to make too many payments.
Colt Knight:
Yeah. And that's a good transition to, like, the last topic that we have, and we've got a couple more minutes here, is debt. And, you know, some people try to buy their way into the farming business. Some people are paying their way as they go. But I think there's a lot of farming expenses that we take on as debt that we probably shouldn't.
JJ Jones:
Well, I agree. I think, again, we get into farming. And, again, there's some things that are gonna be required. Land, nobody can usually write the check for land.
Colt Knight:
Yeah.
JJ Jones:
And so you have to borrow that money. But you can for equipment wise, we don't have to go buy the brand new green or orange or red paint. We can go buy used, and we don't have to buy the big 85 horsepower tractors. We can get by with a 50 horsepower tractor. I always tell producers to try to, limp into it, so to speak.
JJ Jones:
Mhmm. You know, get go in. And and again, you can get too cheap. And I've and I'm just as guilty as this going the cheap and it actually cost me more money in the long run. But you don't have to buy the best and the brightest to make it work.
JJ Jones:
And then once you start cash flowing and making money, then you can use some of that money to buy the equipment and not have to borrow the money. And so we've been spoiled the last, you know, several years. We had cheap interest rates. I mean, we was talking last night about our home loans and and what they were. And and and now try to go buy it, and we're sitting at 8%.
JJ Jones:
And and 8% money on, you know, $10,000 loan or $50,000 loan, it's at each end of the profit pretty quick.
Colt Knight:
Mhmm.
JJ Jones:
And so and so it's always better to try to pay as much cash as possible. Again, I have producers that try to go out and borrow all their operating expenses and get the operating notes. And then, you know, And it it again, try to pay as you go is the best way to go. And and again, if you're gonna borrow the money, look into that, you know, what is gonna cost you, you know, long wise. And and and one thing we didn't discuss on this is and one thing I don't get into is the tax implications of this because it's different for every person.
JJ Jones:
And so if you're in it for the tax purposes, then that's a whole another ballgame, you know. But but again, back to the debt thing. I always tell people try not to borrow too much. And because you again, borrow 20,000 for that side by side and expect the cows or the goats to pay for it. It just ain't gonna happen.
Colt Knight:
Yeah. It's a depreciating Yeah. Rapidly depreciating.
JJ Jones:
Yeah. So asset. And so it's you gotta be very careful on that kind of thing. And like I said, the interest rates these days and and and my buddies in the ag lending business think that it's gonna start coming down now. I told them I believe it when it happens, but I wouldn't, you know, I wouldn't expect it till after these elections all get through.
JJ Jones:
So
Colt Knight:
Yeah. And I think it's in some cases, it's too easy to borrow money in the farming industry because we've got FSA. We've got farm credit bureaus. And
JJ Jones:
Yeah. It is easier and we got and and but it's not as easy as it once was because, you know, used to they would loan you a 100% value of the of those animals. You know, if you was gonna buy $10,000 worth of cows, they would loan you 10,000. Now there's coming up. You gotta come down with 20% of that.
Colt Knight:
And that's almost speculating Yeah. Because for that to work, you know, there has to be no drought. The feed prices have to stay the same. You know, you have to have,
JJ Jones:
you
Colt Knight:
know, 80, 90% calf crop or get it, you know, to make it work.
JJ Jones:
And like right now, the cattle industry right now is going through a real boom. And I mean, the numbers look really, really good.
Colt Knight:
And then on the other side of the coin, the commercial swine industry is this is the 2nd year in a row that they're losing money, 30, $40 ahead. And some of those businesses are gonna be closing this year.
JJ Jones:
So well, you know, on the cattle thing, we've seen this before, and and they borrow the cows on a 5 year note. And if the good prices don't last for 5 years, it's a , you know, it's almost impossible to get through it. You know, 2014 was the last good year we had. I don't know if y'all have good it was up here, but in Oklahoma, we were seeing, bred cows sell for $3,000. And I was just going I didn't see the market lasting 5 years to pay for that $3,000 cows, and it didn't.
JJ Jones:
It lasted 1 year. Mhmm. And so those guys were hung with notes that they actually extended to 7 years or longer to to make them pay. And so that's, you know, when you're doing it, when you're borrowing the money, don't be don't overestimate the market. Always, I'm really bad.
JJ Jones:
This is kind of funny. I get accused of killing lots of dreams Mhmm. Because I'm a little pessimistic. I've been accused of making a meth lab look unprofitable. So, but I feel like if I'm a pessimistic or I don't call myself pessimistic.
JJ Jones:
I call myself a realist. But if I'm more real and my numbers turn out to be lower than what they actually are, then you actually are happier. But if I put them and I put fluffier than they should be and they turn don't turn out that good, then you're mad.
Colt Knight:
Yeah. I find most people plan for pie in the sky, and they're not planning for the rough years. And my master's adviser he was talking about forage production and stocking rates.
JJ Jones:
Uh-huh. But I
Colt Knight:
think this applies to the financial side of things too. You always plan for a drought year, and then when it's not, you're in good shape. Yeah. But when the drought comes, you are still prepared and and ready for it. And if we cheat our money in the same respect, you don't get caught with your pants down, so to speak.
JJ Jones:
Right. Right. When the when when those drought years here hit and you have to do something different and pay more to buy your feed or something, you actually have the money in the bank because you've done a good job of of planning and and and banking your money, so to speak.
Colt Knight:
Yeah. We're working on really small margins in the livestock industry. So planning conservative is is the only way to go.
JJ Jones:
Yep. I agree.
Colt Knight:
Well, JJ, it was great to have you.
JJ Jones:
Well, appreciate being there.
Colt Knight:
This is your first community. Oh, sorry. This is your first day in Maine, so I normally ask folks what their favorite part about Maine is, but you really haven't seen anything but the airport and one restaurant.
JJ Jones:
In one restaurant. Yeah. No. It's definitely different than Oklahoma. I do live on the eastern side, so we do have trees.
JJ Jones:
And so I'm but I'm used to the trees part of things, but it, it is definitely different. And and the fact that I actually was wearing a jacket in August this morning was kinda different too when you because in Oklahoma, it's probably a 105 degrees.
Colt Knight:
So what's one thing that you look forward to in your visit while you're here?
JJ Jones:
Oh, I look well, you know, I've keep hearing about the you know, I need to eat a lobster. So I'm looking forward to eating eating a lobster. I love seafood, so I'm I'm looking forward to lobster. And then also too, you know, we talked about getting to see some of the some of the scenery later on tomorrow or some other day. So I'm looking forward to, waiting in a stream or 2.
JJ Jones:
So Yeah.
Colt Knight:
I'm gonna take JJ up to the northern part of Moosehead and get into the Kennebec River and see if we can catch a salmon or or 2. Yeah. But we hope that y'all will join us next week for the main farm cast, and we are gonna conclude this episode. Alright. Howdy folks.
Colt Knight:
Dr. Knight here. The Maine Farmcast wants to hear from you. Please send us your questions, comments, or suggested episodes to extension.farmcast@maine.edu. Again, that is extension.farmcast@maine.edu.
