Trying times ahead!!!

I have been going over our budgets and plans for the next few years crops. We will survive but there will not be much extra "meat" on the bones with the prices I think we will be getting for crops and cattle. That fact brings back memories of the 1980s. The stress and heartache caused by the bad economic times then. I think the drop could be as bad now it just will not be fueled by a grain embargo and high interest rates. It will be fueled by record debt. The high farmland prices of the late 1970s was maybe $4-5K per acre. We now have guys looking at $10-15K an acre ground. I do not care if they paid 50% down they are still looking at debts that make the 1970 prices look like a cake walk. If we have another large crop of corn and soybeans we could easily see $2 corn again. Think of how much higher the production cost are now??? Even with the better yields the numbers just do not add up.

I can well remember sleepless nights worrying about paying the bills with low prices. I can also remember friends and neighbors losing all they had during the tough times. Even thought I know many have asked for the troubles heading their way I still have no wish for another farmer or businessman to lose all they have worked for. There are BTOs that deserved little sympathy because of their actions but they will be in line with just regular farmers too. Many of the BTO actually will survive because of their lower cost per acre/bushels. Also lenders will work with them more than they will someone that is not in is as deep. Lenders can write off $50k easier than $1m.

Still I feel for those that will suffer the trying times we have ahead of us. I asked all of you to thinking about how this will effect those around you. I hate the vulture attitude many have when a neighbor fails/sells out. That is the end of a man's dream. It is way worse than getting fired or losing a "job". The men involved will often feel a complete failure. That feeling should never be wished on anyone.

I can remember my Grand Father talking about how he saw families in the great depression lose everything they had. Even down to the bank selling their personal possessions. He talked about seeing a ivory comb and brush set sell for $2. The farm wife crying as her Grand Mother's heirloom was sold. He also told of how the lady that bought the set GAVE it back to the farm wife after she paid for it. He used that story to teach a lesson about compassion to your fellow man.

I will remember that story until the day I die. I know that would not happen these days but the feeling of seeing your Father/Grand fathers farm sell because you mortgaged it will happen. So the emotions would be the same. I hope I feel sympathy for those fellows and not distain/glee.

Everything cycles and people keep forgetting.

Hi the Richie catalog came in the mail the other day for Canada. there are some big farms in there, one I know real good has the receivers name on it. and I seem to think it's a thicker catalog than came this time last year. We haven't even seen whats going to happen for the fall sale run yet. Things are going to be way worse up here because of the strong U.S $. All the parts and equipment have gone up about 40%. There was a tractor at the local ag fair in January was $850.000 Can. You haven't hitched anything to it, paid the inputs/land costs or harvested anything with that money.

They said they sold one and maybe another. I'm kinda thinking there is at least 2 guys out there with more of someones money than brains!. The wreck is barreling down the tracks fast. There is some round here I'm going to the sale and all I'm buying is 2 chunks of pie! They got to big and greedy some days they were at the golf club while the sun shone,not home seeding like everybody else. Well guess what it rained for 3 weeks and they didn't get a crop in, then sit crying they got no money. Some of then did this 2 years in a row! I do feel bad for the guys that tried hard and got caught, but not the ones that brought the whole situation on by pure greed and the got to be the big I'am attitude !.
Regards Robert

And they say history never repeats itself? Then we have this day in history post everyday? I hated history class in school! Lol

my grandpa mac told about working for a man that said mac when you need coal go to the corn crib and fill your bucket we don't have money to buy coal and the corn isn't worth anything.
he also told about working for another man one day grandpa saw a guy shut the gate to the farm yard and nail a sign on the gate.
grandpa went over and asked what are you doing the man said we're going to have a sheriff sale here. he then asked grandpa do you work here grandpa said yes. he then said does he owe you any money grandpa said yes again to which the man said do you know how much? grandpa said no but my wife does she has it all wrote down. the man said bring me the numbers we will see to it that you get paid.
the man grandpa worked for had over 1000 acres and lost everything. this happened in the 1930s

My Dad & Mom talked a lot how tough it was during the depression. I was born in the middle of it so I got to live the last years of it myself.

Farm foreclosure auctions were numerous. Finally the governor started sending out the national guard to stop the auctions. Then the farmers organized "penny auctions". The other farmers wouldn't bid and watched the crowd to make sure no one else bid, so the farmer being foreclosed on could buy all of his property back for one penny per item.

