By Paul Taylor, Esmond Farmer
The New Year’s celebrations have passed, the resolutions are being reassessed and signing 2016 is coming more naturally. So if you’re inclined, what are you going to do differently this year?
Each of our answers is likely to be unique. Maybe yours is to lose that extra weight in order to get off the hypertension meds, or figure out how to deal with grain prices below the cost of production. Whatever it is, we’ll keep those resolutions this year … it will be different this time.
Being a person that loves conversation, I have been asking folks I visit with about what they see ahead in 2016. Of course, the responses pretty much reflect their circumstances.
Some younger farmers respond they are scared to death about adequate farm cash flow and profitability. Other folks share concerns about a coming long-term cyclical decline of farm profitability following the “wealth build” years since corn ethanol brought an economic resurgence to much of rural America. Some see opportunities ahead in the transitions that are most likely, if not certain, to come.
Today’s farm situation may be like the early 1980’s in that many knew then that something in our economy had to change, but identification of strategies and timing were not so clear.
The profitable years of the 1970s are referred to by some as the “go-go” years for that generation of farmers. We hear from folks in agriculture that the circumstances today are different from the 1980s. Of course they are. We don’t have crippling interest rates in the vicinity of 20%. We don’t have a hangover from the binge and subsequent hangover of seemingly unchecked inflation either. Crude oil and commodity prices have led a deflationary trend that few expected. We are used to low interest rates and lots of cash around.
Back around 1980 when I was farming in southwestern Wisconsin, I recall coming home to Esmond for a family visit. My dad and I talked about the changes the 1970s had brought to local farmers. New paint was everywhere it seemed; new four-wheel drive tractors, combines, field cultivators and bigger planters populated the countryside. Folks had recapitalized and over capitalized their farm equipment. I recall thinking at the time, no new equipment would need to be purchased for years. Ultimately, that is exactly what happened during the 1980s.
For farmers, the ‘80s were a brutal time financially with low incomes and anemic cash flows. On the farm and off, bankruptcies followed. It was a transformed farm landscape by 1990, for farmers and agribusiness alike. It will be different this time.
A concern exists among some that the policy of near “zero interest rates” of the Federal Reserve and Quantitative Easing since 2008 will have unforeseen impacts. A realized example today would be the strength of the U.S. dollar and its impact on our competitive position for exporting products ranging from ag commodities to Caterpillar equipment.
Today’s farm situation may be like the early 1980’s in that many knew then that something in our economy had to change, but identification of strategies and timing were not so clear. There are some among us today that believe we can transition smoothly from the boom portion of this cycle to a ”new plateau” of higher prices than pre-2006 without creating havoc in the ag community. Will it be different this time?
May you and your families be blessed through the coming seasons. Whether your 2016 resolutions hold or life’s events push us to make uncomfortable adjustments in our operations and households, one thing I have high confidence in this year … it will be different this time.
Down on the farm … I’m Paul Taylor.
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