Farmers headed to the fields this spring facing a third consecutive year of revenue declines. The USDA projects 2016 net farm income at $55 billion — a 56 percent decrease from ag’s banner year of 2013.
Before you jump head first off your grain leg, a little perspective: 2013 was amazingly good. So was 2012, despite the drought. Basically, 2006 through 2013 was a remarkable era in farm country.
So, what’s a crafty ag professional to do now? First, don’t panic. Secondly, consider these recommendations.
Lose the commodity mindset: Thanks to the Internet and affluent consumers, there’s a vast marketplace for differentiated food products.
A beef farmer in Montana can legitimately earn a living selling organic, grass fed, gluten-free, certified humane, brushed by his daughter, blessed by a rabbi, spoken to in Swahili, steers named after British poets, to customers in Boston.
Bonus — you can charge a premium for non-mass-produced food! Remember, commodities are sold on price, unique products are sold on value proposition.
Double down on business practices: Farming is a business and a lifestyle. Unless you run it as a business, there will be no lifestyle.
Have you met with your lawyer to update your estate plan? Are your insurances in place, guaranteeing adequate coverage should catastrophe strike?
How is your banking relationship? You need a financial partner you can count on when margins are tight. There’s always another bank who’d love your business!
Three years into decreasing crop prices merits a meeting with your landlords. (And that’s painful for me to say because I am one!) Yes, cash rents and land prices have downside on the horizon.
Now is an excellent time to strengthen partnerships with your vendors. Three years ago, a few dollars of input costs could blow in the wind. Today, that could be your profit margin.
Shake hands with the reality of agricultural production: Hugely profitable cycles in agriculture are the exception, not the rule. I remember the boom years of the 1970s, although it was from afar. We were a small dairy farm, without significant assets and limited grain production. But I remember the boom.
More importantly, I remember the bust of the 1980s. High interest rates, huge surpluses, bankruptcy auctions, the PIK program and imploding land prices.
As an industry, we’ve been way worse off than we are today.
Agriculture isn’t a bad business. It’s a commodity business. From copper to corn, cattle to crude oil, commodities are cyclical. It’s the reality of what we do.
The bright side: They say “a rising tide floats all boats,” which really means, “it’s easy to make money when everyone’s making money.”
Well, the tide’s out. You can long for the good old days or you can use this downturn to make yourself stronger. If it’s any consolation, I’m pulling for you!
Damian Mason is a professional speaker, entertainer, writer, businessman and farm owner. Learn more at www.damianmason.co