Episode 16: Robert Barley

Published Aug 3, 2021, 6:35 PM

This week Paul Neiffer has a conversation with Robert Barley of Star Rock Farms LLC in Conestoga, Pennsylvania. Robert shares lessons he's learned from experience in running this operation, plus how he's approached succession planning, and working with employees, neighbors, vendors and professionals in a profitable manner.

Mhm.

Yeah,

Welcome everyone. This is paul neiffer. I'm the host of the Farm C. P. A. Podcast presented by top producer and today I am pleased to have joined me rob or robert Barley and he and his brothers and family

farm in pennsylvania and their operation is called Star Rock Farms. Uh rob. How are things back in pennsylvania?

All things are pretty good. Right here. We've had just enough rain crops look good. We did have a little hail uh the other night, but I think we made it through with a minimal minimal problems. Uh but it's it's a little too hot but not extreme.

Yeah, we about three weeks ago, you know, we had that heat dome come here in the pacific northwest and I think our high temperature was 1 17, 1 18. I know actually up in Canada, you wouldn't think of being that hot in Canada, but there was a town to the west and north of us, almost over in the pacific ocean

that hit 1 21 at least now we're back into the eighties and nineties, so it's not too bad. Yeah, that's that's pretty hot. We didn't, we we got to the upper nineties but we haven't seen 100. Which that's we don't need to see 100. No, no, no, I got roped into playing in a charity, got sort of a charity golf tournament and that day I think it topped out at 1 10 or 1 12

and that's as close. So I've come to heat stroke. I don't want to go through that again. So I don't need that. Plus my game isn't that good anyway, so, uh, rob why don't you? I know you have a pretty good history of being, you know, a farm operation in your area, but go through, how did the farm start? I think you're now the third generation. But let's,

let's discuss briefly, the first generation, the second generation will get in the third, and then ultimately we'll discuss the fourth generation.

All right, well, uh, you know, we consider um my grandfather to be the first generation, even though his father,

it was a farmer, um uh but they never kind of, he didn't take over anything that he had, but my grandfather, he worked in the silk mills in the twenties and thirties, and and farmed uh kind of on the haves for a while, and then around 1940 1939 1940 he bought his first farm and still worked in the silk mills

and steadily, uh you know, was able to then become full time farmer, you know, milking cows and and growing tobacco. Uh but I will say he never quite had the uh was never big on risk. You know, he had went through the depression.

Uh, so he was very frugal and so on, and he

He did buy a few farms, but he was very slow to expand, slow to take risk. And then uh, in the mid-60s, my father and uncle joined together and they started farming a large amount of tobacco eventually took over my grandfather's uh operation

and um, continue to farm tobacco until about the mid seventies when they expanded dairy operation to about 300 cows. And then eventually that expanded to 500 cows. Um, and they, uh, they milk cows up through to the about the mid 19 eighties when they actually went in the herd buyout. And that was about the time my dad had joined uh, the pennsylvania state House of Representatives or was elected to the House of Representatives. And they farmed, uh, continue to farmland and, and uh, and then it raised beef cattle, finished some, you know, had a finishing uh, fish cattle in the uh, in the old dairy facility, uh, in 1992. My cousin and I took over then for, uh, you know, from my father and uncle. And uh, we essentially purchased uh,

the, um, the stuff, the cattle they had and the equipment and took over their line of credit. It was about to wash. We probably got, they actually maintained ownership some of the equipment so that they could appreciate it out. But uh, you know, they were, they were kind of ready to, to transitional and like I said, my dad was full time and

uh, in politics. And uh, my uncle was, he's six years older and just ready to kind of step back a little bit. He worked for us up until he developed an illness and died, died fairly young at age 66. Uh But then um we continued to, you know,

at the beginning, new farm farm farm ground and then had the beef cattle. Uh Then about two years later my brother graduated brother tom graduated from high school and came into the business um

And he wanted to do nothing but milk cows, so we started on a small dairy and eventually purchased 300 cow dairy. And then in 2008, uh we built a brand new uh

A brand new 800 cow dairy, which has expanded to 1500.

