You’re going to lose how much?
September 10, 2015
A few weeks ago, I pointed out that crop budgets don't look very promising for the farmer to make money in 2016. This was not intended to be breaking news to farmers, rather it was intended to create awareness for anyone related to agriculture that the good times are behind us, at least for the next year or two. If you are a grain farmer and this was the first you had heard of crop budgets being tight, then we definitely need to talk.
The news is not all bad though, there are some industry folks actually listening to this information. A day after the article first ran, I heard from a producer who was contacted by a landlord wanting to renegotiate the rent…lower! I also heard of at least one seed company indicating there would be a price drop on "some" of their more popular hybrids, which is a start at least. So the word is getting out there that times are getting more challenging for the producers and some are willing to help. If you are someone who has or is considering dropping price to assist the farmer, then God bless you!
As the producer, you know the budget does not look very good, but you can't just sit and complain or wallow in self-pity. You need to be proactive and work on doing what you can to address the problem. The best way to do this is to keep your landlords, agronomy sales people, bankers, and all interested parties involved and aware of how this year is going and how next year looks. This could be as simple as inviting them out to ride along in the combine or truck this fall. This meeting will help start a conversation which will naturally progress from this year's yields, to current prices, and eventually to how numbers look for next year.
For this conversation to be constructive, you need to show what another tough year is going to do to your finances and ultimately your ability to continue farming. To do this, you need to know your actual expenses for 2015, your breakeven price based on current yield estimates (or the actual numbers we will soon be seeing), as well as an estimated crop budget for 2016. Once you have these numbers put together, you should be sharing them with everyone you do business with. I would recommend even showing numbers from the "good years" as well. It is no secret that you made money during the good years, so be transparent. With transparency comes trust. When both sides can trust each other, they tend to work better together.
We have seen proof that there are folks out there willing to work with producers to help minimize the bleeding, but you need to do your part by being honest, organized, and telling your story. If you struggle with tracking the numbers, there is a program at Mitchell Technical Institute that has instructors dedicated to working one-on-one with farmers and ranchers to help them with managing their finances. If you would like information on this program, please contact the South Dakota Center for Farm/Ranch Management at 605-995-7196 or firstname.lastname@example.org.