The big farmers in those days just used numerous units of small equipment to farm with, (There wasn't any big equipment back then). When the banks foreclosed on the big farms, the small farmers had little or no money to bid on anything. The banks started setting out jugs of whiskey behind the outbuilding, to get the farmers to bid on the equipment!

I wonder how the younger generation today will be able to adjust to tough times after the somewhat extravagant lifestyle that they have lived all of their lives. It is liable to be a big comedown for them!

I wonder what all is going to happen? I am a smaller farmer but owe more than I should due to some mistakes and health problems.I think I can make it but there is no room for mistakes anymore. I could sell out now and have plenty of money to pay everything and still buy a nice property but I always wanted to farm and not work for someone else.I look at the big farmers who are always adding more cows or more land and wonder why? Is there not such a thing as enough? The older I get the less I really want anymore.My banker told me they will be very slow to sell out the big operaters who owe lots of money because of what they would loose and if enough of them are sold out it will lower land,livestock and equipment values on the farmers who are left and cause even more to be sold out due to no equity.So the big greedy people get a pass on some of the problems they created and the smaller farmers end up paying the price? I told my banker I was not impressed but he said it just is that way now.I do not want to see my friends and neighbors sold out as I would miss them. Some of them want there neighbors to be sold out so they can buy up or rent the land they were farming.It really is a sad time right now and it will probably get worse if we have good crops this year. Tom

My theory is still holding true.

"The less I farm, the more money I make"

Gene

Some years ,farming isn't about how much you made. It is about how much you didn't loose. Low milk price is going to make it more difficult to keep writing with black ink for me but , I have been seeing low returns coming for well over two years and have been positioning our farm to be profitable with lower prices. We have replaced equipment in good years and paid down debt. Adding on to our barn will allow us to produce more milk in years to come but , is doing more work for the same money getting ahead ? I don't see this happening in the auto industry, and it sure don't happen with government employees . As well the whole time tighter and tighter rules around animal care and environmental stewardship are imposed upon us farmers , with no monetary gain to offset cost. Consumers demands do not always reflect profitable or realistic goals down on the farm. Yet radical voices of special interest groups continue to change the public opinion of farmers , and on farm practice . City folks seem to hold the view that it is some how wrong for farmers to make profit growing the food they need to eat.

With interest rates so low right now folks are refinancing every few years to be paying interest payments and leaving their principal alone. I'm more concerned what's gonna happen if interest rates tick up a couple of percent.

There was a farm sale near me that was auctioned off over the weekend. The land sold for about the same price as it has sold for in the past. In other words, it went high. Everybody left that sale shaking their head because they know that it's going to be tough to pencil in a profit this year.

Shoot, last few years in the berry business we've had zero crop [Easter Freeze], 1/4 crop [hail damage to blossoms, followed by storm damage to berries], 1/2 crop [Japanese Beetle infestation], 75% crop [Droposophila fruit fly infestation], I forget the others. Oh yeah, Walmart starting to sell Mexican frozen berries....

The dairy end of it is going to be touch and go, too, JD. All it is going to take is just one mistake, or one stroke of bad luck, and you are done. Know of at least three of the local smaller guys who are right on the verge of selling out right now. Gonna be a tough year with no room at all for mistakes or bad luck.

There is a possibility that the federal crop insurance programs might save many farmers who didn't have that type of protection in the late 70's and 80's.
A person can argue all they want about the pitfalls or benefits of insurance but it could be the lifeline that helps some weather the storm.

When do you guys think we will hit bottom? At the harvesters convention they made it sound like 2018.

The strange thing is how many ag products are being brought in from over seas grass fed beef from Australia and Ireland. There is studies that you can produce beef and compete with corn yet if you go to a banker they will not lend you money unless it's to raise corn or beans.
I have a friend making over 40 dollars a hundred for grass fed milk he has very little machinery and does grazing. I have always believed it's not what you make its what you spend. I held on through tough times with no help from bankers or family a lot of the right sort of farmers that the bankers like have been sold out or bailed out me I'm still going

One of our great politicians in the past said something like, [ Those who do not study history are destined to repeat it]

I hate to think that way, but I have some younger family that bought out the dairy farm and think they have to have new equipment every couple of years. His dad and grandpa weren't like that. They saw the bad years and were prepared. Only replaced what they had to. If prices stay low for very long, a guy in his late 20's is going to loose a family farm and be destroyed like jd explained. Vultures are always circling in my area.