And then in also in the early 2000s about this, uh we we uh

Um we purchased a sal unit which we leased back to an integrator. Uh and then in 2016 we actually took over management of that and have an agreement to sell to sell the hogs. And uh

In between we ended up uh in early uh like 2012 we did purchase a large operation across the river. Uh we were located in Lancaster County, this is in your county where we have a 2000 head feedlot and did have an existing

400 Cow robot barns. But when we purchased the robots that robots were going and has since become heffer housing for us for for our dairy here in Lancaster County,

so we continue to be fairly diversified in different things. Um

And uh I think that served as well. Uh, any time it hasn't went all our bad. Yeah. No.

Yeah. And you mentioned robotics, I was up in new york visiting, uh, some friends that has a dairy operation up there and, and he uses the robotics and it was just interesting seeing the house, you know, they get in there and then, uh,

you know, and the robotics are pretty general. But once in a while I remember I was watching one count and ended up falling down and it's

jumping around, but it was fine. So it was, uh, you know, I know, uh, you know, with labour these days, any time that you can, you eliminate that labor and it isn't necessarily, the cost is just being able to find labor and, you know, the immigration policies right now and so on. It's just tough dealing with labor.

Yeah, I would say for us, we, we have looked at robotics from time to time.

Uh, it's not, you know, we,

I wouldn't say recently we've had the easiest time, but we haven't really had an issue where we can't find people and can't find out.

But uh, at this point, you know, when you run the numbers, it, it seems like you're better off, um, you know, still doing it the old fashioned way with, with humans. But I'm sure there'll be a point where that changes and as, as wages continue to increase, it may be, may come sooner or later, sooner than later.

Yeah, it's like out in our state, we just passed

a bill that you now have to pay time and a half overtime. Now, it's being phased in over a couple of years. Our minimum wage is almost somewhere in the $13 range, but you had to hire anybody, you have to pay frag or anything, you have to pay 15 16 $17 otherwise. Yeah, it's just crazy now, I know that

that you have these different operations, you know, got the hogs and the cattle and the dairy and the and I think you do, do you still do the broilers for Purdue and so on. Is is that we do not. We actually sold that operation and we no longer, we no longer rm broilers. A matter of fact, my my wife,

I've bought

uh 40 meat chickens about eight weeks ago and I think they're going to be processed this sunday and I happened to be out of town. So. Very good. I don't know how, I don't know how that happened, but it happened. But I think one of the articles I was reading is that you have uh

multiple entities set up for these different operations. Can you just review what type of entities and what operations and why you did it that way. Um Our original entity, which was first the Star Rock farms partnership then became Star Rock farms LLC um did own

uh well, did manage the broiler operation, so that's no longer part of it, but currently they have the 2000 head beef feedlot that we raise cattle for a custom feedlot, raised cattle for for a large packer. Um And then

we had owned some hogs in that entity, but have transitioned

all the ownership of our hogs and we finished about 100,000 hogs a year. Uh all coming from our 4000 head sal unit, have a marketing agreement to sell that to a large packer here in pennsylvania, probably can figure out who it is. Um But uh they uh well, like I said with our agreement, we, you know, and and our management team here, that that's going really well, so that's that's

Green Valley swine, and that's a name that kind of came with the place. Uh And then we have an entity uh Star Rock dairy incorporated, which is strictly uh the dairy operation, the cows and heifers does not own or farm any land

um buys all its um

uh feed from Star Rock Services, which is our cropping entity and sort of our management entity. They would haul the manure, uh all those types of things. Um And then additionally are our largest value, of course, is in our in our barley farms, uh

LP, which is our real estate entity and the way we have it set up, um you know, barley farms and owns all all the real estate we own and then with least to either dairy or LLC or services, uh depending on what what uh, you know, whether it's farmland, whether it's the dairy facilities, whether it's the

the beef finishing facilities,

um and then additionally inside of Star Rock farms LLC, they own all the equipment, which is then leased to the other entities as well. Um So, and that has done um has helped us to really,

really see where, where, where things are working. You know, some of our challenges with the dairy. Um and the services, uh

should the dairy by from the services at at cost or should they buy at market? So it makes a difference, you know, and if you're if you're benchmarking against local dairies, they're considering their their corn price right now to be, you know, four bucks, 3 75 4 bucks cause that's the cost it was to raise

or, you know, but right now we're getting seven something here. So uh

you know what's the word? So we we have, that's, that's always a discussion we have on how to make that work. And, and, and we essentially carry, we will we will do like a

a side set of books for the dairy if they're doing benchmarking too. So they're matching up kind of apples to apples with other other operations and it can work the other way has it in a while where essentially the corn prices below cost of production. So then the dairy would actually be be getting taken advantage of that. So

yeah I'm just curious because I know some of our clients and some of the people I talked to because I do a fair amount of F. S. A. Planning, you know, farm service agency planning and you know last year with C. Fap and then the year before with MFP, did you run into any payment limits because of your structure

or were you able still to go ahead and maximize those payments? I'm just sort of curious on that.

