55 Years And Counting From The Tractor Seat

By bill whitman 

 I recently read about income forecasts in agriculture for 2025 and 2026. The smart guys are predicting marginal profits in 2025(?) and declining profits in 2026. I really worry about data being interpreted in a way that defies logic. I really don’t know how the additional subsidies the USDA will be giving out in 2025 will be distributed, but I maintain that subsidies are not the solution, but a Band-Aid. I also believe that suppliers will be the first to take a cut in new subsidy payments.

It seems logical that we take a very academic approach to our finances setting aside emotions and being very rigid with our financial decisions. I’ve been watching good, successful farms making decisions based on a simplified business model. If there is no ROI (return on investment) reasonably assured, you don’t spend the money. To survive these years of negative income on the farm, you adopt this model.

There are three parts to our production “pie” for grain farmers. Land costs, look closely at cash rents and land purchases. There are always opportunities in a down environment. Can you renegotiate cash leases involving the landlord into benefiting more when profits are available and sharing in the belt tightening when needed. Simplify inputs. To the extent possible stick to the basics and target average yields instead of reaching for “super yield” (I saw that phrase recently). There are some lower costing seeds available from reputable seed dealers. I heard Matt Griggs mention that Beck’s had a seed that produced a “decent” yield and was lower priced that others he used this year. Next is equipment and storage. I imagine that Farm Service Agency will be offering 0 percent interest on grain bins on a 10-year note. When that deal reappears, it seems like a good investment. Just this fall we saw a lot of farms selling corn at $3.90 a bushel and soybeans around $10 a bushel price. A scant 2-1/2 months later, corn is at $4.35 and $11.20. It doesn’t take long to pay for storage with price swings like this.

Now I want to speak about equipment costs. I’ve watched good farms lower equipment costs by slightly downsizing equipment in exchange for more seat time. Others need to look at lease costs because there are now times when buying out the lease will save you money and put an asset (albeit depreciating) onto the financial statement. What’s the tradeoff? Maybe you don’t have the latest in technology and comfort but if you have taken care of the equipment, you know what you have. In each decision you do what makes academic sense.

The previous paragraphs were speaking toward grain farmers. This is not to exclude livestock farmers, who happen to be enjoying a pretty good, sustaining market. Despite how bright the future appears, try and take advantage of the extra money to invest in your livestock. Keep heifers that are breeding prospects to expand your herd to provide for a larger inventory when prices are moderate. Remember, cash in the bank is a depreciating asset. Put your profits to work. Swine and poultry farms need to be readdressing their agreements with their partners. I suspect that both swine and poultry will enjoy the same market increases as cattle have because beef is starting to stretch the pocketbooks of the consumer.

This will be my last article this month and this year. This means we find ourselves in December, a month that has such significance in so many ways. Though there are fewer who understand what happened Dec. 7, 1941, over 400,000 Americans gave their lives because of the attack which brought us into World War II. Then there’s Christmas, a celebration of a birth that changed the world and gives each of us hope. It continues to change my life and allows me to grow each day into what I hope is a better person. And finally, Dec. 31 is when we can either celebrate a good year or put a bad year behind us. Either way, each of us can look forward to a new year with new opportunities.

IndianaAg@bluemarble.net

Horse Sense: You can’t see the sunrise looking west, though many try.