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| https://www.proreferral.com/hg/ways-earn-money-your-property/ |
Five years ago it was a great day every day to be a farmer in the Midwest. Commodity prices were high and interest rates low; this combination allowed farmers to have purchasing power for new equipment or land.
Recently, China’s economic contraction has shown detrimental impacts on the US commodity markets. With a possible reduction of exports to China, commodity prices have fallen as of recently, but with every completed trade with China the commodity markets react positively. Lower prices and uncertain volatility affect all areas of the agriculture industry.
Jim Monke talks about the risks of credit in his book Agricultural Credit: Instituitions and Issues" (2015). Low prices have farmers in a financial frenzy. Input costs are not decreasing while commodity prices continue to decrease.
Many have recently financed farmland loans for a 15-year term but with lower profitability and working capital an increase to 30-year loans may be done to reduce per acre payments. This is becoming a common conversation in most loan officer’s offices these past couple months. Farm debt has reached an all time high of $318 billon at the end of 2014. Data shows that this is to rise 3% in 2015.
Debt-to-asset ratio has been up and down the past 50 years but in the last 5 years, the ratio has been on a steady incline and is expected to be at 10.9% in 2015. Debt-to-asset ratio is used to determine the risk factor for the lender; a lower ratio shows less risk.
In these low price, high risk times farmers try to incorporate technology as often as they can, but it is also one of the areas farmers cut back on first.
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| Marc Arnusch shows his sprinkler system that monitors one of the pivots in his fields. http://www.washingtontimes.com/news/2016/mar/6/farmers-consider-expensive-tech-amid-low-commodity/?page=all |
Marc Arnusch of Greeley, CO comments on the need of technology in an article from the Washington Times: "I don't see that technology is a luxury at all, I see it as important as the tractors on our farm."
Arnusch uses soil-moisture monitoring in this fields. He buries tension probes in the field that senses how much water is in the soil. Last year, he used 20% less water on his corn crop.
If farmers can adapt to ag technologies they too can see lower operation costs.
To read the full article with Marc Arnusch: http://www.washingtontimes.com/news/2016/mar/6/farmers-consider-expensive-tech-amid-low-commodity/?page=all
Sources:
Monke, Jim. "Agricultural Credit: Institutions and Issues." National Ag Law Center. Congressional Research Service, 8 Apr. 2015. Web. 13 April 2016.
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