Sure, Volatility is Tough but it Offers Opportunity

November 15, 2017 02:10 PM
 
Sure, Volatility is Tough but it Offers Opportunity

If you’re ready to see 2017 in the rear-view mirror, you’re not alone. A lot of farmers, mired down by low commodity prices and a frustrating production season, are ready to close the books on this year and move on to 2018.

The good news is that while farmers will continue to experience a lot of market volatility in the year ahead, they should also be able to find some good opportunities, says Tom Sloma, senior vice president for ag lending at Farm Credit Mid-America.

“There's a lot that happened in the protein sector, a lot of expansions on that side,” Sloma says, for example. “Ag is cyclical so we'll go through these cycles, and now it's more about how we look forward [and capture] what the opportunities are ahead.”

Earlier this week, Farm Credit Mid-America hosted its 2017 Insights Conference to provide its farmer customers across the states of Indiana, Kentucky, Ohio and Tennessee with some business management and financial information to position and prepare their farms for the year ahead.

It’s no secret that farmers who have a good handle on their financials will be in the best position to take advantage of opportunities as they present themselves—whether it’s capitalizing on a specific market price or being able to buy a piece of ground the neighbor decides to sell. Farmers who know all their costs—fixed, variable and family living expenses—and can spell them out for their lender will fare the best.

“You have to know how to pick up a grounder to play baseball, and you have to know your financial numbers to have a good farm business,” says Keith Lane, executive vice president for specialty lending at Farm Credit Mid-America.

“It can’t be a sometime thing. You have to look at your numbers at least monthly to know how to adjust throughout the year,” Lane adds “That’s just as important as scouting your fields for pests. Know what you have to work with at any given time as you go through the year. If you’re not already doing that, that’s a good first step in planning for next season.”

Lane says he realizes that some farmers may not know where to start the assessment process to clearly identify those costs and recommends talking with an ag lender.

“A good ag lender can sit down with you and help you figure out the numbers you need to put together,” he notes.

He adds that farmers hoping to work through local seed or crop-protection providers for financial resources in 2018 may find those resources have dried up.

“Money isn’t as readily available from a vendor as freely as it was two years ago—you may have to move to a commercial bank or farm credit system.

“There is money available for folks who are credit worthy,” Lane says. “The keys there are get your financial materials together, have a plan ready for next year and know what you need so you can articulate that to a creditor. Communication is key to most things and this is true, too, for your financial situation.”

In the process of communicating with your lender, try to be open and forthright in sharing information, Sloma adds. "We want to ensure farmers are successful, and it's not only about what you are doing in the next 30 to 60 days or maybe year, but it's talking about where you want to take that operation in the next five years and who all will be involved in the operation," he says. "So really, we're taking more of a longer-term view of what farmers are doing and helping them strategize and build a successful plan as we work through this down cycle in the ag economy."

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Comments

 
Spell Check

Don Larsen
Wayne, NE
11/15/2017 08:23 PM
 

  I have been farming since 1975 and the short term opportunities are non existent now. Corn was $3.00 a bushel in 1975 and a new 100 hp tractor was $18000. A quarter of land across the fence from me just sold for $7500/acre. If your banker is willing to loan you the money for this purchase, you better find a new banker. Corn at less than $3.00, $80/acre land taxes, and deteriorating working capital do not fit this scenario.

 
 
Craig
Kearney, NE
11/16/2017 06:28 PM
 

  You are dead on Don. Commodity prices simply do not support the prices of anything that we in Ag must spend(rent, taxes,machinery prices, crop inputs, etc) to conduct our business. And there is nothing in sight that is going to increase commodity prices. The USDA forecasts prices in this range for the next 5 years, and barring an extreme weather disaster, they are probably correct. In the 1980's, $500 calves couldn't pay for $400/acre pasture, so I'm not sure how $850 calves are going to pay for $2000+/acre pasture. And $3.00 corn didn't pay for $1000/acre land, let alone land at $7500/acre. There is a massive, low interest rate fueled, bubble in Ag, and at some point it's going to explode. Booms in Ag always lead to busts. And the busts always wipe out all of the money made in the boom. History is going to repeat since few learn from pasr mistakes.

 
 
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