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Veteran Advisor

Feeling Stressed-Out, There's Help

Because of the low commodities market, the bottomline's of farm operations have taken a hit. Looking forward, without adjustments in expenses, grain marketing, etc., the financial stress could be sitting in the passenger side of your pickup, for awhile.

 

But, there is help. I invite you to take a few minutes and digest what a farm financial associate shared with me in this Q & A about what he is doing to help farm families under financial stress.

 

Full Story: These Are Soft Hard Times For Farmers

 

I hope you find this helpful.

 

Mike

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9 Replies
Honored Advisor

Re: Feeling Stressed-Out, There's Help

Mike everyone should read the article, what stood out is ...`many don`t realize a bank examiner can come in and force the bank to close out farm loans`.  they did it in the 80`s, if it was done again and excess land and machinery hit the market, it could take this sucker down and the cascading effect of perhaps having a decent 10% debt could turn ugly quickly with declining valuations.  I don`t think it would happen, but it`s something to keep a eye on.

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Veteran Advisor

Re: Feeling Stressed-Out, There's Help

BA Deere,

 

I found this guy at a meeting that I attended, but for a completely different reason. He seemed to be able to move forward this whole discussion of low markets, tough times. It's getting hard to find a different angle for this farm economy's environment. But, Mr. Jensen has a unique perspective about just how farm families are trying to hang in there.

 

Thanks for your kind words. I hope others find this helpful.

 

Mike

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Honored Advisor

Re: Feeling Stressed-Out, There's Help

This time is not "soft" hard times... it is going to be a hard fall..and already has been for those who staggered out of the drought...............for several reasons.

You are right ...... Banking regulations is one of the reasons.......Banking regulations have more to do with political correctness, non-descrimination, and such than they do with a healthy banking sector..

 

Second there is nothing but smoke and mirrors for an agriculture safety net compared to the 80's....... 

 

Third, there are not other jobs to turn too---- The rest of the economy in the midwest stinks worse....

 

Fourth, 

I love this quote...... "They now have pressure coming from anything from new vehicles; a new or renovated home; expensive vacations; newer, bigger, better electronics; and campers. It’s hard to pull back from that new living level."   

All that tells you is how disconnected this guy is from reality....... It gives him a parasitical appearance and maybe insight to his bias against profit in agriculture.

But he is right and wrong... foolish and misrepresentative examples....  but the cost of living on independent farms (or anywhere else) is much higher than in the 1980's.  In many ways higher living costs are now mandated.  Farmers who choose to bypass costs can find they do not have the choice.  Health insurance, computer/phone technology, internet services, quality housing, federal child care standards,  on and on....... should be expenses of choice, yet they are mandated by legislation from the rich legistators and bureaucrats looking to force living standards regardless of income levels.

We have the "helter skelter" of economics in agriculture.  Farm land that is unaffordable for farmers will likely not be owned by its inhabitance in the future.  That is the life blood of farming,,, without it there is no borrowing power, no retirement, no security.

 Equipment too expensive to own....The competition for low income transportation and rental property is extensive, making it too expensive to afford.......Something is sick when a 5 yr old truck with 140K miles sells used for a price within 20% of a new one.  It is not a matter of cheaper, but who gets financing........at every level.  For years we have shipped our worn out equipment to Mexico.  have they sustained good production with old equipment? No.... They are buying grain in ever increasing numbers.  But we expect our farmers to ratchet back to the a poverty existance, tear out that enternet connection.  live without expensive sewers ...and mosey back to a "better time" with a pitchfork and a lover.   ---- but they can't have children or a pet in such conditions.

 

Stable markets.......... a benefit of 1980 is non existant now we have no idea what is a sustainable price level.  Inputs or production.

 

Living expenses ..........The former concept of tightening the belt and staying out of town is not available..... a good % of that "living standard" is mandated.  Health insurance, technology, internet, clean water, clean air, quality housing, etc etc.  More and more is dictated by the "regulation" noose.  

I rode a bus with a young man who was going to the social services office locally to apply for assistance.  He was told he can not apply in person, he must go home and apply on line...  The look on his face was telling.  No chance he had internet access or a computer.  Nor the training to navigate the web site of a disconnected government agency...  He was closer to a cardboard box than assistance, not a minority, not handicapped, an unmarried live in who can't afford to marry and loose benefits......with mouths to feed and limited skills..playing a survival game          we are in La La land when we hold out the carrots to manipulate living standards.

Farm people are not exempt from this and the public is asked to pay up constantly to be or care for the poor.

 

Parasites............Unfortunately this interview guy comes across as just looking to capitalize on hard times on the farm and doesn't even have the energy to change the name on an old program.  I'm sure he doesnot intend to listen without a fee paid by either the "soft" poor farmer or the "soft" taxpayer.

 

Unfortunately this is a whole new ballgame from the 80's and banking standards and governmental oversite (demands) is just part of the problem.....

It has always been a survival game, and this is a new level in the game.....we will see how well the animation in this one is drawn.  I fear there won't be many survivors...... Just new levels of integrated food production...