Well we um we are

and I worked with Kennedy and code to set this up in our in our cropping operation but it is a partnership

originally it had been an LLC which was then then we did run into payment limitations

but then

the three of us are single member llcs inside the

the G. P. Inside the part of the partnership. So um it's it's just a general partnership, so it's just a general partnership and so in that side um not so much, the dairy course is actually a corporation. Um It's actually an s corp uh We did

run into it there but we were essentially you know with the three of us, we were essentially going and it hadn't been a problem until you know these last programs because really the dairy wasn't getting getting much hogs never really got any. Uh So yes we did um

kind of had

you know I guess in hindsight, if I knew it was all coming, maybe we could have done something. But

you know, I quite honestly, I,

I think we made out pretty well through those payments and I'm not, I'm not here to complain so well. And some of the people that talk to me, what do we need to do to change our structure. And I'm like, I think that was a one shot deal and I wouldn't, I would because the problem with changing your structure on some of these energies, you're talking a huge tax liability. I mean, uh, you know, potential tax liabilities. So

yeah, you know, sometimes, yeah, you maybe you lost a little bit, but uh, you know, as far as a payment, but uh, you still, like you said, you still made out pretty good. So yeah, And I know, and I'm not really that familiar, but I know out in the midwest, um,

that, you know, family members, you know, other family members come into the partnerships to get multiple payment limitations and so on. I just went through an FSH audit and I don't know, I could legitimize that because they were pretty, I mean it was not a problem, but they were pretty fussy about, you know, what,

what was your contribution and so on. So I think really cracking down on that. So to say that our wives were part of it would, we would have to really be, not that they don't do anything, but to the level that they were asking for, that would be a dishonest, you know, tech, you know, technically there is a special, we're sort of getting off subject, but it's a good subject to over,

you know, there is a special spousal exemption that says as long as they provide capital or they're part of the ownership, they actually don't have to provide any hours. Now. If you're bringing your kids, kids are different. I mean, then they have to provide the management or the labor, but the spouse actually can

not provide any labor at all and still qualify for an exemption. Now, that,

that just means, you know, they don't get extra money. It's just potentially you would qualify for, for a higher limits. So, right, okay. Now, does

having these entities, the way you've set it up and we'll probably discuss this may be a little bit later on. Uh, does it make it, uh, easier for transition to the next next generation? Or, or does it make a little bit more difficult?

Well, no, I think, I think, um,

it will most likely make it easier because, you know, where the true value lies and it's similar to how we transmission with my parents, um, where, you know, we, we took over the actual, uh, you know, active entity, but they maintained ownership of the real estate until about

10 years later.

Um, so, you know, something like that could have,

could, uh, happen here as well where we continue to own the real estate and began to maybe start transitioning that slower uh with,

you know, with notes and with gifting and so on and so forth. And you know, where um the operating entities can transition much quicker and you know, they're they've already kind of moved, some of the kids have already moved themselves into certain areas where, you know, my

my cousin, my cousin Abe, his his daughter is uh more with the crop side, my uh

my son who works part time, but more in the in the cattle and hogs side. And I have a daughter that's helping out with calves and and you know, there's there's areas there within different entities that that could make that happen and that and that also gives opportunity for more management roles.

Um and that's kind of where we're working now um

as well, so.

Yeah, and and you know, looking at your operation, just, you know, in a 30, 40 year period or less, you've grown it, you know, quite a bit.

Um let's just discuss that growth, I guess what I'd like to know is what do you think you did right in order to accomplish that growth? What what what did you think, what what was the one thing maybe that that led you to the best growth?

