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November 20, 2019
A young man I know well asked my advice on how he could get his own farm started by next spring.
He had USDA's farmers.gov pulled up on his screen when he called. He wanted to know more about programs, base acres, MYAs, ARCs, PLCs, EQUIP, insurance and such. He was learning.
He knows how to farm land. He's a hard worker and known as a good, reliable farm hand in his area. He can handle equipment — from tillage, to planting to harvesting — better than most. His family doesn't own land or equipment, though.
He wanted to find some land to rent. He was working on avenues to get use of equipment. None of it was going to be free.
I really didn't need the back of the envelope to show him: Setting out to farm with no land or equipment during the worst economic downturn in recent memory, well, wouldn’t be easy.
I didn't want to poo poo his ambition, though, or his drive to advance in something he loves, so I told him briefly what I knew about the basic economics, programs, risk management and financing of farming.
"If I can clear just one dollar, I'll consider that a win," he said.
He will find securing financing difficult; not any with reasonable terms. I made him promise he wouldn't go after or entertain any 'alternative' methods to bankroll his farming desires, or get locked into an arrangement he can't unlock.
Even established, good farmers find it tough now, burning through their capital. And, yes, I had to explain to the young man what capital was. He wanted to learn.
According to a well-presented American Farm Bureau analysis released in October, U.S. farm income in 2019 will reach $88 billion, or the highest net farm income since 2014’s $92 billion, but it will still be a third lower than the record high in 2013.
It is important to note that of that $88 billion, 40 percent (or $33 billion) will come from trade or disaster assistance, the farm bill and insurance indemnities, the AFB report says. Farm debt in 2019 is projected to be $416 billion, a record-high, with $257 billion in real estate debt and $159 billion in non-real estate debt.
In November, the American Banking Association and Farmer Mac released the 2019 Agricultural Lender Survey, which surveyed more than 450 ag-based lenders. The top five concerns these lenders had about their producers were:
Liquidity (working capital);
Farm level income;
Uncertainty around tariffs and trade;
Some growers are finding profit, even now six years into a depressed U.S. farm economy.
Ben Potter, senior editor for Farm Futures and reporting from the ABA Agricultural Bankers Conference in Dallas in November, said the tone of the conference "could be boiled down to two words: Cautiously optimistic."
Potter says, "57 percent of agricultural borrowers were profitable this year, up six points from a year ago, according to the survey. But there's a regional split there, with the West (69 percent) and South (66 percent) moderately outpacing the Corn Belt (55 percent) and Plains (55 percent). Nationwide, lenders expect 56 percent of borrowers will hang onto a profitable season next year."
I didn't have these numbers handy when I spoke with the would-be farmer. Might be a good thing. Hard to say if they are all good or all bad. Like I said, didn't want to poo poo him too hard. We need his generation interested in farming in the U.S. one way or the other.
The young man wasn't discouraged with our conversation. I told him I'd connect him with some folks a heck of a lot smarter than I am in such matters. He said he'd keep looking into things. I could hear the wheels turning in his head on the other end of the line.
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