My summer travels are winding down after many schools, seminars, webcasts and, yes, good old-fashioned work on our dairy farms in Virginia. The following are some interesting perspectives and views I came across through interaction with many of you and on-ground, front-line intelligence.
An 81-year-old man paid $8,000+/acre for good farm ground in the Midwest. He boasted that this is a safer investment than the stock market, which can change 1,000 points in 10 minutes. He said, “I am investing in my son-in-law’s future.” This scenario is playing out across America as Main Street remains skeptical of Wall Street and Washington.
“I keep 70-90 days of my revenue in cash in the bank” was another producer’s strategy. “It is about return of investment rather than return on investment. I never want to be shut down or miss meeting my expenses if the credit markets lock up again. Also, it is opportunity cash to use when the right investment comes along!”
A producer on a panel indicated, “I do all the standard financial documents and trend analysis, cash flows and business plans and have proven net worth. My lender does not seem to care and I have to pay the same rate of interest as the deadbeat farmer down the road.” What is wrong with this picture?
Another producer indicated that if taxes go up in 2011, he will scale back by cutting labor and capital spending and enjoy life more. I wonder if Washington is listening.
Corn prices are directly correlated with oil prices. Approximately 74% of the change in oil price is influenced by changes in the value of the dollar.
Instead of being all about revenue, it is really all about margin, which requires a plan concerning revenue, cost, and interest rates.
One in seven chickens leaves our country. One in 10 hogs is exported along with a large percentage of beans. If the rest of the world cuts U.S. agricultural exports off, the recession comes to the Midwest and others in these industries.
This is just some food for thought from my recent Road Warrior travels.
Editor’s note: Dave Kohl, Corn & Soybean Digest trends editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at sullylab@vt.edu.
