The year 2014 has truly been a time of transition for the agricultural industry and rural areas. While challenging, there will be more opportunities to succeed in agriculture in the next decade than the last 30 years, but there will also be more opportunities to fail. A game plan including resiliency and agility will be the themes for 2015 and beyond for those moving to a higher level of management in the industry of agriculture....More
The reality has set in that grain prices, cash flow and profit margins will be modest at best. Whether this part of the cycle correction will be one, two, or even five years or more in duration, farmers and their lenders will have to manage through these economic white waters....More
If your working capital burn rate is less than one year, it would be considered high risk. Above 3.5 years is indicative of a strong second line of defense and of course, between one and 3.5 years would be considered acceptable, but not stellar. To say the least, this winter and next year will be a balancing act as farmers juggle quickly converting liquid assets to cash to keep their businesses in operation....More
The combination of lower projected corn prices and soybean prices in 2015, together with nearly steady input costs for seed, fertilizer, and chemicals, will limit estimated potential returns over direct expenses and land costs, at average crop yields. Another major variable in breakeven levels in crop production are loan payments on capital investments such as farm machinery, facilities and land purchases....More
Five agriculture stories to read this week include advice for renegotiating farmland leases (if you haven't done so already), as well as an FAQ on Title I programs in the 2014 Farm Bill. Read a perspective from Bayer CropScience CEO about the benefits of modern agriculture, and how that impacts our food safety. And while the Thanksgiving holiday has passed, it's not too late to be #thankful4ag, and to take a look at what U.S. farmers provide to make those amazing Thanksgiving meals.
Lessons from the past find that the stress point in business financials is repayment capacity given debt service commitments. Repayment capacity and the management factors that influence it should be front and center in many farmers’ game plans....More
This month in particular, let's all be #thankful4ag. In doing so, go to thankful4ag.com, a cool website set up by Bayer CropScience. There, you can create a virtual holiday meal, learn some neat agriculture facts, and, the best part, help donate meals to those in need....More
The grain industry is taking a body blow punch as prices have moderated over the year. If the lower prices continue into 2015 and beyond, there will be a “punch in the mouth” which will disrupt many producers’ strategic planning in the middle and later parts of the decade. A certain set of producers will still be profitable in the economic moderation. Let’s examine some of their characteristics....More
Five agriculture stories to read this week offer advice for watching your bottom line during this time of lower commodity prices. There are tips for winterizing your sprayer, as well as tips for successful weed control. Also read about the impact of low gas prices on the ethanol market. Finally, for some fun, enjoy the latest Peterson Farm Bros. parody, I'm so Farmer. Those fellas are so clever.
Yield improvements will be the key to Chinese efforts to continue boosting corn production, according to Dr. Fred Gale, USDA Economic Research senior economist, but yield improvements will not be adequate to meet growing corn demand....More
Economic trends from the past five years have had an outsized positive influence on row-crop productivity, says Wells Fargo Ag Economist and Senior VP Michael Swanson. As they fade, “recognize that your economic future is in the hands of the new trends replacing them,” Swanson says.
Lower corn and soybean prices are causing some concern among farm operators, as they negotiate land rental rates for the 2015 crop year. Some 2015 land rental rates may be set at levels that do not offer much opportunity for profit potential from crop production in 2015, or could even result in a significant net loss to the farm operator....More
The great commodity super cycle has burned out. It lasted for a decade, two and one-half times longer than any previous super cycle boom time over the past century. The easy money has been made in the grain industry; however, top-flight managers can still earn a profit when they focus on production and operations, marketing, risk management, and, of course, carefully monitoring finances....More
Farmers undertake various tasks to meet the challenge of flowing their crop efficiently from field to market. Though on a very different scale, railroads are confronted with a similar logistical challenge. In 2013, U.S. Class 1 railroads hauled 124.5 million tons of grain....More
Too often young people attend a university for the degree rather than the education, which can be a waste of money and time. As a professor, I am not disputing the value of an education; however, some of the most motivated lifelong learners are outside a degree program and they often make very successful entrepreneurs....More
How often have you wondered whether a new practice or piece of equipment will pay? Kenton, Ohio, farmer Brian Watkins built a computer farming simulation model to calculate the cost of such options. “It tells me how much time a piece of equipment will take to operate and repair, how much fuel will cost and how it will affect other things we do,” he says....More
In many of my speeches I emphasize that better is better before bigger is better; that is, get efficient before you embark on growth. What is a good financial measure of efficiency for farm businesses? One of my favorites is the operating expense to revenue ratio....More
One of the key financial ratios that agricultural lenders use to determine repayment ability is the term debt and lease coverage ratio. It measures the amount of debt obligations (debt service which includes principal and interest), compared to the debt servicing capacity (net income plus interest and depreciation)....More
A few simple precautions and a little bit of common sense can go a long way toward helping prevent farm-related accidents and injuries, especially at harvest time, two Purdue University agricultural educators say....More
Brian Haugen is preparing his farm for lean times. Leveraging his management experience, discipline, standard operating procedures (SOPs), a diversified revenue base, shared human resources for productivity and collaboration with more than 35 landlords, his corn and soybean operation will do its best to weather the storm over the next few years....More
Five agriculture stories this week offer tips for manure management and sulfur application. Read about propane supplies this fall, and get insight and tips for financial success on the farm during lean times. Also, watch the farm documentary Farmland on Hulu.
I could not be more excited to get the news that the Farmland movie is on Hulu and Hulu Plus! I saw a pre-screen of the film in February at Commodity Classic, and the film was released to a limited screening in theaters in April and May. If you didn't have the chance to see it then, watch it now. Like right now. Stop what you're doing, and watch this incredible film....More
Rising diesel prices have made tackling fuel economy more important than ever. Given how much you spend on fuel each year, even a small change in fuel usage can mean boost your profit. For example, using using a low-viscosity oil can boost fuel economy, but that's the just one of several management tactics you can use to boost profits in spring and fall....More
How often do we see, particularly in family business transition, a situation in which the younger generation returns to a business that has been a profitable high performer for the previous generation, but it continuously fails to “finish the race” or underperforms compared to peers when the younger generation steps into the driver’s seat?...More