Don't count on it. A lot of land that was historically idle outside the US went into production when corn was 7-8 dollars per bushel and quite a bit of it is being farmed at considerably less overhead per acre than the US at present. Also, there is quite a bit of political support to end whatever ethanol mandates that may be in place.

It's also been said, some people will believe anything there told. We call them sheepeople, or drones! Lol

A friend of mine years ago said crop insurance is great for a disaster if you have otherwise top yields. Also, you still need to have a handle on profitability. Around here 75 percent coverage is the highest the insurer will go. If you get 80-85 percent of your normal yield you will not receive any compensation to cover costs. Further, revenue protection is great in a falling cycle where the insurance company is offering rates based on the previous crop year even though the price is clearly cycling downward. Trouble is that cycle is short lived. I am not saying that insurance does not have a place as a risk management tool but it is not a magic bullet that is going to head off structural profit problems with your farm. Lastly, I would say that the companies do observe your yields and make adjustments to your yield average for coverage purposes. If you started off with a 50 bushel average and go through a 5 year period where you are 97 percent, 65 percent, 80 percent, 62 percent, and 91 percent of 50 bushels your yield base will be adjusted down to reflect your recent history. A lot of farms in the East including mine often hit that gray area where you fall below your average but not enough to collect on your insurance. The net effect is that your yield base suffers erosion in a subpar production cycle. Everybody needs to run their own numbers to truly know how effective insurance will be for them.

There are still plenty of guys saying that it is different this time. Lots of them bristle at the notion that land prices may fall. I think it is inevitable though it may not crash like they did in the 1980's. If things get tight and they will the taxes on 10, 15, or 20 thousand dollar per acre land will become unbearable for quite a few. The net effect will be that a producer will have so much money available to pay a certain amount of taxes with anything beyond that pushed on the market to avoid a tax sale scenario. If land is selling currently for 10 thousand in your area the sharks and vultures will be looking to make their buys at considerably under that and are disciplined to wait for "their" price even if a parcel changes hands more than once in the interim.

I am on the land owner side of things and my current tenant of over 20 years was wanting to drop the rent for 2016 and I understand why. Problem is two fold, the newspaper is full of people who are willing to pay cash rents like corn is $10 and my property taxes are 2 1/2 times what they were two years ago. We had our first serious disagreement over this but ya know what? He is now paying me more in 2016 than he did in 2015 because he didn't want to lose the ground. All in all I am very glad that I am not farming right now and cash renting the place and truthfully it is darned tempting to sell out. Looking at the auction papers I see many ads for big time late model equipment and I find myself wondering when that well will run dry too meaning there has to be willing buyers beside the lien holders???

The last time we went through this mess we owed a lot and were trying to be BTO( for the Time) this time no debt not so big not so worried!

In the past 6 or 7 years I have heard phrases again like NEW PLATEAU of prices. IT will never get that low again. We will not produce it( grain cattle ETC ) at less than cost.Land will never get cheap again .it wont happen again etc.

Well three things are absolute #1 it can always get cheaper #2 it will only go back up ( once its cheap) after significant production problems somewhere #3 land cost will determine profitability. If your land is paid for you wont have problems making the payment or taxes vs if you have big payment to make.This includes feedlots , if paid for vs not .This has been a major problem in ag for quite awhile. Land prices or lease go up a crazy amount when commodities go up but fail to adjust on the back side of the curve.I blame things such as insurance and farm payments as taking the free out of free enterprise. Insurance and gov hand outs have allowed farms to get too big too fail and not allowed for our young people to get into ag.

I changed renters a couple years ago. I'm glad I did my previous renter did whatever the fertilizer companies told him he spared no expense raising corn and beans the only exception he had was saving on rents he has lost a lot of farm's that way . When I started looking for a new renter I asked them how they were going to do it. Good pay was nice but I looked at the long term. My renter is a young kid his family rents a lot of ground but they push the pencil and are not afraid of alternative methods one thing they do now is not only do they grow seed but they also bag seed increasing the return on investment. They have offered more money than I took what I'm did was make enough for my needs the rest I gave back in return they use that for land improvements such as lime, fertilizer and bulldozer work that would make it easier and more profitable for them to farm. I also have included in the rent agreement that they have the first right to buy this farm at a reduced price . I look at it as a way to pass on the farm to somebody who wants it and also soften the cost of high rent

Your lack of interest in history explains a few things!

