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Business done in 2008 might be the new ‘normal’ for farms

By ANN HINCH
Assistant Editor

INDIANAPOLIS, Ind. — In 1989, a group of small seed companies met to create an organization that would represent their interests. Twenty years later, the Independent Professional Seed Assoc.

(IPSA) convened in Indianapolis for a watershed convention, sponsored by some not-so-small names: Dow AgroSciences, John Deere Credit, Bayer CropScience and BASF, to name a few.
Since the theme was “Back to the Future,” keynote speaker John Phipps – an ag journalist, engineer and farmer – was charged with examining whether ag’s future will go back to what it was before last year, before the roller-coaster of futures and the continuing hike of input costs.

“If you were like me, you were so glad to celebrate Jan. 1, 2009, because it meant 2008 was over,” Phipps said to his audience last week. But, quoting a farmer friend, he added, “You know what scares me? What if (2008) is normal?”

He also pointed out the economic problems the country and world at large are facing are seeping into agriculture. Farmers have seen themselves as outside the “real” economy for a long time, he said.
“We thought we could hover out there and not see this touch us,” he said. “There is no more outside world.”

Full-time farmers are watching families in other industries losing jobs, and some part-timers are losing own off-farm jobs. Phipps, who also studied economics in college, sees a potential national unemployment rate of 10 percent on the horizon, as well as an under-employment rate of around 17 percent.

He said this may culminate in late 2010 as the nation struggles to absorb the deficit left by the Bush administration as well as the cost of the stimulus package President Obama wants Congress to pass. He said he is basing this on expert opinions he is reading.
“It’s going to look pretty pathetic, whining about our LDPs when there are people who have no homes,” Phipps said.

He added that agriculture, however, is facing some of the same sorts of economic problems, such as enduring global competition on food supply and pricing. Even large companies are having difficulties – he pointed out John Deere slowed exports to Eastern Europe and Russia in late 2008 because it was becoming harder to secure letters of credit and ship equipment.

Despite this, ag is doing better than many other industries, and Phipps said this can help the country eventually recover. He described farming as “the backbone of America” and spoke movingly about the industry needing to carry the rest of the nation on its shoulders – as it has done before in hard times – until the entire country can flourish once again.

Reconnect and repair

As farm business owners, Phipps said he and his son have determined they want to approach the future with better people skills. Though technology is often cited as the main key to economic survival and growth, he believes it lies in rebuilding trust in business.

“What’s happened in America … the real event that has occurred has been a shattering of the bonds of trust in our commercial communications,” he opined.

Phipps said it seems people are quicker to anger these days and believes it’s partly because of the “in your face” tone of communication in which business and media engage – and that the “angry” response is more likely fear.

For example, he said some farmers and seed company representatives get upset when people voice skepticism or worry about genetically modified seeds, instead of trying to understand the source of the questioning. Perhaps the response is less upset at being doubted, and more the fear of losing business.
First, he advised listening more and talking less. “I am a terrible listener,” he admitted, but said he is trying to listen more closely to the worries voiced by his landowners, for example, and even competitors.

Second, he advised keeping promises made in business. If a farmer has contracted to buy fertilizer and the price goes down, it may be better to pay the original price, to preserve a relationship with the supplier. It shows the farmer understands the supplier’s financial problems and it creates trust, which makes for better future dealings.

Third, he said farmers should revise their definition of “community.” In the past it’s been geographical – neighbors and club members, fellow churchgoers, made up most of one’s business contacts. With globalization and the Internet, “community” now may be more about common interests – even in the business world.

For instance, Phipps’ son – and business partner – made friends through an online game during his leisure time. Phipps said he thought this had nothing to do with business, until one of the friends lost his job. One of the other gamers – who lives overseas, in Australia – was able to put that person in contact with someone to help him find a new job.

“Don’t tell me that the idea of ‘neighbors’ is gone,” Phipps said. “We’re just going to build them in a different way.”

He said anytime farmers have a chance to get together somewhere other than just at the fence – at a conference, a roundtable, a convention – they should, to talk with people in other regions and learn.

Speculation

Phipps believes there needs to be some sort of resolution on fertilizer pricing before late March. He said the chemical industry has “grossly underestimated” the willingness of U.S. farmers to buy up inventory for their fields and believes they may simply plant more soybeans and less nitrogen-hungry corn in 2009.

He speculated maybe later this year, Americans will get tired of investing in no-interest T-bills and turn once again to stocks with attractively low prices, thus boosting the stock market. He suggested America should extract itself from the rest of the world as much as possible and concentrate on rebuilding itself before reaching out to help others again.

Globally, Phipps said China, which has eagerly funded U.S. debt until now, is pulling back because Americans have become a “nation of savers” compared to our previous spending.
He said China is closing factories every day, but also has been steadily buying soybeans and pork to feed its people in coming hard times.

He said India – which not long ago was one of the world’s two fastest-growing economies – is also in financial trouble. The country has political problems with Pakistan and, unlike China, is a democracy whose economy cannot be controlled by one ruler.

1/29/2009