Well, I I think for us um and I'll never forget uh the year after, we were top producer finalists. Um

I was on a panel with LAn from, I think I got that name right? Maybe not. Yeah. And uh

uh I got to ask the question about my uh, my business plan and and so on and, you know, we we have something, but I I said uh

you know,

ours is flexible because, you know, opportunities come along on a regular basis and

uh they're not part of our business plan, uh but they're too good to pass by and and uh Lon long kind of laughed. And what question went to him? He said, boy, I'm glad you had that question first because I was afraid to say that. And you said it. So, uh,

but yeah, there there's no doubt about it that I think, you know, being flexible and finding other opportunities,

being able to work, we've been able to work with some families over over the years that we're transitioning out, that,

that some people may be, couldn't work with and and we were able to successfully work with them and uh, you know, not necessarily by their assets or anything at a discount, but at least get the opportunity there. Um, You know, we,

so I think that's that's workforce, we were not afraid to go into other entities, you know, we

back when we took over, we were hauling a significant amount of biosolids. Um,

and uh, getting paid very well to do it. That that kind of went, uh, that time kind of passed as some other larger entities came in and made it made it less uh less valuable to do it. So we moved on and then uh we get a large uh you know, we get a fair amount of a byproduct

that that makes really good feed we get at a fairly low cost

and that was why we got into hogs. And so we started feeding a few hogs. And and then you know, the opportunity came up to to purchase this stallion because the guy that had owned it ended for a long time and didn't want to make some investment that was necessary, made that investment. And

um you know that that has worked out well for us and has given us an opportunity to to feed hogs at a lower lower a little lower cost than than the competition out there because of the byproduct that we have. Um And then you know, in our dairy operation just uh

being able to, you know, first by the one farm that was already set up

um at a reasonable price and beyond the milk cows there and then you know transition to

to a new uh facility. And I and through that process, one of the things that I that I I think um was so important and and I think uh

it's the reason we we have a lot of good consultants that have worked with a lot of good consultants, We were looking at placing a dairy facility, had a couple of places in mind and showed the consultant the site consultant and went around and you have another one and we showed in the next one and we had like three lined up, you have another one

uh you know and then finally we were out of out of options and we're like well we could put it such and such place and he came over and said this is where you need to put it and he was right, he was right, he picked the right spot. He it was the place where it needed to be. We originally at that point um we're looking at the possibility of a

a sort of like a tunnel ventilated barn when we were up on top of the river hill where you always have a breeze. Uh And we have one of the most

um

you know we have a barn that handles the heat about as well as any barn out there just because of the location, the breezes that come up through there and I mean it's it's set up well it's a high clean barn but um you know that that's I would say taking advantage of opportunities and having good

good advice from, you know, certainly from our fathers to start with but

you know through other folks throughout the years certainly um

have had a lot of good good advice from different people. Yeah you mentioned the opportunity I think and I've I've said this a couple of other times, like on our podcast

is when you really make your money, isn't when times are good. Yes, you want to bank that money. But if you bank that money, save that money, have that money. Then when times are bad, that provides those opportunities now you don't want somebody to be in trouble or anything. But you know, that's that's when you actually make the most money is when times are bad,

not necessarily when times are good. So,

so so now now to go the opposite track, you know, we we discussed maybe the good side uh has there been anything that you did wrong?

Well, I would say um

The biggest challenge we've had um over the years occurred uh following kind of 2018 I mentioned we had purchased a very, it was very large operation

In early 2012, like 2012. and um

you know, it was a big chunk and you know, honestly when we purchased it, our plan was to, you know, sell

some other ground and so on and so forth. Well, you know what happened in 2000 and 12, 13, 14 times pretty good. Real good. And we didn't really have to, and as we got into 2018 and and you know, we were we were doing okay. Um

but

we weren't, we weren't necessarily uh right sized with uh

from the bank standpoint, uh we had to make some changes and we had to, you know, liquidate some property which we had in which we did in a and didn't lose, not like we lost money on any of it, but uh I think

with with the way the banking industry operates now, um I remember the first banker that came in here, he on a napkin, he told me to lay out, you know, kind of our uh numbers and so on, and in five minutes he said, yeah, you're good to go and uh

and that just doesn't happen anymore. I mean you're not happen,

you're not even dealing with you, we have, you know, our local banker, ag banker and in a very strong

bank that deals with uh you know, farming industry, but but they're not always want to making the decisions, you know, they got uh covenants that they have to put in place and

um farms don't always have a good year every year, and then there's covenants need wave and it starts getting it. And so I think what we realize is we need to strengthen our balance sheet. Uh you know, as as mo russell says bulletproof the balance sheet and uh

