Rod Hebrink, president and CEO at Compeer Financial, discussed the financial health of Wisconsin, Illinois and Minnesota farmers during a visit to the Farm Progress Show in Decatur, Ill., on Aug. 28.
“From a lender’s perspective, we have been pleasantly surprised with farmers’ overall financial health,” Hebrink said. “Most farmers will be able to continue farming.” However, he noted, dairy farmers are in a much weaker financial position than corn and soybean growers.
“The period of profitability for dairy producers was 2013 and 2014,” Hebrink said. “For the last four or five years, we have been in a downturn. We’ve had some shallow losses. As a result, many producers have been living off their reserves. In the past year, we’ve seen a number of dairy farmers of all ages exit the industry.”
Although milk prices have been steadily rising since February and have returned to a profitable level for most, Hebrink said it will take time for dairy farmers to catch up. He noted that dairy farmers will continue to exit dairying, but at a slower pace. Wisconsin lost 700 dairy farms in 2018. The Dairy State has been losing between two and three dairy farms per day so far in 2019.
“Wisconsin lost 10% of its dairy farmers in the past year,” Hebrink said. “Many are making the decision to exit farming on their own; others who have discontinued dairying are grain farming now. Some are also raising beef.”
Hebrink said low interest rates have been a positive for all borrowers.
He said the cold and very wet spring was a challenge for many farmers. “We did a lot of educational programs last spring to help them decide if they should take prevented planting,” Hebrink said. “Every farm is in a different position. We worked with them to help them decide.”
He noted that one characteristic that often separates successful farmers from the average is management. He said top farmers focus on managing operating costs all year long and making prudent marketing decisions.
“That all takes discipline,” Hebrink explained. “December corn futures hit $4.75 per bushel in June. Some waited for it to go higher, and a small percentage locked in a profit. But that’s the discipline it takes.”
Hebrink believes most grain farmers are excellent producers. “Most of them really know how to grow crops, and they do a great job,” he said. “The differentiator is how well do they manage?”
Hebrink said more grain farmers use futures than dairy farmers. “Dairy farmers need to do that, too,” he said. “Milk prices have come up through the year. The fundamentals are there for dairy farmers to lock in a profit.”
Hebrink also advised dairy farmers to sign up for the Dairy Margin Coverage Program at their local Farm Service Agency office if they haven’t done so already. Sign-up ends Sept. 20.
“The new program will make significant payments,” he said.