Analogous to a racetrack, it does not seem possible that we have already hit the 2024 quarter mark! My extensive travel and engagement this winter with numerous groups have provided much insight from the road. The following are a few brief perspectives.

2013 to 2020

It appears that the period ahead of us in the agriculture industry is one of tighter margins and extreme economic volatility. The timeline has similar characteristics to the post-commodity super cycle era of 2013 to 2020, just prior to the pandemic. What is different this time is that costs, capital needs, and interest rates are inflated and very resilient to change. This is squeezing margins and will require your business and financial management “A” game.

Burning working capital

The other day, a producer indicated that he had built up $1 million in working capital and cash reserves. Last year, operating losses reduced his reserves by one-third. He stated that in 2024, he will be required to make some difficult decisions to preserve those liquidity levels so that he does not need to use his equity for refinancing to cover working capital needs.

Farmland values

Farmland values in select areas are shooting through the roof as competition between bidders, often two individuals, escalates. Overall, one can observe the softening of the land marketplace. However, the supply of land remains limited in some areas with sufficient demand, resulting in a resilience plan on land values. Most individuals purchasing land are growing businesses with cash and working capital along with equity reserves to be able to finance the purchases.

Make you a millionaire

The green energy movement is interesting to observe nationwide. Some producers have indicated that firms are promising to make them millionaires overnight if they sign up now! We have heard this one before. Make sure when considering any opportunity that it passes the economic and business “sniff test.” Is the opportunity consistent with your short and long-term goals? What are the possible unintended financial and nonfinancial consequences? In today's economic environment, any new program has to be profitable, or in the black, without a bunch of government subsidies to be sustainable.

Debt and global slowdown

Large forces such as a global economic slowdown of trading partners and buildup of government, business, and household debt will need to be closely monitored throughout the remainder of the year and beyond. Will the asset devaluation occurring in China spread to the rest of the globe? Can we continue to increase the U.S. federal debt by $1 trillion every 100 days? Maybe both will continue, but the buildup of debt is not sustainable.