Farmers Forced To Make Tough Choices During Downturn

If you’ve farmed long, you know the good times don’t last forever.  And neither do the bad times, but this downturn in the farm economy has been going on a long time.  The current slowdown has many farmers looking at their operation and what changes can be made.

Farmer Mac’s Curt Covington said after five years of lower commodity prices, there’s not a lot of liquidity left to burn, and not a lot of working capital in rural America.  Covington added leverage is increasing farmer balance sheets nationwide.

“When leverage goes up, long-term debt goes up on the balance sheet, interest costs go up.  When interest costs go up, profitability goes down.  How does that impact that business?  First, it causes them to slow down, capital purchases, in causes the slowdown in expansion.”

Secondly, Covington noted it forces many producers to put pencil to paper to paper, asking what expenses can be trimmed.

But what if there’s no fat to trim?

“Some farmers are saying “well, to right size my balance sheet, I’m going to have to sell a section of ground, I’m going to have to sell a 40, and those are good decisions.  You can’t borrow your way out of this problem.  You can’t hope that things are going to get better on the marketing side to fix things,” Covington added.

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