Farm land as a real estate investment strategy…

Join Ken and Phil Hinrichs as they talk about how investors and others can use farmland as a viable real estate investment strategy. To learn more about Rich and his company be sure to visit his website at : http://hinrichstrading.com/

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Transcript

Ken McElroy (00:01): Welcome to the real estate strategies podcast. I’m Ken Mackleroy, and I’m here to give you creative ideas on how you can get started or continue your journey in real estate. Each week, we will bring you inspiring and informative conversations with successful people and their path to obtaining or investing in real estate. Enjoy the episode. Everybody is Ken McElroy here, and thanks again for watching. I’m here with my very good buddy, Phil Heinrich. KFL

Phil Hinrichs (00:31): Hey, nice to be here, Kenny. Thank you

Ken McElroy (00:33): Guys. This is really a treat for me because I’ve known Phil a long time, but as you guys know, we do a lot of real estate and we have a lot of people on the show that, you know, do self stores. They do office, they do retail, they do malls. They do single family. They do flips. They do all that, but very rarely do we have somebody who understands farmland and agriculture.

Phil Hinrichs (00:55): That is my buddy, Phil. Hey, good to be here. And good to get you on the farm too, Ken.

Ken McElroy (01:00): No, I know. So guys, this is really going to be amazing because a lot of times people don’t think about real estate if, um, you know, a farm, right. They, I mean, they know it is, but they don’t know how to produce from it.

Phil Hinrichs (01:13): Right. Well, right. You know, urban people think urban and, you know, farm people do definitely think farming. So, you know, there is the two animals out there and, and they’re just looking at different things. They

Ken McElroy (01:25): Are, they are, and that’s why I’m excited to get into that. So let’s um, let, so let’s talk about your company, Heinrich’s trading company HTC, you know, why don’t you give everybody kind of a flavor of how you started? Cause I know this is generation.

Phil Hinrichs (01:40): Yes it is. And, and thank you. Uh, it’s an honor to speak on behalf of Henrik’s trading company because, uh, I’m the fourth generation can and uh, everyone in the family has been involved in agriculture and also been involved in the processing. So you have a really direct relationship with the farmers. Uh, we were born in, uh, meaning HTC was born approximately about 23 years ago. And this was one thing that the Henrik’s family has always asked their, uh, siblings to, uh, move on and build your own. And so, uh, I found it very fascinating and uh, you know, Hey, you gotta walk slow, but it’s nice to have the leadership behind you.

Ken McElroy (02:25): Well, if you’ve got an impressive company, I know I’m, I might not get it right. But guys, he, you were way ahead like hummus, right? Chickpeas protein. It’s like F it’s ever everything right now. Like you, and you’ve been doing it for all these years, but it’s just kind of really come out of nowhere. Right.

Phil Hinrichs (02:45): Last 10 years, it’s been a real great launch. I mean, the millenniums just want something with non allergens and they want, you know, the health, uh, uh, kick the superfood, they’d call it right. You know, and, uh, chickpeas have really found their way. And as we talk about real estate today, you’ll notice that I focus a lot on acres and ground. That is protein driven.

Ken McElroy (03:08): Yeah. Yeah. So I think this is, you guys are going to really, really enjoy this because what, what you’re doing honestly is you’re, you’re, you’re basically feeding the market that’s coming

Phil Hinrichs (03:20): And right. Yeah. Well, exactly. I mean, our driver is the food chain and as we look at the food chain, we look at the, uh, the ground and, uh, man, I’m telling you what Kennedy has. We’re going to talk today. We’re going to go over seven different States. We’re going to talk about a generation of people. And by the way, you know, when you’re dealing with these farmers and you’re dealing with the land, you’re talking about people with generational stories that are greater than ours. So it’s, it’s a, it’s a really nice group.

Ken McElroy (03:51): Phenomenal. I’ve met a lot of them here in Idaho to homeboy, by the way, look at this. We’re here at quarterly in Idaho. It’s beautiful.

Phil Hinrichs (03:57): Well, I’m telling you what now that’s Aqua farming out there and I’m, I’m kinda catching an eye for it. Uh, TIS the season.

