55 YEARS AND COUNTING FROM THE TRACTOR SEAT BY BILL WHITMAN The very first time I received money for baling hay for a neighbor, Mr. Hann told me, “That should be the hardest money you ever earn”. Over the years I have thought about that encounter many times. Of course, he was referring to saving part of it and earning interest on the deposit. A couple of years ago I was talking with a bank economist about the large numbers farmers deal with these days. He said, “Farmers and ranchers need to focus on the margins, not the gross dollars”. To simplify the meaning behind this, I know a farmer who handled over $900,000 one year and paid taxes on less than $25,000. We all know how accountants juggle dollars on a balance sheet but the reality is that we make what we can put in our wallets at the end of the year. In the good years, most of us will either upgrade equipment or secure additional land. When I spoke to an old employer of mine recently who was no longer a dairy farmer but moved into all grains, Dan shared, “the one thing I learned farming is that you have to squeeze every penny to survive”. I’m sure we all have regrets about financial decisions we’ve made in the past. In the late 1970s we had a spectacular year where soybeans sold for over $12 a bushel. There was a frenzy of new equipment purchases and expansion of farms. The cash rent went higher, equipment cost more, and inputs shot up. The following 2-3 years saw the price of grain drop to earlier averages but so many farms still had the expenses of expansion, equipment payments, and inputs went down very little. By the early 1980s the government was providing programs for dairies to exit the business as well as banks and other investors calling notes on countless farmers and ranchers. Over the last 3-4 years, the American farmer and rancher has made money. I’ve watched as younger farmers have bought equipment, and built bins, in short, spent money. That said, I can’t help but remember the old axiom, ‘history will repeat itself and those who don’t learn from it will suffer the consequences’. If there’s one thing I’m sure of it is that there are tough times ahead. The times I speak of will result in a financial strain unlike anything the younger generations have known. As alluded to previously, so many factors go into what we purchase as inputs and receive for our crops and livestock. International trade, our own government’s use of our products for humanitarian and political purposes, not to mention the influences of weather to not only our farms and ranches, but also those in other countries factor. I read somewhere that Brazil now produces more corn than the United States which may take away some price supports. I think we need to encourage our younger farmers to plan on tighter margins and use some reasoning to determine the effects the rest of the world will have on the year. And no matter what someone says, use the adage, “if it looks like a duck, walks like a duck, and quacks like a duck… it’s probably a duck”, when making decisions. In later articles I will identify my reasoning and how it has affected farms and ranches in the past. In the meantime, take care of the pennies and the dollars will take care of themselves. IndianaAg@bluemarble.net |