I think we've done that here in the last couple of years and it kind of goes to what you were saying there earlier, be ready for,

it helps us even be more ready for opportunities and that um I guess that's a lesson we learned and with the good times coming right now, put a little bit of that away, um, and make make good smart decisions, not, not uh guess to uh,

as to another, another speaker that I've also listened to dr cole, you know, getting those big toys out there, so go buy a bunch of toys. So it's too easy to make dumb decisions when times are good, you know? So that's that's true now I guess. Uh and I think we all learned from

our mistakes. That's how we learn. At least I learned better from a mistake than I do from a success.

Would you do anything over? If you look back on it, would you do anything over or is it just,

hey, that's part of being in business?

Well, I will say through that period of time, um, it strengthen our partnership.

Um, we got a little more honesty, maybe out of each other. Um,

I guess. Uh, so yes, I wish we wouldn't have had to go through that, but, and I don't want to go through it again. But it did it did, we learned a lot. And so I guess in some ways, yes, I would probably change that. I would be more proactive, you know, an understanding that, you know, that side of things. But um,

what we learned through, it's probably some of the reason we're in better shape now than than maybe, you know, we've been in a long time and so I guess kind of what you're saying if you if everything is always good um you don't uh

you don't never really learn to get better, you don't get tough and you don't you know learn to you know to to do the things that are necessary. So. Yeah exactly exactly. Well rob right now we're actually going to take a quick break, we're going to have a message from our sponsor and then uh

we'll come back to having a discussion right after the break.

Mhm.

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Mhm.

Right

mm

mm.

Welcome back everyone. This is paul neiffer. I'm the moderator for the farm C. P. A podcast presented by top producer and we're gonna go, gonna go ahead and continue our conversation with rob Barley. Uh So rob. The one thing being a C. P. A. That I really like is the fact

that you've taken advantage of in my opinion taken advantage of managerial accounting to help manage your farm operation. I think a lot of farmers they sometimes view accounting is sort of being the necessary evil, you know, the banker needs it or we need to prepare the tax return and they really don't embrace it

as a management tool. Can can you go into you know why you why you why you use them, why you decided to use it and so on?

Well uh I guess to some degree um

how we got to doing it is not necessarily because of what you're saying there. Uh We were actually working with um

well the Farm Bureau and we were they were an accountant and probably stayed with them a little too long. I think they do an excellent job. We got a little too big and maybe a little too complicated uh for their resources. And uh we had there was a property

that ah we had that

that we

We're selling at at more than what it was worth for you know uh essentially a landfill. And um the idea was this was supposed to last a fair amount of time and we were going to be able to manage the income over 15, 20 years. Uh so they had an option on it and

things changed and all of a sudden they exercise their option. And so we were stuck with some significant amount of income

uh and not really and a lot of the income was going into our parents because they still own the fair amount of the real estate. So we need to figure out a way to save some tax. And that's when we brought in uh the current firm that we're working with acuity uh and C. P. A. S. Which was steve hips men and

and mike PCI, the one that I think that you've worked with and uh

and they helped us get through that process. And part of that process was setting up some separate entities for for tax reasons. But in the end they ended up being very helpful from, you know, a manager accounting and um

and that so it was, you know, kind of a

uh

blessing in disguise I guess. Um And you know, we've we've had to make some some changes with them and what the entities were uh for different reasons and so on and so forth. But essentially we separated out our entities and yes, we can very much,

it's a much easier to understand what's working, what's not working, you know, why and and so on and so forth. And we have uh you know, we have embraced it here, we have our accounting staff. Um Every bill is allocated not only to the right entity, but also the right uh category within the entity.

