Welcome to the party, if this is the most mind-twisting winter ever on your farm. Coming off the confusion of 2008, we're all a little baffled about where crop acreage is headed, to say nothing of commodity and input prices. Just how the nation's financial crisis will play out and affect agriculture remains a mystery, as well.
One thing's just about certain, though: Some folks will make money this year. Take steps to make sure you're one of them.
"There are going to be opportunities in agriculture, with one condition: that you manage your risk," said Bill Biederman, senior vice president of Allendale Inc., a commodities firm based in McHenry, Ill. He, and other ag industry experts, spoke in January at the Top Producer Seminar in Chicago.
Biederman has his eye on the federal government's response to the financial crisis. "When you inject a lot of government money into the economy, what do we normally see? Inflation. So get ready," he said.
It's getting competitive out there, whether you're talking to bankers or landlords. "Today we can't afford to be average," said Allen Lash, CEO of AgriSolutions Inc., a financial management firm in Brighton, Ill.
"There is a growing dollar difference between the top producers and the average producers. You can't be successful long-term by being average," he told attendees.
That could point to tough decisions for some and possible reallocations of resources and time.
"Hard work is not sufficient. It's the issue of working hard but also working smart," said Paul Lasley, Extension sociologist and chair of the sociology and anthropology departments at Iowa State University.
"The problem is, the future is not what it used to be," Lasley said.
Agriculture is in a reasonably good position compared with the rest of the economy, said John Blanchfield, senior vice president of the American Bankers Association's Center for Agricultural and Rural Banking in Washington, D.C. "Banks have sufficient funds to make farm loans this year," he said, "but fundamental things have changed."
Mike Boehlje, Purdue University ag economist, sees several factors increasing risks, ranging from higher input and rent costs to shaky financial footing for suppliers.
"There is a lot of help available from government programs, crop insurance, options and futures. There's a pretty good safety net, but the world has changed. We got lethargic in risk management strategies because there's a lot of socialization, frankly, in agriculture. With risk, you at least have some potential. You want to take away the catastrophic risk," Boehlje said.
Be particularly careful when fronting money to input suppliers, Boehlje said. "You might pay cash for fertilizer and it's not delivered. There will be retailers that go down this year. If you have paid cash for inputs, you are an unsecured creditor. This is a huge issue," he said.
Whatever you do, be on the watch for new opportunities to arise.
"In any turbulent time, there is an opportunity. Let's be sure we don't get so mesmerized by the downside that we miss the opportunity. There will be more surprises, not less. There's something called luck, and there are some things we can't predict. One way to buffer yourself is by making sure your financial resources can withstand the surprises," Boehlje said.
You can e-mail Charles Johnson at email@example.com.