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cubsfan
Frequent Visitor

Do guys go broke anymore

Been farming a long time but I can't remember a time when things seemed so profitable. Even with the high cash rent and inputs. I can't remember the last time a guy went under in my area. Maybe we got this thing figured out.

20 Replies
Veteran Advisor

Re: Do guys go broke anymore

Google dairy farm bankruptcies, Lots and lots of them especially big farms!  No we aint got it figured out. JR

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Senior Contributor

Re: Agree with jr

You have not seen the books for swine operations in Ontario if you think everyone has it figured out.

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Honored Advisor

Pride goeth...

...before a fall.  If things are going great, you do not have to be much of a manager to make it...the margin of error is that much more forgiving. 

Some people make the mistake of thinking things will always be this favorable in ag....just like millions did in tying themselves to bigger and bigger mortgages up until a couple of years ago, or by buying some of those derivatives in the mortgage investment markets.    

A trend almost always slows or reverses itself at some point in time.  It is knowing to control yourself when things are good, so you can stick it out with reserves or lower exposure when they are not, that makes for a real business plan. I had a salesman call the farm today, adn he mentioend that this is the first down economy where he "had to worry about it myself."  :

"As in no longer under Mom and Dad's roof, right?"  I asked, and he said I was right.  This is about the fourth one I can recall in one way or another...since I've been under our own roof. 

Right now, this one simply makes me feel that our retirement comfort level will be either a bit lower or a bit delayed.  Then again, it could get WAYYYYY worse, couldn't it? 

Don't know how old you are and how many cycles you've experienced under your own roof, but I think you will see a lot more of them, good and bad. 

For you , with high rents and other inputs, it only takes a drop in markets to turn everything from sugar to manure...you can only hedge out so far, right? 

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Contributor

Re: Do guys go broke anymore

Have seen big dairies go under. But am still seeing hog barns going up with other older barns that still would work sit empty. Prices go much lower in crops and the guys that contracted out rental agreements at high dollar might be forced into early retirement, but the guys that run a few hundred acres but owned it all and didn't change their operation over the years have been riding high. Just like the stock market, if you can gut it out through the tough times then in the end you MIGHT come out smelling like a rose. Very Very wet in SE MN

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Veteran Advisor

Re: Do guys go broke anymore

First Tier Bank in Nebraska was taken over by FDIC last week--not due to Ag though---loans Calif. - Nevada-- Florida---etc. Sure makes you wonder why someone with all that expertise would put their money out a thousand miles from home when they could of had low risk loans locally ---To BIG to fail or to BIG to succeed???

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Honored Advisor

Re: Do guys go broke anymore

Those shaky loans from far away were part and parcel of the drug of greed that pulled our whole banking system to the brink.  If you bank with Farm Credit, you may recall its attempt to gret Congress to alter its system charter to allow it to get into the action of mortgages outside its described rural territory. 

They called the initiative "New Horizons," and our association pushed us to all sign postcards to send to our national legislators, to convince Congress to let them trade in this trash.  I was totally opposed to the idea, and said so out loud...have been shunned by the CEO ever since.  He simply cannot handle anyone questioning his business acumen. 

The fact that I turned out to be right in spades seems to have only made this worse.   I never said "I told you so," but we both know I bucked him hard on the subject.  Thank goodness Congress did, too.  One reason ag credit didn't freeze totally up in the past two years is that Farm Credit was not in the samed danger that most banks had gotten themselves into. 

I am sure the reason this landed this way was that commercial banks and insuracne companies did not want to split the pie into more, smaller pieces, so we ahve that same greed to thank for at least this small saving grace.   

Whatever the reason, we dodged a bullet in ag financing. 

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Advisor

Re: Do guys go broke anymore

Just remember that if something is too good to be true it usually is.  When I can generate enough cash to buy a 40 every year something is unusual to say the least.

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Veteran Contributor

Re: Do guys go broke anymore

Around here if the weather doesnt change soon there will probably be several farmers hurting. Lots of ground unplanted and what is planted is nothing to brag about. All it takes is a weather disaster and low prices to have it come to a screeching halt.

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Senior Advisor

Re: Do guys go broke anymore

Part of the reason is that farm credit and other rural banks got educated during the 80's just like farmers did. They have learn to require plenty of equity and cash flow to substantiate their loans. And farmers for the most part have became more prudent as well. At least this farmer has.