Leveraging One-Off Income Opportunities

Hi, I'm Dr. Dave Kohl, professor emeritus, agriculture, economics, and academic Hall of Famer from Virginia Tech, Blacksburg, Virginia.

The theme today is one-off income. It's real interesting, the grain industry is experiencing one of the best years since the great commodity super cycle that occurred between 2007 and 2012. And one of the things with the stimulus checks and with the demand coming out of China, the weather events, and then of course the devaluation of the dollar, many producers have had the blessing in a one-off income.

I think it's very, how managers manage that one-off income. Because oftentimes the problems occur in your best years. One of the things is, did you use the one-off income to build working capital? Did you use it to pay down debt? Did you build efficiencies -- and remember -- better is better before bigger is better. Get efficient before you get bigger. Did you upgrade some of your capital expenditure needs or did you embark on a major expansion?

In a recent webcast, we found 53% of agriculture producers were going to make a major expansion, and this was a group of grain producers. I forewarn them: be careful of making long-term decisions based off one-off income, because oftentimes it can get you into financial difficulty.

So again, how you use that money and how you use that profits and incomes during the good times often will dictate three to five years of what can happen in your financial situation. Well, we'll see you the next time.