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The Ag Industry is Feeling the Pressure

Date: 
Author: 
Glenn Wachtler
Educational Opportunities: 
Articles
Interests: 
Grain, Dairy, Swine, Beef, Young, Beginning Farmers
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Agriculture is definitely an American success story.  The productivity and size of America’s Ag industry is virtually unmatched by any other Ag industry in the world.  We are fortunate enough to have plenty of products to keep prices in this country relatively low for the American consumer and still have the ability to export vast amounts of products around the world.  Unlike many other industries, agriculture in this country is still made up of many individual Ag producers growing products for the world market.  According to the latest World Agricultural Supply and Demand Estimate (WASDE) over fifteen percent of the corn production in the country will be exported and forty seven percent of the soybean production will be exported. American farmers need a strong export market to succeed.

It’s as if overnight, global challenges have come to the forefront.  Global challenges including a potential trade war which leads to volatile markets and an uncertain future.  In addition to trade, currency fluctuations between trading partners can have a major impact on how attractive a commodity is going to be on the world market and how much of total production will be exported.  Another potential headwind is the large supply in some areas of the world including the U.S. may lead to depressed prices extending into the near future.  These are just some of the global issues that are impacting your farm operation.

Most American Farmers do not have a trained economist on their farm, nor a lobbyist, legal team, consultant and marketing expert to guide them through the complex situations that  they are facing today. So how does a relatively small individual producer in the U.S. survive when it seems like the weight of the world is on their shoulders?

Actively learn, communicate, and align yourself with others:
Global agriculture issues are in the news daily and stories of global challenges are starting to be shared with people far outside the Ag industry that do not have a background in agriculture nor do  they have any in-depth knowledge of the issues.  Educate yourself and practice communicating the issues as you see them affecting your farm operation.  When people are able to connect with you on a personal level as you are telling your story, they will be more likely to be open to your viewpoints.   Also, do research on organizations that are aligned with your viewpoint, and show your support for them.  These organizations likely have economists, lobbyist and legal teams that can be leveraged to your advantage.

Control the things that you are able to control:
How global economic forces affect your farm is analogous to how the weather on the wide open ocean affects a sailing vessel.  Sometimes the wind is at your back and sometimes it can be pretty rough.  The best strategy is to be prepared and run a “tight ship.”   There are many factors that you do have control over.   You have control over your financial position, risk management plan, in addition to your  family and personal relationships.   Tighten up your balance sheet by reducing debt and if need be, liquidate unnecessary assets.  Also, add to your sources of income by taking on additional custom work, non-farm work, or pursuing new business.  I personally know many farmers that have transferred the knowledge they have gained from running a successful farm business to another industry and they have achieved great financial rewards. 

Risk Management needs to be more than just a plan.  Your risk management strategy needs to be executed.   Simply trying to get the highest price for your grain is not a risk management strategy.  A risk management strategy for pricing grain analyzes your break-even production costs and has definitive prices and timeframes to sell grain in order to manage risk.  Reducing or eliminating crop insurance may save some dollars, but it is definitely not part of a sound risk management strategy. Purchasing crop insurance should be viewed as a requirement, not an option.

Family and personal relationships can be one of the most challenging or rewarding aspects of owning a farm.   They are also some of the least talked about subjects on the farm.  In a perfect situation, everyone will be rowing the boat in unison, but it seldom works that way in the real world.   Consistent and open communication can assist in uncovering challenges before they become problems, and opportunities may be discovered by listening to the goals and ideas of others who share a vested interest in the farm.

Ask for Help
Don’t hesitate to ask an Ag service professional for help.  Your banker can also be a valuable contact as you review your financial position and make changes that affect your farm.   In addition, I encourage every Ag fproducer to do an annual business review in order to improve their ability to navigate rough waters.
 
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