Farming: Where It’s Been and Where It’s Going
Al Kluis , writing for Successful Farming, reminds everyone that in order to move forward in agriculture, you need to look back and learn from the ups and downs. Here’s a recap of the last five decades:
- 1970s: Farm prices and profits were steadily increasing, and USDA farm programs required set-asides. Inflation increased each year and so did costs which meant farm profits were hard to reach. The increasing inflation was a problem for agriculture and U.S. economics as a whole.
- 1980s: President Reagan was elected in 1980 and he promised and succeeded in slowing inflation. This caused interest rates to soar (prime rate peaked at 10% in April 1980). The new Freedom to Farm policy eliminated set-aside programs, increasing planted acreage. With the U.S. dollar rising to 164 in 1985, farm prices and profits were hit hard, and land prices dropped by 50% to 70%. All of this created the Great Farm Crisis which hit bottom in 1987. Farm prices finally started to turn around by 1990.
- 1990s: This decade was a time of rapid growth in farm productivity and global demand. Those who had and sold good crops at the right time made good returns. By the late 1990s, prices and profits started to diminish, putting in a major low in 1999.
- 2000s: George W. Bush was elected and global trade and export demand moved into high gear. Then came the financial meltdown of 2008. Stock markets, farm prices and profits dropped, hitting bottom in 2009.
- 2010s: The next four years following 1009 held higher prices and profits. A major high in grain and land markets emerged in the third quarter of 2013. These four years were followed by down prices from 2013 to early 2017. The U.S. experienced zero interest rates and slow economic growth, and many began questioning the benefits of free trade and globalization. In June 2016 England pulled out of the Euro and in November 2016, President Trump was elected.
Kluis thinks the changes being proposed by the new administration will probably have the most dramatic changes on ag profits since President Reagan in 1980, but he believes things will be just the opposite of what they were then: He expects a wave of inflation, and he’s optimistic about prices but concerned about profits. So here’s what he advises in order to position your farm for the next eight to ten years:
- Prepare for inflation
- Manage Your Margins
- Maximize Your Income
- Invest in Your Team
Farming is, as Kluis put it, a very long-term business. Positioning your farm for the future is critical to your success and survival. See what he has to say about the preparation steps above by clicking on the link below.
There are many of you who have ridden the “agricultural roller coaster” of the past 50 years, and if you planned accordingly and survived, you’ll be able to weather whatever comes next.
-Terry Olson, Titan Outlet Store Team