Ken McElroy (04:06): All right. So let’s jump right in. So how do you use farmland as real estate to generate profit? Like I generate profit from my apartment buildings. You know what I mean? You know what I do, you know? And, and that’s what everybody thinks of real estate that way they think of, you know, get some land, built, something on it, put some tenants in it and cashflow yours is very different. So how do you do that with farmland?

Phil Hinrichs (04:29): Well, farmland, well, let’s start with, you know, we have the three consumers, we have the small, medium and large consumer. And boy, when you start talking to large, you understand that market really well. But when you start getting down to the nuts and bolts of America, it’s the medium size farmer that really drives the bus. I mean, corporate America lives off the medium size farmer. So now you’re trying to find the right fit for that person.

Ken McElroy (04:58): There’s a medium sized farmers at acres.

Phil Hinrichs (05:00): Yeah. Thank you. Uh, when we talk acres, we’re going to talk a 2000 to 4,000 acres is what a medium sized farmer is to me. That’s big. Oh man. If you start thinking about it, it’s like a 3000 units of a, an apartment.

Ken McElroy (05:17): All right. Yeah. That’s fair. So small is under 2000

Phil Hinrichs (05:21): Medium is two to 4,000 and then big as big as 10 to 30,000. Okay.

Ken McElroy (05:26): Alrighty. Alright. So how do you generate profit from, you know, cause you know, like I said, you do chickpeas and protein and that’s been your niche guys, by the way, he does 1 million hundred pound bags a year, right? You gotta be one of the largest ones.

Phil Hinrichs (05:43): Well, we definitely have a responsibility globally and domestically and you know, some years it’s all about the crop and acres produce so many a yield. So at the end of the day, that is our goal that keeps our factories and keeps our families moving.

Ken McElroy (05:59): Okay. So let’s talk about how that’s done, like start at the very beginning and how do you produce profit out of it?

Phil Hinrichs (06:06): Farmland. Okay. So, uh, you know, we got to, first of all, it’s boots on the ground and number one, we’re going from the farm to the fork cave. And you know, you’ve heard that term a lot, but how it works when you’re looking for protein, meaning let’s just talk about chickpeas today. Use that as an example, when we’re out there looking for farm ground, uh, we’re looking for what would best benefit it? What’s the cost of this ground and we’re going to also look at the production ability and then the logistics of it. So I, I usually look at it in that synergy of, uh, how, when we’re out there shopping for farmers. Okay.

Ken McElroy (06:46): Yeah. So basically soup to nuts, right? Absolutely. You said farm to fork and then so you actually like, like me, like I have to find contractors and the banks and the financing and all that stuff. Yours is a little bit different, right. Where you go, um, straight to the farmer and a lot of cases. And in some cases you have your own. Yeah,

Phil Hinrichs (07:07): Exactly. I mean, we’re definitely farming ourselves, but most of the time we are establishing the grower. And so when the grower’s looking for the right land, uh, the value of it, so we understand our production costs and you know, number one, when you’re out there talking to people about selling them farm land or buying farmland, I mean they gotta make it pencil out. And so that is why we’re driving the bus with the protein part of it. So this is the gray area for me.

Ken McElroy (07:38): How do you know what, what pencils out? You know, because it’s, I mean, that’s like for me, you know, I know you’re in your lane, right. And you’re doing a great job, but you know, when you, I look at farmland, I’m like, all I see is, you know, wow. Like what do I do next? Right. Like, so what, what are some of the things that you provide as a landlord of the farm property for like some of your tenants?

Phil Hinrichs (08:02): Well, the very first thing we always do is we visit the farm. You know, we know our dirt and the next thing is then, you know what you can ask out of that grower, or you’re going to ask out of that land when you’ve invested into it. So we’re going to take the investment side, which is the really brick and mortar of looking at pharma. And number one, you’re going to look at where it’s located the value of the production, the quality of the land, meaning the zip flat, steep, moderate, uh, those types of things start taking in an account. And then when I really think about, uh, what the farmer can control, because at the end of the day, I’m talking about something that is way different than you I’m talking. I have to deal with mother nature. And that puts a value on the soil.

