Help to Weather Turbulent Times

March 9, 2015 12:00 PM
Help to Weather Turbulent Times

Experts share how farms can advance with caution during the 2015 Top Producer Seminar


Producers, market analysts and business experts gathered for three days of education and networking at Top Producer Seminar held Jan. 21-23 in downtown Chicago.

The event with the theme “Chart Your Course to Profits” attracted more than 1,000 attendees, including 720 of the nation’s largest producers, representing about 4 million acres.

Read on to discover some of the top takeaways from the conference as well as major trends in farm business.

Thank You, Sponsors
Top Producer thanks its sponsors for making this event possible. Premier sponsors: Advance Trading, Apache Sprayers, BASF, Bayer CropScience, Cargill, Case IH, Dow AgroSciences, DuPont Pioneer, ESN, Farmers Business Network, Firestone, John Deere, New Holland, Top Third Ag Marketing and Verdesian. Co-sponsors: CliftonLarsonAllen, Conservis, The Gulke Group, K-Coe Isom, Soybean Premiums and Wyffels Hybrids. Supporting sponsor: FarmLink.


Global Economy Enters “Uncharted” Territory

The current state of the global economy represents something producers haven’t seen in the past.

Power Hour Noon Logo“To have the U.S. on fairly solid ground, at least compared to where we’ve been, and have most of the world economies go into recession is a little uncharted ground,” explains Mark Jensen, senior vice president and chief risk officer, Farm Credit Services of America.

The U.S. is on the tail end of a 30-year downward interest rate cycle, and Jensen says his company is encouraging people to lock in rates.

In Europe, the Swiss have “basically disconnected themselves” from the euro, and it is likely Europe will implement some form of quantitative easing, Jensen notes. Meanwhile, in China, growth rates have slowed to between 7% and 7.5%, though it’s possible growth is as much as one point lower.

In light of those economic realities, farmland values are one point of focus at Farm Credit Services of America. Investor purchases have given way to farmer purchases of land in the past four to five years. It’s unclear whether investors will re-enter the market if land values fall in the coming years, Jensen says. 

All industries are marked by cycles, yet Jensen says farmland is on sturdier footing than the housing market before the 2008 mortgage crisis, as more land has been financed with cash.  

Net farm income is off between 20% and 30% from recent highs, which has implications for rural America. Some Corn Belt states are seeing an economic slowdown. In Nebraska, for example, metro job growth is strong, but in rural areas, it is off a little bit.

By Sara Schafer

5 Ways to Think Beyond the ‘Now’

The world is changing, as is agriculture. One key trend is an obsession with data. “Data analytics has a long history of transforming industries,” says Ron LeMay, chairman and CEO of FarmLink. He provides these five keys for taking advantage of future opportunities.

Embrace Change. “I have not seen one company that has decided to resist change and succeed,” he says. His advice is to see change as positive.

Increase Capital Efficiency. Underutilization of machinery minimizes returns, LeMay says. For instance, on average, a planter is used 10% of the year.

Get Granular With Scope. With a focus on knowing more about a farm, LeMay encourages producers to dig into the details. “Challenge yourself to make decisions at a granular level,” he advises. 

Master Actionable Data. Actionable data are different than Big Data, LeMay notes, because they require a large scale of information, quality controls for collection and tools to analyze small areas. “If you use data effectively, you will have an extraordinary competitive advantage.”

Trust But Verify. “Even people you trust can be wrong,” LeMay says. Instead, he says farmers should become engaged with data to understand reality. 


Drone Swarms Head for Heartland

The future of agriculture likely will include swarms of drones performing in-field tasks once done by large machines. That’s the assessment of David Hunt, with Ireland-based Agrilarity, who spoke during the 2015 Top Producer Seminar.

He points to a recent announcement that Intel has created a chip enabling drones to avoid obstacles. 

Meanwhile, drones also are capable of flying themselves and have become increasingly less expensive. For example, a drone that cost $700 in 2008 couldn’t be sized to the small level of today’s machines. Today, a $700 unmanned aerial vehicle (UAV) can get from point to point on its own and be equipped with a camera.

Beyond drones, more disruptive technology is likely on the farm, driven by sensors, Hunt explains.

“Why is it so important to digitize agriculture? First you digitize, then you analyze, then you automate.”  

