October 21, 2016
The agriculture economy is a long way from the higher commodity prices of a few years ago, when farmers were buying new machinery, building storage sheds and purchasing land.
Today, lower commodity prices are causing farmers to have fewer funds available at the end of a season. However, just because there is less money does not mean that there are not good investments right now. But where should farmers invest to get the most bang for their buck?
Three Midwestern farmers offered their insight on what to invest in during a down agriculture economy. Here are their top three strategies:
RISKY MOVE? Farmers are still willing to purchase land in a down farm economy. Some buy because of price correction, others because of availability. Farmland in many areas of the country does not come up for sale often; purchasing now may be the only opportunity to acquire the land. It is a risk some are willing to take.
1. Land. Alan Madison farms 3,000 acres in northwestern Illinois. It was 15 years since Madison bought land, but that changed in March of this year. He and his wife purchased a farm. "We had been looking," he notes. "We had a correction of 10% to 20% down from what the high was in our area, which was $15,000 to $16,000 an acre for Class A land." The correction triggered Madison to buy. "We weren't sure when we would see that again." Couple the correction with lower interest rates and purchasing the land seemed a viable option, despite lower revenue.
2. Iron. Whether it is machinery or facilities, Illinois farmer Bill Raben altered his investment in iron and now focuses more on repairs. Over the last few years, Raben has been trading out machinery. He found that with discounts, it was cheaper to trade than to lease or pay for repairs. However, last year that was not the case. Rabin decided not to trade because the value of the combine and/or tractor was not as high. So he focused on making repairs.
SHARING STRATEGIES: Three Midwest farmers share their investment strategies given the current agriculture economy. Johnny Hunter of Missouri (from left), along with Bill Rabin and Alan Madison, both from Illinois, all agree that spending money to maintain equipment is a need in any economy.
Raben also has begun mending grain bins rather than adding on. "The bigger you, get the more storage you need," he notes. Raben has 380,000 bushels of on-farm storage, but admits it is not enough. The fourth-generation farmer, who farms 6,000 acres in south-central Illinois, says that the money is just not there to upgrade storage this year. Instead, he is back to investing in repairs to bins until the ag economy shifts.
3. Soil. Missouri farmer Johnny Hunter says his biggest place to invest now is in his soil. Farming in Stoddard and New Madrid counties in southeast Missouri, the third-generation farmer runs 5,400 acres that include field corn, popcorn, soybeans, rice, cotton and pumpkins. Hunter says it is "important to invest in improving soil health." He keeps a close eye on nutrient management programs so his fields can continue to produce for generations to come. He incorporates no-till practices and cover crops to help keep the soil in place and improve organic matter. "We are not making any more land," he says. "We have to invest in what we have to keep it productive."
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