What is in this article?:
Advice from a non-ag outsider with strong business credentials who regularly critiques his business plans has been critical to improving his farm management, says Jim Kline.
Kline’s eyes were opened to the benefits of an outsider’s perspective when he served on the board of directors of a non-ag company with $30 million in annual sales. “I learned a lot from that,” he says. “I should have paid them for the experience.”
When the company’s CEO retired, Kline asked if he would serve as a sounding board for his farm. “I think in agriculture, especially if you grew up in it, you have to think outside the box, especially financially,” he says. “My advisor asks tough questions. Doing something the same way you always have just isn’t good enough.”
In recent years, Hartford City, Ind., farmer Jim Kline has focused on improving productivity and paying down debt to seize opportunities if, and when, times get tougher.
Beginning in 2010, as good times for corn and soybean producers continued to boost farmland prices and rents to new highs, Jim Kline took a hard look at the go-go atmosphere and prepared for a downturn.
“I have tried to pride myself as I get older in not becoming overly conservative, but when you see land prices and rents go up as fast as they have the past few years, it tends to fall off relatively fast as well,” says Kline, who farms 8,000+ acres near Harford City, in east-central Indiana.
As he looked to the future, Kline, 56, turned to lessons learned from the 1980s farm crisis. He began paying down debt, trading machinery less often and slowing down his farm expansion. “Instead of buying land, bidding up rent and buying new machinery, we held back,” says Kline.
Today, Kline carries “little” land or machinery debt.
“My crystal ball was a bit fuzzy because I was early in backing off,” Kline admits. “But I farmed through the ‘80s. Within a couple of years, you can lose a quarter of your equity. We have been on a run like nothing I have seen since the ‘70s. I think we need to brace ourselves.”
Although Kline thinks tougher times are ahead, he claims no special insight on how the farm economy will play out in the coming years.
Like what you're reading? Subscribe to CSD Extra and get the latest news right to your inbox!
Some university ag economists see a bleak outlook. For example, a recent “worst-case” scenario outlined by Iowa State University Ag Economist Dermot Hayes shows corn prices as low as $4.27 in 2013, $3.85 in 2014, $3.41 in 2015, $3.12 in 2016 and $2.89 in 2017. Worst-case soybean prices were projected at $9.69, $8.89, $7.85 $7.09 and $6.55 for the same years.
“I think we could spend a lot of time where “4” is the first number for our corn pricing opportunities,” says Kline. “That doesn’t work very well at current land costs. Now that we have paid down our debt, we can weather the storm, no matter how long it lasts.”