Ag Economist Farming Preparing For “Financial Winter”

If you’re not happy with the weather, wait a little while and things will change.  That phrase works not only for the weather, but the overall ag economy.  Ag economist and financial analyst Dr. Dave Kohl recently spoke at the 2017 Ag Bankers Conference in Wisconsin.  He said the ag economy runs through four seasons.

He said the current economy enjoyed it’s summer, with high commodity prices and great growth from 2006 to 2012.  Currently, we’re in the fall, where prices are declining and some producers are feeling more and more restricted.  Dr. Kohl said he anticipates the economy will hit winter in 2018, which will negatively impact roughly 60% of farmers.

“We’ll weed out some of the inefficient, some of the less progressive types of managers and those 40% will selectively buy out the operations that are inefficient so we’re going to through these four seasons.  This is a long gated downturn.  The 1980s was like a Clayton Kershaw curve ball, it just dropped off the table for about five years and we slowly came back.”

Dr. Kohl  expects spring between 2021 and 2025.  But, what about the statistical 20% of farmers that may not make it to the spring cycle?  To determine if marginal operations will make it the next four years, difficult questions will need to be asked.

“Are they multiple refinances, are the refinances because of management issues, are they because of lifestyle issues?  Too high of a maintenance lifestyle?  And in that case if they continue on they are going to get out to the end of the peer and the water is going to get deeper.”

For those currently struggling, Kohl recommends a game plan, with specifics on how your market plan will change, and how you will pare down your operation.  He said those conversations should take place with a financial consultant.

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