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| Farmers remain cautiously optimistic |
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Lindsay and I spent part of the past week in Louisville for the National Farm Machinery Show, where, quite honestly, I expected some measure of doom and gloom. Given the challenges facing industrial concerns and the manufacturing segment in specific, I came to the Kentucky Fair & Expo Center prepared to face an onslaught of pessimism and complaint.
I couldn’t have been more wrong. The phrase I heard in almost every corner, and from almost every person I interviewed was “cautious optimism.”
As I’ve written before, I think people in agriculture are by and large optimistic people. I often joke that farmers look at a situation two ways: either “it could always be worse,” or “it’ll be better next year.”
While generally said tongue firmly in cheek, there is no small amount of truth in that statement, as I learned at the NFMS. From farmers to dealers, from equipment manufacturers to other members of the agricultural media, people were looking forward to better days just around the bend.
To what do we owe the optimistic bent with which farmers came to learn about the latest and greatest in agricultural equipment technology? I firmly believe the basic attitude of folks in rural America is positive, first off. When you live and work on the, land, when you tend the crops and reap the bountiful harvest of nature, when you raise and enjoy productive livestock, you have a lot to be happy about.
Certainly there are innumerable challenges, heartaches and discomforts incumbent on those who are responsible for feeding, fueling and clothing the world, but the fruits of agricultural labor are, so to speak, extremely rewarding.
Warm and fuzzy feelings aside, does there exist any real evidence with which to back up this mood of anticipation? There may be. Data from the USDA suggests that farm income should be acceptable in 2009.
Even with the economic bearishness pervading Wall Street and Washington, the agriculture sector is still doing better than average. The Economic Research Service reports 2009 net farm income is forecast to be $71.2 billion in 2009, down $18.1 billion (20 percent) from the preliminary estimate of $89.3 billion for 2008. Still, $71.2 billion would be 9 percent above the average of $65 billion earned in the previous 10 years.
In other words, we’re still doing much better than average, all things considered. Furthermore, when looking at the long-term projections, USDA economists suggest that although net farm income initially declines from the highs of 2007 and 2008, it remains historically strong and rebounds to near-record levels in the latter part of the projections. So, for the next decade, prospects are reasonable for a healthy bottom line in the next decade.
I had an interesting conversation with some pork producers at the Ohio Pork Congress last week about this subject, particularly what producers thought about the “fallout” of producers from the industry in this economy.
One gentleman put it to me straight that while certainly some folks would decide to retire or sell the family farm, we won’t see the mass exodus of producers we saw in the 1990s. Producers have by and large “learned their lesson,” as another put it, both the lessons of the 90s in the hog industry and the lessons of the 80s in the rest of the industry.
Balance sheets, according to experts we heard at a Farm Credit Services forum in Louisville, are much healthier in agriculture and rural America than they’ve perhaps ever been, and the debt-to-asset ratio in our segment of the economy are exceptional for maintaining a successful cash flow and equity position.
Now, my glasses aren’t rose-colored, so I know that there will be winners and losers regardless of the economy, but I do have an expectation that there is a tremendous amount of opportunities ahead. Following the “boom” and “bust” cycles of American history, some of the biggest and best moneymaking opportunities came shortly after some of the worst fiscal bloodletting.
As I tell folks when I speak on this subject, my advice for the next two years is to keep your head up, your eyes open, your butt covered, and your banker happy. The first three may be easier to do than the fourth, but if you do the first three successfully, you and the banker might both be a lot happier in the end. Happy hunting, and enjoy the chase. |
| 2/25/2009 |
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