Audio Transcript

James Mintert: Thanks for joining us for this special edition of the Purdue Commercial AgCast. Today’s podcast features two of the speakers at the upcoming Purdue Top Farmer Conference, which will be held on January 10th in West Lafayette. Joining me today are Matt Erickson, who’s a policy specialist with Farm Credit Services of America and former chief economist for the U. S. Senate Agricultural Committee, and Chad Fiechter, who’s the Center for Commercial Agriculture’s research director and Assistant Professor of Agricultural Economics here at Purdue. You can attend this year’s Top Farmer Conference in person on January 10th or virtually using the Zoom platform. Conference details are available at our website, which is purdue dot edu slash commercialag.

On today’s podcast, Matt Erickson outlines some of the economic and policy issues he’ll focus on during his keynote presentation of the conference. Chad Fiechter will be discussing a new app he’s developed that he will demonstrate during the conference. The app makes it easy to calculate your farm’s key financial ratios using just your tax return along with beginning and ending balance sheets.

We’re recording this in late November and the announcements are coming fast and furious from the new administration with respect to all the changes that could be taking place and new appointments. So Matt, talk to us a little bit about what you’re going to cover in January and, and what some of the changes we might see with the new administration.

Matt Erickson: Yeah, thanks for me on, Jim, looking forward to speaking at Top Farmer in January. We had a pretty big election here in November. When we get to January, we’re going to have a new congress, and it’s going to be Republican led on the House side as well as on the Senate side. And we’re also going to have a Republican administration with, the second term of President-Elect Trump. And so when we think about the policy goals, the policy pillars, you know, that are being discussed in the news right now, and being debated in the news, I think first and foremost, you take it one day at a time. Because right now they’re in planning stages in terms of what they want to accomplish as the new year rolls around. So when we think about some of these things that are going to be debated here in 2025, things like extending the Trump tax cuts that are set to expire here in 2025. You’ve got things like cutting regulation, immigration, the border security wall, funding those items, cutting federal spending, as well as, looking at more efficiencies in the federal workforce. All of those things will be debated here in 2025. And things that are important to agriculture, such as the Farm Bill.

And, I think we have to keep in mind, though the situation where the intersection of policy and the macroeconomy, or the U. S. economy, are going to be an important indicator. You know, one, we are getting closer to the fed’s 2 percent inflation target, but that last stretch, that last mile is gonna be a bumpy road here when we think about, inflation, looking at bond market, interest rates, so on and so forth. That has a direct impact on producers businesses. So, we’re going to have an hour session. We are gonna talk a lot of different things, a lot of different policies, a a lot of different economics, within the situation. But again, this is a moving target, as we sit here in November and until we get to January for Top Farmer.

James Mintert: So Matt, I think one of the things that’s on a lot of producers minds and a lot of agribusinesses minds is, what does the change in administration mean with respect to a new farm bill? We’ve struggled trying to get a farm bill passed throughout 2024. Looks like it’s going to get pushed back to 2025. What kind of changes might we see?

Matt Erickson: Yeah, and I that’s right now. I think Republicans are kind of seeing what they want in a farm bill. You know, I think a good framework of that could look like what the House Act Committee passed out of the committee this past year in 2024, led by Chairman G. T. Thompson from Pennsylvania. We could see more of this notion of more farm in the farm bill being put in there. I think the concern here, when we think about 2025, and all the major pieces of legislation, the priorities that the Republicans want to think about, we got to make sure that the Farm Bill and those key commodity price supports don’t get lost in the shuffle in terms of providing farmers that predictability and certainty that they’re they need. Um, so I think hopefully when we think about some of those things like the 2025 Farm Bill or a Farm Bill just in general, hopefully it doesn’t get lost in the shuffle when we talk about some of these major pieces of legislation like the tax bill and and so on and so forth.

James Mintert: So as you think about changes that are going to impact producers’ businesses in 2025 and beyond, what do you think some of the key points that you’re going to be thinking about?

Matt Erickson: Yeah, I think first and foremost is inflation. And I know we’ve been talking about inflation basically since the COVID pandemic. But one is we’ve got to make pretty darn sure that we get to the fed’s 2 percent target and we don’t see a double dip of inflation. And, you know, let’s be honest with ourselves, there’s a lot of inflationary pressures out there that are just unknown. You know, what could happen with these tariffs that the new administration plans to implement. I think Mexico and Canada, the expectation or what’s been out there from the president-elect is they want to put 25 percent tariffs on coming in from Canada and Mexico, and 10 percent additional tariffs on China. So, those are inflationary pressures that we have to keep in mind. Also too things like immigration, we still have a relatively tight labor market with 4. 1 percent unemployment. You know, how could those impact things such as inflation and the relatively strong labor market that we’re still seeing right now. We’ve gotta keep in mind that the macroeconomic policies first and foremost in my opinion. Two, think we need to talk about and have those conversations of how we should advocate for the tax bill that’ll be coming up here in 2025. All those things will have a direct impact on producers’ businesses. Tariffs have an impact on commodity prices, they have an impact on potentially inflation. Um, and obviously taxes have a impact on bottom lines of producers, so 2025’s gonna be pretty critical year, uh, in terms of this intersection of economics and policy.

