Putting good times to good useIn times of prosperity, it's important to prepare for what comes next.
By: Jonathan Knutson, Agweek
Political candidates, especially ones running against an incumbent, are fond of asking voters whether they’re better off today than they were four years ago.
Don’t worry; I’m not seeking office. But I’ll ask farmers and ranchers anyway: Are you better off today than you were four years ago?
For the overwhelming majority of producers in the Upper Midwest, the answer is unquestionably yes. Oh, sure, producers haven’t benefitted equally. Too little precipitation last year and too much moisture this year and in 2011 hurt many farmers. But the past half-dozen years have brought, for most producers, a winning combination of high prices and good yields. Exceptionally low interest rates have helped, too.
As one veteran farmer told me privately, “If you couldn’t make money these past few years, you’re not much of a farmer.”
The good times have allowed farmers to pay down debt and to upgrade their equipment and buildings. Ag bankers say most farmers’ balance sheets are healthier than they’ve been in years.
It’s been a great run of prosperity. But there’s a downside, too.
Input costs have soared. Rising farmland values get most of the attention, but other necessary components in raising crops and livestock are more expensive, too.
There’s also cause for concern on the political front. U.S. ag producers, particularly ones from the Upper Midwest, don’t appear to have as much clout in Washington, D.C., as they once did. The long, ongoing effort to pass a new farm bill is a sign of that.
Farm group leaders blame political “polarization.” They say extremists on the right and left refuse to compromise on sensible, middle-of-the-road legislation.
Some deep thinkers also worry about a growing disconnect between agriculturalists and the rest of society. They say a growing number of Americans have no direct ties or links to agriculture, reducing their ability to see farmers’ side of things.
If you’ve never been on a farm — if you don’t have any friends or relatives who farm — you probably won’t empathize with agriculturalists. (It works the other way, too. People who have lived all their lives in a rural community probably have trouble understanding how inner city residents view the world.)
4 years from now
Here’s another question for farmers and ranchers: Will you be better off in four years than you are today?
Raising crops and livestock requires optimism, and optimistic people always want to believe that tomorrow will be better.
But raising crops and livestock requires realism, too. And farmers and ranchers generally are realistic enough to know that the glorious combination of high crop prices, strong yields and low interest rates simply can’t continue indefinitely.
History tells us that production agriculture in the Upper Midwest is cyclical. Short periods of prosperity are followed by long periods with little or no profits.
History also tells us that producers need to strengthen their operations during the good times so they can tough out the lean times that inevitably follow.
The past half-dozen years, on balance, have been terrific. I hope you’ve enjoyed them. I hope you’ve used them wisely.