55 Years And Counting From The Tractor Seat

By bill whitman 

I was recently listening to a bull session at the feed store. The gist of the conversation was a young farmer talking about how much more debt he had to take on for next year’s inputs. The interest of his operating line of credit was more than last year, by quite a bit. His concern was where he was going to find the money if the price of grain doesn’t get back up where he needs it to be. Most of his audience were guys about my age and we often talked about the cost of new equipment and using money from a good year and put it into inputs to lower how much you must borrow.

This reminded me of something a FarmTuber said on one of his videos a few months ago – if you haven’t made money as a farmer in the last 15 years, you probably shouldn’t be farming. His statement kinda caught me by surprise and made me think about the last 15 years. Like most farmers I remember years more by weather than by dollars. As long as we make it another year, I’ve been good.

Further thought on the subject though made me consider the bad years. In the late 1970s and early 1980s, and then again in the 1990s. Back in the 1970s and earlier, the rule of thumb was that you lost money in cattle three out of five years and made good money two out of five years. I recall talking to a banker in 2009 and mentioned how we approached the cattle business. He told me that today’s lenders would no longer carry losses over the bad years. Lenders now promote “risk-management” and have most ag-related businesses transitioned already. I know this for a fact as most feedyards purchase the commodities for each group of cattle brought in on the very day they’re purchased. They are required to secure the margin by purchasing the commodities and contracting the cattle as they are received. I know grain elevator managers who have lost sleep when they haven’t sold everything brought into their elevator during each day’s business.

Don’t misunderstand, “risk-management” makes sense to me and I do think that most years it is the best way of running the financial side of our farms and ranches. Where I have difficulty is when we’re expected to adjust the costs to the point it hurts the condition and production capability of our livestock and crops. My grandpa used to say that you can’t starve a profit out of anything. I relate the same concern when our lenders have us cut back on taking care of and building our livestock and land. I think most of us know that we need to improve our livestock and land each year. I do understand mitigating our losses by using alternative resources in a tight year. Truth is, we should probably be doing that in the good years as well.

So, I imagine we’ll all be tightening our belts when looking at the cost of operating and new equipment interest rates this year. It also will make us work extra hard on getting the very best price for our livestock and crops available in this year’s marketing cycles. There are some marketing services that have good performance records over several years. When developing your marketing plan for 2024 maybe you should look at these services more closely.

Finally, if younger farmers are worried about a year of higher interest rates squeezing them, what happens when we truly have a bad year?

IndianaAg@bluemarble.net