Wow! The year 2009 is just flying by with schools, conferences, farm work and events at the dairy creamery. At each of my stops on the road, inquiring minds are interested in the state of the economy from an agricultural and general economy standpoint. Well, here is the halftime report for agriculture.
There is no doubt that U.S. livestock industries are suffering. The hog industry is mired in a long-term economic slump. The media hype related to the swine flu, officially called H1N1, was devastating to many. A producer on my banking school panel indicated his swine buildings are vacant because the current economic environment would further hinder farm performance and deplete working capital.
The dairy industry economics is following the lead of the hog industry. Larger, more financially leveraged businesses are losing up to a million dollars a month. The smaller dairies are facing similar struggles and many are questioning long-term viability.
The poultry and beef industries have issues, as well, because costs are high and demand in certain segments is facing economic turmoil.
The grains sector across the country is facing weather, input cost and bottom-line margin issues. Land values in many areas of the country are softening with more properties on the market and evidence of “no sales” at public auctions. Lenders are becoming more conservative in underwriting standards related to collateral and cash flow. Some bank failures are starting to occur in farming and rural areas.
As the recession continues, unemployment rates may exceed 10%. However, if you count discouraged and displaced workers, the level is already above 15%. With 75% of North American farms and ranches depending upon non-farm revenue as a cash-flow source or supplement, this could be an issue later in the year.
WHAT CAN YOU DO?
In volatile, unpredictable times, there are things you can do to help, at the least, ease your mind. These include:
- Develop an emergency fund of six months of income at a minimum, and preferably nine to 12 months of income. The latter is important for couples with a high debt load or uncertainty in jobs. Put away a little money each month.
- Pay off consumer debt, targeting high interest rates first. Also, some recommend paying off smaller debts first to build momentum and a sense of success.
- Limit credit cards to two or three, and keep them in a location that is difficult to access to reduce impulse spending. Pay off the entire balance monthly to avoid high interest charges.
- Use cash instead of credit cards. Many people are more reluctant to spend cash than charge on credit because they can actually “see” the money being spent.
- Teach your children financial responsibility. Stress the importance of saving and personal money management by walking the talk.
Dave Kohl, PhD., Corn & Soybean Digest trends editor, is professor emeritus at Virginia Tech. He's published four books and over 500 articles on financial and business topics. You can reach him at firstname.lastname@example.org.