Um And you know, there has to be pos on everything. Um you know, and uh were, you know very concerned about whether we are capitalizing something or not and so on and

and uh that's been frustrating sometimes for the guys out in the field having to, if they didn't do what they were supposed to in the paperwork, they get a call and that's not, not something they want to deal with. They've learned that they've learned to not growl so much. Uh, but uh,

yeah, it's been been great. And then, you know, essentially on a

monthly, quarterly, you know, annual basis, we can look at, we can look at things and find out where issues are

and uh, and get uh, get answers that, that we can trust. And as time goes on, it's more and more that we can trust. You know, these answers and, and they don't even on top of that. We have certainly in the dairy operation, a strong record keeping, uh, in their internal systems and you know, the uh systems they have and then on a cropping side with my, my john Deere and granular,

we use both of those. So that, that has helped us. We have learned that

um,

we, we worked with with like a farm work, farm works for many years and in transition out of that into FBS. And we worked with that, try to kind of do the same thing where you're managing

uh, you're doing your managerial,

some of your managing stuff inside your accounting. And we, we, we have learned that it's, it's some, it's helpful to have some information in there. But to have every little piece in there, it's complicated. So we still,

we still, you know, working my john Deere and granular to help more. So granular now to, to understand, you know, the,

the down of the acre and so on costs

rather than we're not overwhelming the office staff that doesn't necessarily understand all that stuff. And I think that separation,

although they work together, that separation has helped us, you know, to kind of look at things two different ways. So yeah, I think the concern that we have as accountants is when we're dealing with the accounting system, we don't want a lot of noise in there, you know, And sometimes

you take that management information if you dump too much into the accounting system,

it creates that noise, that sort of, you know, we just want nice clean data inside of the accounting system. Like you say, the granular, whatever it might be, conservative, granular, you can get down to that per acre, but in the accounting system you don't want to deal with per acre on everything because then you just create this balloon.

I'm almost gonna call it a mess. So I think that's good now, do you do all this on your own or is there some outside help? I'm, I'm guessing there was probably outside help from a duty to get it set up and so on. But are you doing it all on your own now or some of it being done by other people.

Yeah. The only thing really. Uh, I mean, we, we draw an acuity from time to time with some of their expertise, they certainly prepare our uh, annual statements, the reviewed statements. Um,

but you know, less and less, uh, there's more and more in house here from the, you know, from the farm management side. Uh, my son in law pretty much manages that and he, um, you know, certainly works with the folks at granular and the folks at uh, john Deere, you know, to make sure everything's working right. But

more and more of that is pretty much, he's taking care of that as well. He has a,

he has a data entry person that he's also works with on day to day stuff because he, he does our scouting runs, you know, sprayer from time to time. He runs other equipment as well. So, um, more busy in the fields. He's in the fields. Uh, but uh, you know,

so yeah, I think we've,

we've gotten better and better at doing ourselves, but we still have folks to fall back on and I don't think we'd ever want to totally cut those cords. Um,

because you know, there's, there's some stuff that they continue to have and uh, information they have and, and stuff that they expertise that they have that if I wanted to have all that I need to hire too many people, you know, it's, it's uh,

and, and a lot of times, you know what, you enjoy doing your highest and best use is,

is working on the farm operation not necessarily cranking out uh you know financial statements and so on. So everybody has their role in, in in those operations. Um Yeah, it's just, I know I know that as you get larger

the accounting function, the management accounting function can actually, I won't say it's a profit center. It's never a profit center

but it can help you make more informed, better decisions than not having good accounting data. So I think you guys are probably taking advantage of that. That's that's that's certainly true. And as I mentioned,

the more accurate it gets. Uh and the more you trust you can trust those numbers then you you have, you can pull that trigger

without a second thought. Yeah, exactly, exactly. Now this sort of transition, I guess that might be the right word into succession planning. You discuss briefly, you know that transfer from generation to 23 where generation to sort of maintain the land base.

But as far as the operating in a tease,

you know, they sort of were transferring that over to your generation now you get generation for coming up. Uh just go through what's what your plans are on that transition. Maybe what some of the steps you maybe have taken or planning on taking.

