Farm Recovery Not About Grain Prices, Economist Says
During this period of a lower agricultural economy, farmers should focus more on what they pay for inputs vs. what the farm markets are doing, according to one ag economist.
Michael Boehlje, Purdue University economics professor, is preparing to address farmers at this year’s Top Farmer Conference held July 7-8. While he’ll be focusing on how farmers can take advantage of opportunities to grow their operations in a downturn economy, it’s the direction of the producers’ focus that might be surprising.
“It’s not all about grain prices,” Boehlje says.
“To be frank, it’s more about what is going to happen to input costs that is important. So what we’ll emphase at the conference is that the way to get back to positive margins is not hoping that you have price improvements for what you sell. Instead, be really cautious in terms of what you pay for what you buy, and that you are getting the most productivity out of what you are buying.”
Purchasing inputs and procurement strategies will be more important, going forward, to get farmers back to better times than grain price increases, the Purdue economics expert says. Because farmers can control what they pay for cash rents, fertilizer, and chemicals, it’s important to buy at the right time and get the most out of those decisions, he says.
While the crops grow in the field, Purdue’s Center for Commercial Agriculture is bringing together farm management experts and agricultural economists from Purdue, the University of Illinois, the Federal Reserve Bank of Kansas City, and other organizations.
“There are ways that farmers can grow their operations without having to take on more leverage and financial stress,” Boehlje says. “So, at this conference, we are going to focus on the upside turbulence of this lower ag economic turn vs. the downside,” he says.
When asked if farmers have the mental capacity to focus on the growth opportunities right now, the economist remains realistic.
“For those who are highly leveraged or have a cost structure causing them to have high negative margins, their focus has to be on how to handle the downturn,” he says. However, those farmers who have kept their powder dry, been cautious in their expansion strategy, not bid up aggressively on cash rent, are positioned to make growth decisions.
In its 49th year, the Top Farmer Conference will focus on management and strategy issues, still including technology to a lesser extent.
“There has been a major shift in agriculture’s financial climate over the last couple of years, and margins have significantly tightened – especially in the crops sector,” said Jim Mintert, Purdue agricultural economics professor and director of the Center for Commercial Agriculture. “We’ve developed this year’s conference with that in mind. We want producers and agribusiness professionals alike to really understand the current economic climate and identify strategies that will position their operations for future growth and success.”
Stage of Recovery
It’s a tough question to answer, but many are wondering about what stage the farm economy recovery is in right now.
“My sense is that we are bottoming out. We have seen a nice price recovery driven by weather in corn and soybeans. But, as I say, it’s not all about grain prices,” Boehlje says.
The conference will be at Purdue’s Beck Agricultural Center, 4540 U.S. 52, West Lafayette, Indiana. It starts with registration at 7:30 a.m. on July 7 and concludes by 4 p.m. on July 8.