By automating tasks, producers can focus on projects of greatest interest to them.

2015 Policy Focus Areas for Obama and Congress

Trade, taxes and the Keystone XL pipeline are among policy issues that could affect U.S. agricultural producers in 2015, says Roger Bernard, policy analyst, Informa Economics. 

Based on the president’s State of the Union address, White House priorities include a focus on middle-class economics, Bernard notes. 

“He made it clear that he’s not going to go along with everything the Republicans want to do,” he says. 

Other points of interest for the president this year will include:

  • Spending: $235 billion in new spending has been proposed
  • Taxes: Hike cap gains rate, new inheritance taxes
  • Keystone: Willing to give some if policy has a broader focus
  • Trade Policy: Push for Trade Promotion Authority (TPA), Trans-Pacific Partnership (TPP)

Meanwhile, Bernard expects activity in Congress to include work on the federal budget, which arrived in timely fashion from the president this year and will likely include crop insurance changes to premium subsidies and other areas, limited health care reform, energy, trade and transportation spending, among others.  

“Set goals and reach them one step at a time. A good attitude will make a difference.”

Gary Jobson, ESPN sailing analyst, U.S. Sailing president and America’s Cup veteran. 


Why More Producers Will Become Hedgers

Most producers don’t hedge, but Dave Fogel of Advance Trading thinks they will eventually. 

“Hedging to me means I have limited risk,” Fogel explains. “When you wake up in the morning, you should be OK with price no matter what happens.”

Grain elevators already understand the principle and are often required to hedge under state law. That’s reflected by the fact that elevators don’t care how the price of corn moves, Fogel notes.

He recalls farmers in the past who became nervous after someone forecast $2.75 December corn futures at harvest. At the 2015 Top Producer Seminar, Fogel says, he’s heard analysts predict $6 corn and sub-$3 corn.

“I’ll bet you one of those guys is going to be wrong,” Fogel cautions. If someone forecasts prices, he says, ask for the past 10 years of their trading statements. Alternatively, producers can identify experts to manage risk.

“It’s about protecting your bushels; it’s not about predicting,” Fogel says.

He points out the challenges producers faced during the 1980s, followed by the high prices they experienced from 2008 to 2012. It’s impossible to know whether good times will return, so farmers need to prepare accordingly.

“It’s very, very possible to grind out a good profit every year,” Fogel notes. That was true even in the days of $2-per-bushel corn.

To achieve that goal, producers can hedge effectively by understanding how marketing tools work, using crop insurance and learning about cash markets and sales, Fogel says. 


Overheard on Twitter at #tps15

@BoshartDavisAg: “#ProudDaughter My dad 1 of 3 finalists 4 Top Producer of the Year. #tps15” 

@colbyhunt: “Never been a more exciting time to be in agriculture, but it’s gonna be weird as hell. –Dr. Lowell Catlett #tps15” 

@rjbardsley: “Chart your course is the theme for #tps15. All about the right tools. @topproducermag” 

@broadbentag: “‘The landscape is littered with those that resisted change in business.’ Ronald LeMay” 

@grantkevin13: “Exciting to see a good mix of both older and younger producers at #tps15. Our future is in great hands!” 

@TomFarms: “We attend seminars like #tps15 to help our team grow more than just crops. #TomFarms” 

@glen_newcomer: “Large crowd at #tps15 in Chicago. Great information to take home.” 

“We live in a culture of opportunities.”

—Rocky Bleier, four-time Super Bowl football champion and Vietnam War veteran

Maximize Your Profit in Lean Years

Producers can maximize profit in lean years by divvying up farms into three categories, explains Chris Barron, an Iowa producer and Top Producer columnist. 

“How valuable is it to keep the farm you know isn’t producing?” Barron asks. Rather than becoming stuck, a producer with 10 farms might align each location into one of these columns:

  • Upper Third: High productivity, consistent, correct scale
  • Middle Third: Breakeven, medium productivity, some consistency/location/scale
  • Lower Third: Lower productivity, inconsistent, poor location or scale

You can then adjust or remove certain locations from the operation based on returns. 

A live “U.S. Farm Report” Marketing Roundtable taping features Dan Basse of AgResource (left), Alan Brugler of Brugler Marketing & Management, host Chip Flory and Mark Gold of Top Third Ag Marketing.


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