Ken McElroy (08:56): That’s like vacancy, right? It’s a lot of pressure. Yeah. Yeah. So, so you have to account for all of those things. So then you sit down with the farmer and you basically cut a deal cause there’s gotta be margin for you. Right.

Phil Hinrichs (09:09): Well, there’s definitely when we’re, when we’re talking about, uh, trading of, uh, and going out there and making a purchase, uh, you definitely know what your abilities are to grow. Now, when you’re out there selling it. Now you’re promoting the other side, uh, in nearby, we have a production facility for chickpeas, you know, you’re, uh, picking up this, uh, ground, let’s just say it’s 500 acres. Uh, you can get a chick pea contract to back that logistics to the facility or our close, uh, you know, your market. You can get a full contract on it. So all of a sudden you start giving, uh, the buyer, uh, of the land, uh, opportunity and security.

Ken McElroy (09:52): Oh cool. So you’re kind of putting all the pieces together, including the buy-side, what the contract.

Phil Hinrichs (09:58): Yeah. I will take the dirt and make a transaction. I will also take the farmers dirt and put him under contract clear to the end of the use of it.

Ken McElroy (10:10): So what’s cool is before you do the deal, you know exactly what you’re gonna make.

Phil Hinrichs (10:14): Well, you can definitely know your inputs and, and the, the factor that I’ll keep going back to is mother nature and yield potential. And, you know, we always talk about yield. You know, if we’re, if we’re even just taking a, a simple task of taking a bean, adding water and how it grows, that’s called yield. And so now we’re talking about a farmer going out there and that average yield is going to be, let’s just say a thousand pounds an acre and shoot, he’s pushing for 15. But if he only gets 500, we’ve got a little issue, you know, where it’s different in your business where rents stay fixed. So to ransom dirt, but not the production coming from.

Ken McElroy (11:00): Yeah. But a lot of it’s interesting in my business, you know, what you pay for the land, because for me, it’s simple, it’s land cost to build it rent, you know? So yours is not that much different, right. It’s contract cost the production and then the contract on the out, right?

Phil Hinrichs (11:18): Yeah. Let me, let me grab that because you talked about ranch and, you know, we have situations where you go out and it’s not an opportunity to purchase. It’s an opportunity to rent. So now you’re renting from a landlord and you’re the tendon and you’re going to gum in and you’re going to utilize that dirt for a project. And let’s just use chickpeas again as one. So that year I’m going to go out and rent 500 acres. I’m going to put chickpeas in, I’m going to contract them with HTC. And that’s how a tenant works. But a landlord, you know, has his fixed costs being cut.

Ken McElroy (11:59): What I love about that is just, just, it’s just a few pieces to put together. So how quickly do you see a deal or Nazi a deal? Like, you know what I mean? Like do, do, do you go out, look for land, just do that. Does it come to you? And I mean, how many acres do you guys have now?

Phil Hinrichs (12:14): Okay. So in our business, we’re a lot like you, we just say the question was, how many acres do I have? Well, our company always answers that a lot now without being, you know, to, to our audience today, you know, let’s just use round numbers. So let’s, let’s call it 50,000 acres that we’re managing. And in that, how do we keep managing that? Okay. That’s no different than maybe an apartment, but we’re managing it. So we have our work schools during the winter. They are production. Time will be spring when we’re going to plant it. We are in control of the seed. So we’re selling the whole program to the grower. And so our audience is out there capturing it. And it’s competitive. People do compete with us. Of course they do. And so with that being said, uh, we have to be very competitive. And in agriculture, you can’t do it all. So like anybody and yourself, we have a team.