Well let me let me just back up just a little bit to the transition from 2-3. Um we still have notes with our parents um and we have uh have life insurance on them, the notes will be um will be inherited by the respective

Children. Uh That's the little unfortunate part when you have uh you know

uh cousins, you know you can't, so uh but we have that that worked out, we have the parents wills in in order that it all works out in our non family siblings will be compensated through the life insurance. Um That's been in place for a fairly long time. Um So that

although it's it hasn't, I wouldn't say it's been perfect, it's it was uh you know it's worked as well. They they we actually never really paid much of their principal down, but I've been paying interest and that's what they live on uh example

A good a good income. Um and they can call up the 5% a year, they don't call a whole lot, but they have in time from time to time. Um and so that that has worked out well for us, it's uh

will probably follow a template that

you know, is along that line, but certainly it's going to be different now that we have, you know, it's uh

you know we have the two brothers and a cousin, so we now we're going to have second cousins working 1st and 2nd cousins working together and you know, so we're um

the first thing we did was develop a family employment policy

and that has um served us fairly well. Um The kids I think understand it. Um they've heard it a couple times and then they, you know, certainly when the time comes they asked for a refresher and even sometimes I I need to go back to it and look at for a refresher. But uh

that helps us to, you know,

bring bring first of all bring the kids into to work, but then their role into as managers and and they've they've already taken those steps uh you know, there's practically there's three of them now managing different aspects. Uh My

my son in law, uh my uh cousin's daughter and then my son in a part time basis is managing a couple of different areas as well. Uh So you know that's step one we are actually scheduled here um

to do to kind of begin on the, you know, the step of where the total family transition, we do have um life insurance on the three of us, that part of that it's already in place. We have uh we will have we will continue those notes.

Um otherwise there'll be a tax consequences if we don't, so we're gonna continue those notes

um And uh and work through

some other, you know, possibilities, part of what we're figuring out now what's what the three of us want, you know, what are we going to be okay with, so and none of us I think are looking for full value by any stretch of imagination. But, um,

figured out what's, you know, what works and so on. And uh, and we're both talking, we're all three talking, you know, 5 to 10 years, you know, not necessarily walking away, but stepping back to some degree. And so, um,

that,

uh,

so that's where we're at right now. Um, I don't have the,

I don't have the road map, you know, clearly laid out yet, but we have a lot of good ideas from what we've learned, what we've seen. You know, it's always about.

Uh and I guess once, uh, once we know that

the new tax rules that will change with the next administration as well, uh we can at least make a plan for today. So. Yeah, well, that's a good segue, you know, because I was going to ask you, uh, I think maybe you've seen what some of the proposals are and they use the word eliminating step up. No.

So they're not eliminating the step up there, just thinking you pay a tax

to get step up and and some of the other things, uh, do you think that it would mean

clearly change your succession plan or is it that, hey, this might happen now, but five years from now, if we get a new administration is going to

change again or I'm just curious what your thoughts on, on what some of those proposals are?

Well, I guess from a, from to answer your first question from a sort of a philosophical perspective, I don't, I can't pick what I'm going to die. I could, I could, if I die today, I'm, I'm probably better off than if I die in a year if this stuff is implemented. But

um,

you know, and, and maybe they're even talking about backdating the implementation, some of this stuff. So maybe I can't die today. Maybe I should have died a year ago. But uh,

I think you've got to be prepared for today because

uh, so that we'll have to make changes. Um, you know, how drastic, you know, I,

I guess we will have to weigh the, the risks and you know, certainly at this point, I, I hope that, uh,

you know, clearer heads prevail. It does seem like that. Yeah, I think that, yeah, it appears that,

um, now you have a, a senator knicks to your state Senator Manchin and, and, and some of these other ones really do not like

the idea of the transfer tax for farm operations and closely held businesses. I think they're okay.

Hey, if if Warren Buffett passes away and he's got $100 billion worth of, of, of Berkshire Hathaway and you're going to pay a Cat Apple gains tax on that because it's liquid. I I think most Congress people are probably okay with that. I'm not saying that's right or wrong, but the idea that you've got a farm operation

And just do the fact that you pass away now, you owe this 40% tax

On income and then possibly in a state tax on top of it. Um, that, that's going too far. Yeah, I agree. 100% agree. 100%. And I, like I said, I think you're right. I think,

you know, it was Senator Manchin and I know, um, certainly folks, I've heard, I've heard tammy baldwin on, on, uh, you know, one wanting at least wanting carve outs for farmers. So, you know, there's plenty of midwestern, I think,

uh, you know, all the republicans are pretty much against it. So we might as well not even talk about them, but we have to bring some, some on board. I think at the very least,

uh, we'll get some carve out for the farmers that well beyond what

what's already been put forth. Because what's already been put put forth, uh, is, uh,

it's not really going to cover the majority of farmers, even though their record keeping said it would cover 98% and uh, and texas a and m said it would not cover 98%. So, uh, apart there,

Well, I'm gonna say it's sort of apples and oranges because the problem with the us days databases, 90

8% of their farmers have revenues less than $5,000. So yes, it would cover that 98% what we traditionally think of as the farmer that is relying on the farm for their livelihood.