Hopefully in the last very good years, those that are farming put some money away for these type of years. Remember so well the 80s, and how it effected us. But we cut back many things, and we got through it

I am also the loyal type or I would not have had the same renter for 20 years. I admire that you want to help some guy get going but I am not in that position. My farm land is my retirement fund, while others invested in the market I dropped my money (and the banks) in tillable acres and back when we still had a payment there were some real tough times keeping up with that and taxes. Thus when it comes time to sell it goes to the high bidder no matter if the buyer intends to plant corn, or houses, truthfully I don't feel responsible for helping anyone get going actually,,, maybe I am greedy???

a lot of $ sitting on the dealers lots (tractors and combines).

Back in the 80's alot of mergers/ buyouts happened.

Allis went to Duetz,
Case merged IH
Ford and NH.
Allied bought White (Allied ran every company they bought into the ground)

then all the mergers since then.

no one left to merge with. I suspect layoffs at JD and CNH at some point.

I farmed full time in the seventies and did pretty well (especially when the farms were split up and sold) but the time came to get big or get out which I chose to do. Its a business like many others filed with risk where if you cant stand the heat you have to get out of the kitchen. Best wishes and good luck to those still farming.

John T

You nailed it farmerwithmutt "I have always believed it's not what you make its what you spend". - you're darn right. It's the low-input, creative farmer who finds alternative markets for their product and are willing to "think outside the tractor" who will be most profitable in the future. High production does not always equal high profit. Most farmers would rather fail conventionally than embrace a new paradigm.

My case is different I have no family to leave it to and all I'm looking for is a place to live and I'm still able to work so it's kinda nice to sit back and watch the kid and he's got 5 rug rats and usually got a couple on board either the tractor or truck. I always tell people I've no kids of my own so I gotta borrow one to spoil. My previous renter his kid has this entitled outlook and that was a reason to look someplace different I want a kid that ain't afraid of getting dirty and don't plan on getting something for free

I've had the same renter on 150 acres for 16 years. When things were good and he was making big bucks he didn't offer me any extra, but in hard times I'm supposed to have pity on him.
We had a hand shake 3 year contract I stuck to even though I could have gotten 30000 more rent in the last two years of it. Why don't these guys ask the seed or fertilizer people to lower there cost so he can make money? No one worries if I make money. My real estate taxes are up anywhere between 100% to 500%. I could still get more than he's paying from anyone in the neighborhood.

I really don't know how to break it to you, but I haven't had anything BUT trying times since 2001. Let's see...

Was having an OK year when a bunch of <bleep> idiots decided to go flying. After that day, several of my corporate clients began having cash flow issues. Seems business just started to dry up. I had recently built a spec home with several of my tradesman clients (with me being the money guy) and we had to dump it fast. I paid them all off and ended up going into savings to do it. Clients who were used to grabbing every $$$ that came into their companies and <bleep> it away on toys could not adapt to the new world where you had to actually manage your business to stay afloat. Many old friends went out of business and dropped out of sight...generally before my bill came due. By 2008 my business was down 60% but I had never had much fat to trim so I kept humming right along. In 2001 farm income was more of a hobby than anything else but that little bit of extra cash was needed now so, since the CPA practice was hurting I decided to expand the farm and bought more land in 2010 on the depressed real estate market. This turned out to be a pretty good idea, even though some days I beat myself half to death doing it. The local wildlife population is delirious over the idea, since they eat more of my profits than I do...still I make a bit on it. I dunno? Trying times ahead? Would those be MORE trying or LESS trying than the last 15 years?

I heard yesterday that the local Case-IH dealer has the mechanics cleaning the parts bins and rearranging. That is how slow the shop is.

Many of the smart a$$es that created the rent mess are the same ones that the banks should have broke in the 80's instead of writing them off. Now listen to them cry how tough it is with a yard full of new machinery. They made their bed now they can sleep in it. My dad weathered the 80's milking cows, he is now retired and payed every cent back to PCA. I started in 87 and run payed for older machinery. I will agree, the outlook is not good and my spirits are a bit depressed also. I do feel for the people trying to make ends meet with what they have. I just don't have any sympathy for the people that always live outside of their means and think they are God's gift to farming.

Farm prices have always run in a cycle and probably always will but when prices get high there is always some that believe they will never drop 'because its different this time'
and there is always a group that think prices will never go back up when they go low.
Economics teaches a tough lesson to all that ignore its laws.