Ken McElroy (13:21): Yeah, yeah, yeah. Yeah. In fact, in our case, in some spots, we actually have a, we actually outsource the management, even though I have the management company. You do what’s best for the

Phil Hinrichs (13:31): Yes, absolutely. I mean, you know, in our business, we’ll go from the dirt, which is the easy part. And then you go into the agronomist side, which is the chemical companies. We stay way out of that. You know, because if I was selling that, they’d probably call it snake oil. We’ve all heard that story. You can’t carry every damn book with you. And so then after that, you’ve got your implement people that are selling the equipment. Then you got your harvesters, your sprayers, your fixed wing airplanes. I mean, you have a lot of players involved, uh, going back to contracting, you know, some of our, um, relationships with farmers or, uh, acres is been well, 32 years with a company like Bush beam, you know, where you’ve got, you know, Hey, they come out. They the same farmers take care of the dirt, take care of the production. And it’s an ongoing growing cycle. Yeah. That’s a win, win. It’s a win win.

Ken McElroy (14:34): Honestly, that’s a win win. When you, when you get somebody like Bush bean, that’s buying your, that you’re buying your chickpeas. Uh, it has to be,

Phil Hinrichs (14:42): It is. And it’s, uh, you know, just like us, it’s a private family, which that’s what they thrive for. They stay out of the, uh, big conglomerates, even though they are very big, they always keep it grounded. And you know, that is the satisfying part about going to work here. Yeah.

Ken McElroy (15:01): I know. I, in fact, I know whatever time I talked to you, you’re like, these are really amazing families that you’re dealing with on these farms.

Phil Hinrichs (15:08): Lots of relationships. In fact, you know, I know when I was young, um, you know, I would step out of my boots a little bit and usually the wrong way. And you know, you’re my father. That was your leader would tell you that, Hey, uh, you know, you got to read your customer, you got to understand why we did what we did. And, uh, you know, what the credit to my father was. He took me with him. Yeah. That was really, yeah.

Ken McElroy (15:32): You watch that. That’s what my dad did. Yeah. You know, I mean, I would go with these clients and I would sit there and watch him and watch, watch how the relationship. It was honestly a relationship between my father and his and his client,

Phil Hinrichs (15:46): You know, and not to go really deep on family. But, you know, we have family involved in our company and we have family. That’s not, uh, I’m lucky enough that I get to work with my brother every day and we’re a year apart. And we are really in our golden days of just having fun. We still think we’re young and that’s what makes it really, uh, a lot of fun to laugh, but you know, our children, you know, there’s other options out there. And so we’re fortunate to have one young man stick, but on the other hand, uh, our other two children, uh, are very, our growers are very interested in them because it continues to be long generational family driven, community driven.

Ken McElroy (16:29): Right. So I know we’ve talked a little bit about, you know, irrigated land versus dry land. I honestly have no idea. I mean, I know what the difference is, but when you look at those two things, you know, I, you know, they gotta be very different and how are they different and how do you approach those differently?

Phil Hinrichs (16:48): Well, first of all, you know, you know, the audience might be very interested in just values. You know, I always was too. And so when we start talking about dry land, we can be in the market of a thousand dollars, an acre on dry land. Okay. We might be in Montana, somewhere out there, and there’s a lot of acres available out there like that. And then you can turn around and you can get right in our backyard, which is the Palouse country in the state of Washington and Idaho. And you can get right to $3,500 an acre. Now the question was dry land versus irrigate. So now we’re going to step right into the mud. And when you get into irrigation, first of all, you can grow a lot of crops. You can maybe grow 50 different crops and just, you know, typically are in a Sandy soil and you’re hydroponically, uh, for, uh, watering this product through irrigation. So you’re very competitive. Now that dirt can go as high as 15,000 acre, just for water, just for that land and dirt, you bet

Ken McElroy (17:52): Get dry land and bring your geisha to it, to value add, or how does that work?

Phil Hinrichs (17:57): Well, that’s one of the windows that you look at of, Hey, when you look at dry land, is there some water rights? Okay. And does it really fit it? Okay. Is mother nature rewarding this dry land without it? The next thing didn’t we talk about the characteristics of the ground flat, moderate or steep. So obviously if you go down the Paloose, this is one of the seventh winters. I mean, there’s no other place that this volcanic, uh, dirt, the way it blew and dusted, uh, that soil we’re at 40% slope. You couldn’t irrigate anything. You hardly stay on that ground, but then you can go down and your country down in Arizona, flat as a pancake, fully irrigated. They don’t want any rain, irrigators do not want rain. Oh, really cannot control the environment that way. So it’s all about controlling the environment, keeping disease free. So that’s why,

Ken McElroy (18:52): Yeah. Cause there’s a lot of ag in Arizona. People don’t realize that

Phil Hinrichs (18:55): How much? Yeah. One of our we’re based down in Arizona and it’s our organic area. Uh, you know, the only thing I wished that you could do for me is shut off that 110.