98% of them would be effective. Are affected by this proposals. Yeah, we're getting we're getting sorted to the end of the podcast and I always end with a couple of questions. You know, the first one is uh is there anything that keeps you up at night, something that you worry about on on the farming side? Uh

Well,

I will tell you this uh

early on in the opera. I've I've always handled the financial side of things. I've always kept it to myself

um and and learn that I can't do that. Uh but I I would worry and so on and so forth.

And at one point, you know, as I was reading through scripture, I learned the right thing is to turn that over to the Lord so I sleep, I don't have any trouble sleeping at night. I turn that over the Lord and I can get to sleep uh now. And it's not that I don't worry about stuff and there's certainly some things right now. Um you know,

that that our challenge um for us, I mean, what, you know, what does the future future hold, you know, with with these tax proposals, what does the future hold from, you know, uh

what's the next big change? I mean, you know, we're constant from a dairy industry, we're seeing uh real transition to a lower cost structure. midwest with the large dairies and, and here in the northeast, you know, I'm the pennsylvania milk marketing board chairman and,

and it's just a challenge to see how,

how we can continue to make things work with a generally smaller um their size here, one of the smallest in the nation. Um and so yeah, that that bothers me because those families really, really care about, you know what they're doing, they care about their farms, they care about their cows and they just become, you know, in a structure that it's tough for them to compete.

So, you know, I guess I have more concern there um

than anything. So I hope that answers your question, but that was it, you know, it's sort of curious, you know, I think a lot of times when we hear pennsylvania, we don't necessarily think of ag country, I mean, or maybe we think of the Amish which I know are in your area,

but you know, in the census book that the USDA puts out every five years,

They list all the counties revenues from farming and historically, you know, California counties, there's like 10 or 12 counties that have substantially more than a billion dollars of of farm income, but I think it's either your county or county in your area is also one of those counties is over the counter dollars in revenue.

Yeah. So, so it's a, there is a lot of ag in your area and very beautiful ag to I will,

I've been through that area and it's it's it's almost as pretty as where I live. So I'll say that. So uh and then uh you know we're gonna end with my my last question that I always ask in and you know what what is your definition of success in farming?

Well I you had sent me that question ahead time. We have a uh we have a mission statement and I so I'll read that. I thought that kind of answered the question as much as as well as anything and our mission statement is to produce quality agricultural products,

an efficient well managed and progressive operation

accomplishing this while maintaining a safe friendly working environment for employees seeking develop and maintain open and honest relationships with employees, vendors, professionals and neighbors and you know do this and doing all this in a profitable manner. So yeah, I think that's a good very good definition. So

well before we go rob, is there anything else that you want to add or anything that we haven't covered that you want to uh make sure that we get in the podcast before we finish up?

No I think I think we've covered a lot of good things and I appreciate uh

uh really have looked to you and on some of this uh you know the issues that we're hearing from a tax standpoint and how we're gonna pay for

for all these programs. I know uh you know I guess we're not here to talk politics but uh at some point we need to stop spending money. I guess the only thing good about these tax proposals, it gives me plenty of stuff that I can talk about in the blogs. So that's that's the to me the only good thing about it and actually that's not that good either. But but I least I won't say I enjoy writing about it, but I you know, that's I guess that's my passion is just to understand how this affects our farmers out there and and hopefully come up with some ideas that can help mitigate help reduce that cost if we can. So uh with that uh we'll go ahead and in this podcast

again rob. Thank you very much for participating and uh and hopefully I'll see you sometime in the future. Sounds good. Thanks for including me.

Thanks for listening to today's podcast. I'm paul neiffer and we'll be back next week with a new episode of the Farm C. P. A. Podcast with Top producer.

Yeah

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Top Producer Podcast is hosted by Paul Neiffer, CPA and Top Producer columnist. He’s a go-to adviser 
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