July 24, 2014

Ag expert: Boom years may be coming to an end for farmers

corn harvest 1An agricultural economist says Nebraska’s corn and soybean producers need to prepare for tougher economic times ahead.

Mike Boehlje, at Purdue University, says he does not expect the setback to be as severe as it was during the Farm Crisis of the 1980s, but he assures, a fall is coming from the flush years farmers have been enjoying.

“In contrast to the 1980s as well as the 1930s where we had busts after the booms, we think we’re going to have a soft landing off of this one,” Boehlje says. “It doesn’t mean that farmers aren’t going to have to adjust to a different kind of business climate. We’ve had record incomes set and now the USDA’s numbers are showing that we’re going to be down about 30% in terms of income.”

Boehlje says farmers tend to focus too much on the prices they get for their crops.

“What I tell farmers is, the first and most important marketing decision you make is what you pay for your inputs, it’s not what you sell your product for,” Boehlje says. “You’ve got control over what you pay for your inputs. You don’t have nearly as much control of what you sell your products for. Farmers ought to spend a lot of time thinking now about negotiating the right prices for their inputs.”

He says the toughest of those input prices to negotiate is likely the rental agreement.

Boehlje says farmers should begin the conversation now with landowners to adjust for lower rent for 2015. He describes the relationship between the farmer and his lender as “essential and critical.”

“The conversation with the lender the last four or five years has been more, ‘How’s the family, how’s the kids, how ’bout that football game, and oh, yeah, you want money? Here, just sign the papers,’” Boehlje says. “It’s not going to be that way this next four or five years. There’s going to be tougher conversations asking for more documentation.”

Boehlje says farmers can add to their bottom line by looking for ways to meet specific needs of some of the processors to whom they sell grain.

By Dan Skelton, KICD, Spencer