Ken McElroy (19:08): That’s why we’re in Idaho.

Phil Hinrichs (19:10): Right. But, uh, irrigated is very interesting. I mean, the, the buyers in the irrigation, uh, window of a farmland, they’re very diversified. They’re very competitive. Uh, they know the soil, they know that the, the, uh, it’s all about the water rights out there. Hmm. That’s interesting. Well, thank you.

Ken McElroy (19:32): Let’s talk a little bit about production versus processing. You know, a little confusing to me, you know, not to you obviously what’s the difference between a processing and production.

Phil Hinrichs (19:44): Okay. In my world, you know, every day and we go to work, we have, uh, three departments, we have a processing side that’s buying and selling, uh, the production that’s coming off the farms. And then we have the production that we’re having the agronomist side of our group. That’s out there looking for farmland, looking to sell, looking to purchase and looking the qualities of it. So, uh, there’s, those are two different sides. And they’re like, you know, uh, black and white, they do not stay on the same page. They don’t follow each other at all. The production side is how the grower, how the owner makes his money. And on the PR on the processing side is how we manipulate the product that comes in to fit the recipe for the buyers and the consumers.

Ken McElroy (20:38): Okay. If I asked you, did you have a good year or bad year? You know, how, how, how do you, how do you know, like what, what determines a good year, a bad year? Because I hear this all the time with farming, you know, you know, what are the variables?

Phil Hinrichs (20:50): Well, it’s supply and demand number one. And we happened to be in a market right now where the supply is a pretty good, but the demand is high. And you know, not very op not very many times in your lifetime, do you get to walk through a high demand? Okay. On, on something, you know, the wheat business, the barley business, you know, the corn and soybean, you know, it’s just daily bread, but you know, when you get into the protein business right now, there is demand. Now on the supply side, the farmers are moving around all the time. So, you know, we can oversupply the chain and all of a sudden, you know, you don’t have the people renting apartments and you’re doing, we don’t have the PR, we have too much production and not enough buyers. So there’s a sweet spot about that. But, you know, in a, a typical answer that the audience might be more interested. You know, the grower gets a good average yield that gets them a fair return. And the market’s receptive to it with a pricing that is people that can make money today in the protein business, there is money to be made. And what’s really good. There is botique to inventors, to people that are kicking it. And, you know, in this day and age that we’re going through right now, uh, we have good supply and we have great demand.

Ken McElroy (22:19): Well, I I’m just completely, you know, cause I’ve known you a long time. And, uh, you know, it’s funny when we first met, you know, hummus wasn’t as big as it was. I mean, this was going back quite a while and I’ve watched you go like this and protein. You were telling the story today about how they’re now coming up with milk.

Phil Hinrichs (22:40): Yep. They’re going to, we’re going to see a launch coming out, uh, that, uh, milk is the new, uh, garbanzo beans, garbanzo milk. Thank you. Chickpeas out of chickpeas. And what is, what’s really interesting about that, that the audience, I want them to lend an ear to, it’s a great mixer because it has no taste. So in the bakery business, adding the characteristic and it’s also, non-gluten non allergen.

Ken McElroy (23:06): Right? Well, that’s why, that’s why your business is flying right now. Cause everybody’s eating better paying attention to what they’re putting in their bodies, the hormones, you know, and the chemicals and you’re none of them.