James Mintert: So taxes, tariffs, uh,

Matt Erickson: Farm bill.

James Mintert: inflation and then throw a farm bill in well.

Chad Fiechter: Yeah, so thinking back to my days as a producer, uh, always was encouraged to do good financial management. And when you’re sitting in a classroom, it’s pretty easy to see how simple it is to divide this thing by the other thing. But when you have so many other things going on, it was hard to remember what those ratios were, what things was I supposed to be measuring, and what did I need to take away once I had those outcomes. So, this is kind of a way to try to simplify that whole process and, uh, instead of Googling how to do the financial calculation, this is going to do it for you.

James Mintert: Yeah. So the painless part really revolves around your work with some students here at Purdue to use AI as a way to generate the meaningful set of ratios using information that producers already have essentially at their fingertips, explain how that might work.

Chad Fiechter: Yeah. So the origins of this is that, you know, Jim, you and others here have been telling people how to use a simple, a beginning and ending balance sheet and the 1040, the Schedule F, your tax documents to calculate these financial ratios. And there’s been a series of spreadsheets that have been created to do just this thing. So in the midst of this AI boom, and my exploratory exercises in trying to figure out how does AI factor into farm management. I hired two computer science students and for the last eight months we’ve been working together trying to figure something out. So what I have figured out through this, they have shown me, uh, very graciously, is there’s a lot of these packages that are already prebuilt. AI packages, and one of them is a document reader.

And so we essentially created an application that helps you walk through creating a balance sheet, both the beginning and ending, and then uses an AI tool from Amazon to read in the, the schedule 1040. And then compute the ratios on the backend.

James Mintert: So, a producer’s gonna need a 1040. They’re gonna need a beginning and ending balance sheet. And, tell us a little bit about how that might work because balance sheets don’t always look the same across producers and across banks, etc. So, tell us a little bit about how that might work.

Chad Fiechter: So, that was part of the problem in the exploring AI is that, you know, it is great and amazing, but it, you can’t just solve everything. So we started with how do we read in anybody’s balance sheet. And that turned into a really big problem pretty quick. Um, so what we decided is let’s create a template to generate a balance sheet. And ultimately what it does is it steps a producer through all of the items necessary to create an accurate balance sheet. And so as long as you have a balance sheet, it’s fairly painless to enter that information in. And then once you have it in that template, it can be uploaded to this program a second time, or if you wanted to keep it for another year. So if a producer didn’t want to use the feature of, of calculating, uh, the performance metrics. You could actually just use it to create balance sheets.

James Mintert: Good point. And so as you think about the performance metrics, then the next step, of course, is to compare them, uh, to the farm itself over time and maybe compare it to other sources of those metrics. And you might elaborate on that just a bit.

Chad Fiechter: Yeah, so once the ratios are calculated, you know, how does this compare? And we just threw in some, some numbers, but a lot of those numbers came from FINBIN, out of the University of Minnesota, on what are crop farms, because we’re kind of assuming that in this first iteration, a lot of it will be used by crop farms. What is appropriate sort of ratios?

Um, this tool specifically stores no data. So once a farmer leaves the site, there is nothing that will be kept or tracked. Except you can download the balance sheets on the back end. And that was purposeful because we don’t want data concerns to keep people from using this tool. But in the future, hopefully, you know, you would keep those records and you could compare yourself against your own performance. And then use places like FINBIN to kind of get an idea of relative to other producers, how are you doing?

James Mintert: So Chad, at the conference on January 10th in West Lafayette, you’re going to walk people through this presentation, show them how easy it can be. Will they get a chance to actually demo it?

Chad Fiechter: Yeah, I hope so. We definitely got a working version and I’m going to walk through that working version. I think right before lunch.

James Mintert: That’ll be fantastic. There’s gonna be plenty to talk about. So, if you’re interested in this, one of the key topics at this January’s Top Farmer Conference go to our website, purdue.edu/commercialag, and you can find all the information about the conference, including a complete agenda and registration information. And you can do that, uh, Not only in person here in West Lafayette, but you can also attend remotely by way of zoom. And on behalf of the Center for Commercial Agriculture, I’m Jim Mintert. Thanks for joining us.