While projected 2017 farm income looks bleak right now, some farmers always find a way to survive.  Quint Pottinger, just 27, is doing his best to beat the odds.

“When I got out of college four years ago corn was $7, and it’s been dropping ever since,” says the New Haven, Ky., farmer, somehow managing a smile. “I was working at a farm 2012 and came home and told my wife, if I’m going to work this hard and build someone else’s dream, I might as well do it for myself.”

Quint and his wife, Leah, had $400 in their bank account and had just booked their honeymoon. He took a substitute teaching job and started knocking on doors, looking for land to rent.

“I went on Google earth and looked for green pastures - land that hadn’t been farmed,” he says. “I wanted to find farm ground we could do well with, but I didn’t want to rent something out from under another farmer.”

Pottinger, like many young farmers, is finding a way to build a business despite poor odds. While he does have a large family farm base, he’s striking out on his own for the most part. He cobbled together 450 pasture acres and began converting pastures to row crops. He bought 80 acres from his family trust – no family discount. He’s trying to compete with the big farmers around him and has managed to scale up to 1,250 acres, despite falling grain prices.

“This harvest was our first big yielding year since college, and I’m looking at that to pay off old debt so we can reinvest,” he says. “The 30-year average for farm profit margins is 4% so we have to structure our budgeting and work in that 4% profit range. Anything extra goes into the business or family living - something that will create stability.”

Make the most of difficult times
Tight margins force farmers to make the most of difficult times, and the Pottingers are no exception. Last year, Quint’s dad Ramey lost some custom acres, so they traded a new combine and reinvested in an older unit “right before the equipment market went south,” says Quint. “It got us out of a financial hole and helped us reduce equipment costs from $125 to $46 an acre.”

Because the Pottingers farm near several bourbon distilleries they used the extra cash to buy a grain dryer. “That’s pretty important because distilleries reject grain loads if they are not at 14% moisture,” Quint says. “When they call you have to be able to deliver quality grain, through the spring.”

Quint also gets advice from Farm Credit Mid-America, headquartered in Louisville, Ky. The lender held a series of conferences for 600 young farmers earlier this year just to teach them ways to weather the current downturn.

“Young farmers have a unique set of circumstances,” says Gary Book, Assistant Vice President of Retail Credit Underwriting for Farm Credit Mid America. “Their biggest struggle is the lack of available capital – being able to finance real estate. We’re here to help them position their operation so when that opportunity does arrive, they are in a good position to buy that asset.”

Those discussions start with business planning and financial ratios. “It’s really eye opening to them to find out what financials they need to track,” says Book.

Young farmers learn about liquidity, solvency and profitability. “We teach them what we call a solvency ratio, which is an equity-to-asset ratio – if the world crashes today could you pay off your debt?” says Book. “Liquidity is your short term repayment capacity.”

Young farmers must also know production costs to determine break even prices.

“Despite corn and soybean prices where they are, I feel like I have found the bottom dollar in my balance sheet so I know what my bottom line price has to be,” says Quint Pottinger. “In September we started marketing the 2018 crop because I know what those input costs are now. So even if trend yields are increasing or decreasing, come fall 2017 I know what my input costs will need to be to maintain profitability.”

More scrutiny ahead
Every farmer, young or old, should know what their lender is looking at when it determines the viability of their operation. And that scrutiny will be happening big time this winter.

In their Growing Forward program, Farm Credit has relaxed its standards for young farmers compared to traditional customers. For a traditional farmer the solvency ratio minimum might be 45%, says Book; farmers in the Growing Forward program may have a solvency ratio as low as 15-20%.

“We determined solvency was one of the biggest hurdles for a young farmer to overcome, so we decided to lower that standard to make more capital available to young and beginning farmers,” says Book. “Lowering that standard in the Growing Forward program allowed a lot of individuals who didn’t have a parent to co-sign to get financing.”

And while young farmers do have difficulty accessing capital for big purchases, they still have advantages over their older counterparts.

“Young farmers are forward thinking,” says Book. “They’re using big data and embracing change and being proactive. They are the ones who are not doing things the way dad did, and they are definitely getting a head start on success. Technology is their friend, not foe.”

A large percentage of land will come available in the next few years as older farmers retire, so there are opportunities coming. “Will young farmers be in position to buy that ground, or investors? We don’t know,” says Book. “It depends on how well these young producers can get themselves positioned today for that purchase. What they are doing now will make the difference in the next 30 years of their lives.”