For quite a few years, the conversations surrounding agriculture have focused on financial stress. Since 2014, we’ve had a rise in farm bankruptcies, we watched low commodity prices place downward pressure on land values, we expected farm incomes to be stretched thin, and we knew that years of struggle were manifesting in mental health crises across rural America.
As we emerge from pandemic restrictions this summer, there are hints of better times out on the farm. Corn, soybean and other commodity prices have roughly doubled from a year ago. At one point last year, retail beef prices jumped 10 percent in one month. And, the FAO Global Food Price Index is about 30 percent higher than a year ago. Farmers and their lenders are breathing a bit easier as a result.
But risks remain: In 2020, $46 billion was paid to farmers in federal relief. This type of support is not expected to continue. The cost of inputs like fuel and fertilizer are up between 10 and 15 percent, which will squeeze margins. And we’re all expecting new taxes, including farmers looking at the potential impact of a proposed transfer tax.
Lack of rural broadband is also limiting farmers’ ability to deploy the technology and data innovations that could help them become more productive. Farmland without adequate wireless connectivity may result in lowered land values and rental rates due to operators not being able to fully utilize tech capabilities.
While addressing Midwestern ag bankers in late May, Virginia Tech’s ag economist Dr. David Kohl suggested several metrics for lenders to use when gauging their ag customers’ fitness for success. His list includes the obvious, like understanding the costs of production and running the farm enterprise, maintaining a sound record-keeping system and the ability to analyse financials and project cash flows. But Kohl also emphasized the importance of plans. Successful farm operators should have marketing, risk management, ownership, transition and enterprise improvement plans — written plans! I love this.
I have always wondered how people can accomplish anything without first putting a plan on paper. I’ve known a few people who resist the imperative to commit themselves to a well-sketched plan to reach their goals. Maybe a few of them have attained success without a plan, but I’d expect they’d be outliers. Luck is not a plan. And neither is hope. I’m no psychologist, but there has to be some tie between the effort it takes to build a plan and the commitment we make to follow it.