Phil Hinrichs (23:16): No, we’re like back in the seventies, when apartments used to put in a swimming pool, that was the checkoff of why you’re sold out. Well, you know what, we’re bringing the protein to the farmer and that’s why we’re getting the phone calls. And you know what, there’s, there’s enough for everybody out there. We just happened to have our story. Okay. Uh, and, uh, it seems to be, uh, being answered to the ingredients people,

Ken McElroy (23:44): Well, let’s go back to this garbanzo milk because what you were saying earlier was that, um, coconut milk or almond milk it, they have a carrot

Phil Hinrichs (23:53): Or they carry a taste. They carry a taste. And these tastes, when you start baking with them, it carries right into the recipe. Okay. Where, when you add a chick pea milk, there’s no, it’s, it’s a carrier, not a flavor. So it’s answering the need for the milk. Okay. But it doesn’t have any taste, so you can add anything the Baker wants to use. And that could be as deep as, uh, you know, from baby food to adult food, to any type of ingredients that milk’s being used at.

Ken McElroy (24:29): And gluten-free, and all the other things absolutely free, which is a big deal. Right.

Phil Hinrichs (24:34): It’s big. In fact, you know what, you know, I won’t want to switch gears, but you know, animals have allergens and that really bugs them. Okay. And chickpeas and protein. We’re feeding the dogs and it’s one of our best customers too, out there because there’s over 2 billion dogs. Okay. And they never complain what a customer.

Ken McElroy (24:56): Yeah. They’re eating pure man. But what I really like about that, uh, that garbanzo milk is going to be massive.

Phil Hinrichs (25:04): It’s going to be either launching that right now. Uh, it’s being manufactured, uh, out of the country and there is a factory going in right now. That’s being put together. It isn’t a quiet deal at all. Uh, it’s going to be huge, you know, you know, anything in the chocolate bars, any of the sweets, you know, when you start talking Milky ways or whatever this is going in it. Oh,

Ken McElroy (25:27): For sure. It’s all going to move that way too. Right.

Phil Hinrichs (25:30): Pure you just, this is a slice of the pie, you know, that’s what you want to be a part of the slice of the pie. You can’t eat the whole pie and you know, that’s not where you want to be.

Ken McElroy (25:39): I know. Well, that’s for sure. So let’s talk about, you know, you’ve watched this chick pea business, this protein business go like this first with hummus. Well, probably other things that I’m not aware of, but, but you know, it’s got unlimited potential. You were talking today to me about the replacement of the egg, which is really interesting, again, going to plant based,

Phil Hinrichs (26:04): Right? Yeah. One of my new audiences that I’ve really enjoyed, uh, touching base with and actually learning about them because I had no clue was the vegans. Okay. And chick pea is definitely a vegan item. You know, they over Pakistan and India, it’s big consumers of it. And, uh, so when we start talking about, uh, uh, the difference between an egg, okay, a vegan really won’t eat an egg. Right. But if you turn around and you know, audience, this is very interest, take a can of beans, any can of beans and make sure they’re chickpeas please, but you take a can of beans and drain them. Okay. And that water is called Aqua fava. Okay. Which is water and beans. Okay. And you, you just, uh, rinse those beans and keep that water two tablespoons will replace one egg. And so if you’re ever short and egg out there, you know, you can go, just grab a can of beans. So

Ken McElroy (27:08): Very big. And do you know this already? Cause this is new information to me.

Phil Hinrichs (27:13): Well, I’m certainly can be a vegan, but you know, I’ve still got my issues. You know, I’m a big guy that likes to eat anything. So I find it very interesting. You can also, if you whip it, you’ll make Marangu. And if you add sugar, you’ll make whipped cream with the same product. Very interesting. Huh. Instead of an egg, that’s very fascinating. So

Ken McElroy (27:39): You see now as the future of, you know, protein, cause that’s essentially what you’re doing. Well, I just can’t believe how, you know, it’s, it’s a, you’re a 25 year overnight success.

Phil Hinrichs (27:51): Well, you know what, we wake up and we count on the, on the inventors. And so we spend a lot of tummy temp. We spend a lot of time with universities and we happen to sleep with Washington state university. That’s an egg school and their science food science department is always trying to extract or, you know, figure out what a protein will do. Well now we’ve the opportunity now is the new protein burger burger beyond burger. I mean, that’s the name people will remember, but as you go in there, it’s a vegan burger K and, and chickpeas is, is something that’s a really good carrier of protein. Okay. And when you start looking at PS 22% protein lentils, 20% protein chickpeas, 44% protein. Oh wow. And how does that compare to beef? I just don’t know. Well, if beef is compared a lot different ways, I mean, do you know it takes 1500 gallons of water to make a pound of beef.