 

Senior Contributor

Re: Feeling Stressed-Out, There's Help

I guess I'm confused. Land values ,rented and bought in my area are overvalued by at least 30%, but yet farmers are starting to complain at the watercooler that there is no margin left. Yep , you just bid it all away. Why???" so someone else doesn't get it" and here's a good one "but I need to support my big line of machinery".
The mentality and justification excuses never cease to amaze me!
Stop digging your own graves!
The smaller guys are having difficulty maintaining land base until equilibrium returns.
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Honored Advisor

Re: Feeling Stressed-Out, There's Help

IHtractor, farmers have about as literal as you can get, a tiger by the tail.  If a farmer farms x amount of acres and spends $1 million in inputs, but drops acres and only needs to spend $500,000, depending on how their prepaying and such is setup, the IRS might look at that as "$500,000 in extra income", in that case, they might have to write out federal, state taxes of $250,000...so it`s like continue renting the acres and losing money or pay taxes and loss even more.   I think there`s alot of factors involved that pride doesn`t always bring out in the open.  I know in my putt-putt operation, I`m in a moderate scramble to spend money by December 31st...money I probably don`t have, but money i`ll be happy i spent when dumping the shoeboxes of reciepts in February tax time.

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Senior Contributor

Re: Feeling Stressed-Out, There's Help

BA,
That senario is somewhat of a stetch , however if the case a recipe for disaster as is all the front loaded sec 179 stuff.
Iets see I sec 179 a bunch of new paint, now I need more acres to justify my new paint, now I gotta be aggressive to get more acres, so I bid all the profiit out...I think the problem of paying taxes will eventually take care of itself in cases like these.
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Honored Advisor

Re: Feeling Stressed-Out, There's Help

Give that some thought................

What you are saying is .....

It is the farmers fault equipment is so expensive............

It is the farmers fault that rent is too high........

It is the farmers fault that prices for grains are down .............

"""""""""""""""""""""    that basis is so big.............

""""""""""""""""""""""""" that equipment wears out..........

on and on

 

There is logic available to draw "the farmers fault" for everything.  It is simple and easy.  He dug his own grave.  

 

that logic ......"new" paints me into a corner.....  

 

it is simply then,  the public is going to have to find smarter slaves.

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Senior Contributor

Re: Feeling Stressed-Out, There's Help

SW,
Not everything is the farmers fault, however some things are. High rent yes farmers fault, As long as you're willing to pay what JD wants for new paint ,yes its the farmers fault, low prices no unless of course you ripped up a cow pasture in hopes of 7 dollar corn.
Farmers gotta take some of the blame, especially in inflated land valuess.
You can sec 179 faded paint too.
Trust me I farm , see it all lived thru the 80's .
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Honored Advisor

Re: Feeling Stressed-Out, There's Help

Oh I don't think there is a day when the farmer does not shoulder blame......personally........ and who on earth cares what the blame at the coffee shop is...

 

If his land rent agreement has not changed in 20 years. Been benefitial to both sides, but three years of inflated expenses and falling grain prices make it high rent.  How is that the farmers fault and what should he have done different?

chasing profit through cheaper rent or higher rent for land can turn into a terminal illness.

 

And I don't like the cow pasture comment..cattle left the pasture first and for a lot of other good reasons..... no matter how logical the theory, there is no cow pasture without cows.   the big production is not coming from an old cow pasture in Iowa.

-- The pasture analogy always turns to a social engineering project that says there should not be farming in the high plains or irrigation in nebraska... It Just becomes a farmer pointing at the other farmer and blaming him.

 

New paint,,,,,,,,,...  It assumes that if you don't replace the old one it will run indefinitely cheaply. Yet repairs on an engine in an old one will run higher than the initial cost of the tractor new.

When the cost of new "paint" goes up rapidly, the cost of everything in the used lot goes up incrementally as well.

We do not dodge this cost simply by saying no to an upgrade..  That is a lie we tell ourselves, but the cost of production factor made up by depreciable equipment still goes up with inflation and rust.

I know at times it is a necessity to say NO to inflated prices.  But Avoiding new paint eventually only guarantees one thing.......... a future salvage yard.

 

Even those that can be pointed to as making those mistakes..... buying overpriced land, taking on rent when it is high,  thinking they can attract rental land by buying better machinery, expanding on last years price instead of a 15 year average projection.  etc etc ..... Look mistaken now....  But the guy who expanded in 2009 doing the same things looks like a wise man.  

 

What seperates a successful farmer from a failed one is mostly timing.

 

I've said several times,  In production agriculture 40% of the process is in your control.  And if you work day and night as wisely as possible you can attain nearly 42%.....   maybe 45%  

It is an abstract comment to make a point.  If the young farmer follows all the wisdom of the previous three generations will he succeed?  No one can guarantee that ..... nor should they..

 

I just try not to believe that the 65% of farmers, in my lifetime, that have discontinued farming did not generate their own demise.

 

Thanks for running through the issues with me, ihtractortheray

 

 

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