Preparing for uncertainty, future challenges on farm

Gloria Hafemeister
Now Media Group


During a recent meeting in Columbus, sponsored by Badgerland Financial, three experienced professionals in the agricultural community shared their ideas for weathering the agricultural storm in the next year.

Challenges and uncertainties farmers are concerned about is unpredictable weather patterns, instability of commodity pricing and increasing regulations from those outside of agriculture.

None of these things are new, however, according to the panelists. There have always been fluctuations in weather, pricing and consumer concerns.

Secretary of Agriculture Ben Brancel used his own family as an example and said, 'Every generation has struggled with droughts and an unfavorable economy. They have weathered the storm.'

He said the worst time a new farmer can get into agriculture is when things are going great because it sets up a mental attitude of high prices. Of course, he acknowledged they don't want to get into it when prices are not good either because they will never get their head above ground.

'The best time to get into farming is when things are somewhat normal,' he said. 'All farmers need to accept the fact that there will always be cycles.'

Bill Albright, a lender with Badgerland Financial, said there will always be opportunities to get into farming, even for those who do not have family currently running a farm. He said there will continue to be farmers who do not have children to take over, and there will be investment opportunities in larger farms as the older partners phase out of the business.

For new farmers, Brancel said the biggest challenge is the cost of getting in. He noted there are opportunities out there and there is no one way to get in. There are many options and types of farms.

Liegel pointed out that there are opportunities for starting farmers, including programs through the federal government Farm Service Agency.

He addressed the older farmers in the audience and said, 'If you aren't willing to give the next generation a price break, you could be stuck with your farm. You want to make it possible for them to succeed.'

Leigel pointed to the importance of working with professionals on transition plans long before the transition needs to take place. He said Badgerland Financial, Extension and other organizations all recognize the need for helping farmers with transition planning and have programs in place to help.

Looking at land values, the panelists pointed out that they can offer both challenges and opportunities.

Albright said there are more acres in production now where crops were never grown before, and the improved seed genetics and other technologies mean farmers have the ability to raise more on an acre than ever before.

As an appraiser, Carl Liegel said he doesn't see a lot of changes in land values, despite the current economic stresses. He doesn't see a lot of land sales right now, and there has not been a big change in rent, either, although there has been a little more variability in the last year or so.

The value of the dollar and interest rates are always concerns for farmers.

'Interest is obviously going to go up, but I don't think it will happen very fast, and you won't see it changing drastically,' Albright said.

Liegel, who just entered the business back in the 1980s when interest rates jumped dramatically, said, 'Back then they went up so fast, and there were no land sales. A lot of farms were lost so there were so many farms on the market.'

Survival strategies

Albright told farmers about the importance of communication and honesty with lenders.

Brancel agreed and advised the farmers, 'When you think you may be headed to a challenge, you should get to your loan officer before he comes to you. If you show a willingness to come forward and discuss it right away the whole process goes better, and you build trust with your lender.'

Among the 80 farmers in the audience, several of them wanted to know what they should do if they are presented with the opportunity to purchase land in this uncertain economy.

Brancel suggested they think about whether they have the equipment and labor to run more acres and if they have the potential to manage more acres or if they are already at a size where it is difficult to keep track of things.

'You need to think about what your payments will be and how you will pay for it,' Albright said.

Crop insurance as a strategy

In a challenging economy crop insurance becomes more important than ever, according to the panelists. All three agreed that having crop insurance will help farmers sleep at night.

Like any insurance, it provides protection for the unforeseen, and those who take out insurance, any insurance, make their payment and hope to never need to collect.

'You insure your house and your car,' Albright said. 'Why not your livelihood?'

Representatives of Badgerland Financial joined in the discussion, pointing to changes in this year's programs.

There have been changes in how to determine yield exclusions, and producers have the ability to have separate coverage levels by practice. This means farmers can insure irrigated fields differently than the non-irrigated fields, for instance.

Many producers carry hail and wind insurance, and in 2015, those with adequate coverage were glad they had it after some of the mid-summer storms.

Since every farm situation is different, the insurance advisors recommended thinking about their primary risks and knowing their input costs before coming in to meet with an agent. Look at variability in soil types, and consider how the grain will be marketed.

They also pointed to the need to consider coverage for things like hauling the grain to the first market and coverage for the possibility of not having enough grain to fill a contract. Even think about coverage for when someone decides to take a joy ride through the corn field.