Phil Hinrichs (28:59): I had no idea that a cow will drink and drink and drink. You know, it takes two gallons of water to make a garbanzo plant. So, you know, just in the, the focus of, you know, yeah. Is huge. When you start talking, you know, what’s it take to grow protein. Okay. And, uh, the other thing too is, is a cow. And I don’t want to beat up on cows cause I love steaks, but the shelf life is very narrow, you know, on a chick pea, it can be seven to 10 years. It just sitting in bags waiting to be dry. It’ll stay 8% moisture in it. If you take care of it and you don’t have to be over the top, you can take care of that protein for a long time. So it’s a good product to have in your pantry because you know, when you turn it into flour, Ooh, you know, bugs attack it very easily. Okay. It’s just a very, anytime you open it, you’re done. But on a, on a dry product, you can, uh, put it in a jar, wash it. You can see if there’s a bug in it, but they really won’t damage it. So there’s some shelf life there that’s really important too.

Ken McElroy (30:22): So what does the industry look like? You think over the next couple of years, you know, cause I know you’re very active. You’re going to all these conventions, there’s a lot of conventions and things that you would go in. And I know you’re very well read. Um, you know, this is scientific, what we’re talking about. I mean, you make it sound like casual farming, but it’s super scientific. So what do you, what do you see coming?

Phil Hinrichs (30:43): Well, I, I see a couple things. Um, I see the, uh, the Cracker business that has, uh, allergens, uh, going on it and gluten problems, uh, being switched over to proteins. Okay. I’m seeing that. I’m seeing, obviously we spoke about the pet food, really a big deal. Uh, we see that, uh, spreading out better, dry or wet, you know, that’s, uh, both very important if you have a cat or that the next part of it is flour. Flour is being roasted first and then turned into flour. And then right there, what happens is you can eat it raw. But if you just grind flour, you know, Hey, read your label folks because you can’t eat raw flour. Yeah. That is something that’ll get you into trouble. And so they’re, they’re changing the environment. Hey, the ConAgra is the ABMS of the world. I mean, those people are really the, the fire behind it.

Phil Hinrichs (31:46): I mean, they’re really out there trying to make the next step because those companies don’t farm. They buy, okay. So, you know, we drive, we ride on their bus that they drive. And so I see that. The other thing that I really like a lot is when you’re on the airplane, we get peanuts. Right? Well, that’s kind of a thing of the past now that we have a mass con, but with that being said, you know, there are people with allergens, for peanuts. There’s a lot of them and it’s really a downer. So roasted chickpeas, big deal. Okay. They’re roasting chickpeas. The next thing that was just sent to me was chocolate covered chickpeas roasted. Okay. So now we’re going to go out there and play with the M M and M world, you know, but we’re going to have something that’s a little more healthy. We’re going to go. And, and we have our melt chocolate that, you know, is, is healthy, but some people don’t need it, but it is a healthy product. So it’s on its way. The other thing is, is a lot of these power bars and you know, that you like to carry when you’re hiking and whatnot. Listen, there is a ton of protein in there.

Ken McElroy (33:03): You need protein. Absolutely.

Phil Hinrichs (33:06): You can survive on protein pretty much. It pretty much can. Yeah.

Ken McElroy (33:10): So this is great, but you know, wow, what a, what a spot you’re in. This is a, it’s got incredible potential.

Phil Hinrichs (33:17): It has a lot of potential, you know, that’s one, one part of the pie. The next one is, is how do you make it work? Right. And you know, you walk slow, you don’t try to do it all. And you try to follow the trend, what we want to be as a quality supplier with good yield coming from our growers, uh, with, with, uh, typical yearly production. So we have to, we got to stay out of the irrigated area because this crop does not like water is very arid and it also doesn’t like humidity. So when we’re out there shopping for dirt and looking for farms, we’re in non irrigated and we’re also in non, uh, humidity places. So once we get to the Missouri and no closer to the Mississippi, we’re done.

