The boom years of the last boom cycle, starting in 2007, are slipping away. That's how Mike Boehlje looks at it. He is a Purdue University Extension ag economist. That doesn't mean the world is. It just means farmers will need to be smarter and operate when margins are tight once again. For the past several years many farmers have seen excess profits.
"That time is gone for now," he says. "Agriculture is cyclic. The down years tend to last longer than the boom years, but I'm still optimistic long term. It's the short term that farmers need to weather."
He has several recommendations that farmers can follow to help prepare and be ready to get through these tougher times of tighter budgets.
First, watch the markets and lock in a profit through marketing techniques when you have a price you can make money at.
"We're not talking about waiting to lock in $2 profit this time," he says. "That would be unrealistic. You may want to start locking in profit by taking the price if you can make 50 cents per bushel, or maybe even 20 cents per bushel. If you can lock in profit, do it."
Second, buy crop insurance. Boehlje says this is the time to buy as much crop insurance as you can. You need protection against risk if the weather is not favorable.
Third, lock in interest rates. There are still banks and lenders who will give fixed-rate loans. He believes interest rates are going up, and while they shouldn't go to levels anything like 1981, at 21%, he believes locking in fixed rates at levels you can still get now would be a good deal.
Fourth, pay down debt. If you're still in a position to do so, pay down some of your debt. It won't be subject to higher interest rates and will put you in a better position if it's gone.