Regardless of whether cotton and grain prices are high, or the bottom has fallen out, a sound business plan is a valuable tool. A strategic management plan should be ongoing, says Frank Fogleman, a producer who is trying to deal with 2016’s challenging economic outlook.
The Crittenden County, Ark., farmer was among 16 leading producers who participated in a BASF “Survival Strategy Summit” during the Mid-South Farm and Gin show at Memphis.
An important part of his risk management strategy, he says, is “Keep it simple.” Farmers sometimes have a tendency to changes things, switching from one crop to another, he says. “I prefer to do what I’m good at. I’m more likely to make yields by growing the crop I know best.”
High yields may be overrated, Fogleman says. “We need to consider economic yield and profit margin.”
Other participants in the summit, which was aimed at giving producers a forum to discuss the current outlook, said the current landlord/tenant relationship favors the landlord, and that under the current economic strain many farmers face going into 2016 planting arrangements need to change. Landlords, they say, have done well the last seven or eight years, and a dependable farmer was a good investment.
GOING THROUGH A MUD HOLE
But that has changed, says Steve Droke, a Hornersville, Mo., producer. “We’re about to go through a mudhole.” Landlords should put a good farmer in the “asset category,” he says. “A good farmer is an important part of the return on investment. A good manager does things on time, and follows sound management practices.” That kind of tenant is worth “making concessions for.”
Droke agrees with Fogleman that farmers have to add more precision to management, and “drill down to the cost of production for each field.”
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Kenneth Hood, Perthshire, Miss., farmer/ginner and former National Cotton Council chairman, echoed Fogleman’s advice to stick with what you’re good at. “Last year was not as good as it should have been,” Hood says. “We had no cotton in 2015 — and I found that we can’t grow all grain with a cotton overhead.”
He’s adding cotton back to the mix this year. “We still have our infrastructure for cotton; we still have a gin and pickers.”
Farmers need to look at production costs and try to find ways to economize, says Hood, one of four brothers involved in their family operation. “But be careful of what you cut — if you don’t make your yield, you’re not going to make a profit.”
Sledge Taylor, Como, Miss., producer and immediate past chairman of the NCC, says the 2015 crop “was good, but expensive. We’re making good yields, but there’s not much left after we pay expenses. With these tremendous production costs, we fear a bad year.”
YOUNG FARMERS’ PLIGHT
Several of the panelist producers commented on the plight younger farmers face as they prepare to make a crop in the most challenging circumstances they’ve ever faced.
“Young generation farmers have never seen a situation like we’re going through,” says Jimmy Hargett, Alamo, Tenn., producer. “We’ve seen 40 percent of the market fall away in just one year. We older farmers have been through three or four of these periods of depressed prices — but young farmers don’t know how to react.”
Despite today’s weak commodity prices, times have been worse, says Steve Droke, who recalls the 1980s and 18 percent interest rates. Now, he says, farm lenders are looking hard at income potential in order to justify loans.
Buddy Pierce, Jonesville, La., producer, says in 2016 “I’ll be farming afraid. But, I know some young guys who have never missed a crop.” He plans on buying enough fuel to get through irrigation season while prices are down. “I’d like to see chemical and seed costs come down, too,” he says
“We’re making good crops — but not making any money,” says Jimmy Moody, Dyersburg, Tenn., producer “It’s a dangerous situation. Lending institutions know that, too.”
Hargett says the major farm seed and chemical companies could help farmers balance their books. “Tech fees need to come down,” he says. “Five major companies could help us out. Tech fees are the same, whether commodity prices are high or low.”
Producers around the table agreed that all their usual crops show little promise for 2016, and that they can’t see good numbers anywhere. Some also worry about water, especially those who depend on irrigation, and say the loss of adequate water would be a disaster.