Ken McElroy (34:09): Okay. Wow. So what are you working on now? You got any big deals. Cause I know from time to time, we’ve talked about investment stuff. Yeah, yeah, yeah. So, so how does that all work?

Phil Hinrichs (34:20): We have a great opportunity coming up right now. We have a facility that is a state of the art number one, K all the food, sir, uh, safety, uh, things that you need lined up on it. You need your, uh, magnets, you need your color sorters, you need your, uh, non Allergan eye, uh, things. And this is, will be a chick pea facility. It’ll cover seven States, the production, uh it’s. It has drivers behind it right now, uh, that are very interesting. Meaning and users, meaning, you know, people that are consuming your product and it’s looking for a bigger home. Okay. It’s looking for a bigger home because it, what next is, you know, we don’t know. I mean, let’s just say, uh, it’s just like ethanol, you need lots of corn. You know, if we’re just talking, canning a protein, we don’t need so many. So we’re really looking at, uh, uh, quality processing facilities that we have. We’re going to, uh, be showing this, uh, item for sale coming up in the next six months. And, uh, it’s full of it’s full of consumers and it’s full and growers. And it’s really a turnkey operation that has taken about seven years to put together. And so we’re very excited about launching that. There’ll be more stories behind that. Um, and then

Ken McElroy (35:53): Wait, people can find that on the Heinrich’s trading company.

Phil Hinrichs (35:57): Yeah.

Ken McElroy (35:58): I’ll put that up on the, on the screen. So you guys can go to there and take a look at it.

Phil Hinrichs (36:03): Yeah. Well, you know, and the best way to look at it for any investor out there is we all have a nice video of the facilities. You can understand it because we’re going to expand our wings from Washington to Idaho, to Montana, to North Dakota, we are growing organically clear down to New Mexico. So, uh, we have a really diversified and that’s what you want because you know, when you starting to talk about, you know, the, uh, protein burgers and the chick pea milk, and you know, the things that, you know, we haven’t heard enough about dog food and all those things they’re coming, you gotta be ready to go. You do you have to have a facility for it takes time as well. I,

Ken McElroy (36:48): I mean, if people just follow hummus and you know, that was on a curve like this and everything else is going to be on a curve like that, and that garbanzo milk is going to be increasing.

Phil Hinrichs (36:58): It really should be a big deal. And, and you know, when you start talking to the usage of milk, I’m sure that the acres that we think we don’t need, all of a sudden, those are going to step back up and you know, what supply and demand will drive that be a very interesting story to watch.

Ken McElroy (37:19): We probably aren’t making the dairy farmers very happy. Well, you know,

Phil Hinrichs (37:24): You’re exactly right. You know, and that’s, I’ll tell you what, my hats off to the dairy farmers, because they do work hard and they, you know, to, to milk a cow three times a day,

Ken McElroy (37:35): Dude, you could do it once. Maybe

Phil Hinrichs (37:37): Boy, I could sure. Watch that’s for sure.

Ken McElroy (37:40): Oh, Beto. This is the greatest. Thank you buddy. I appreciate it. I appreciate the convo.

Phil Hinrichs (37:46): Good luck. I just like to shout out to you, Kenny, as I’ve watched your, uh, shows and listened to your cat POS podcasts. I mean, and I can just tell you right now, um, you know, I translated into agriculture folks, you know, you can take anybody’s message and translated into what works for you. And, uh, I want to thank you because, uh, when I turned you on, you know, I have, I have a hard time turning it off and I love listening to you on the radio. That makes one. All right. Hey, that’s how you get to two. You bet ya. Thank you.

Ken McElroy (38:23): What a great episode. I hope you learn something new from today’s guest for a full show notes. Check out Ken macra.com. If you enjoyed the episode, then jump on iTunes, subscribe and leave a five star review. Also, if you can check me out at Ken Mackleroy official on Instagram for daily real estate advice, see you next week.

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