Most producers will go through financial stress in the next three years, predict 84% of US ag professionals recently surveyed.
A total of 2,300 ag producers, ag economists, consultants, educators and lenders from all 50 states were surveyed by four Regional Risk Management Education Centers and the Center for Farm Financial Management at the University of Minnesota.
Respondents were asked how many of the ag producers they work with are currently experiencing financial stress. On a national level, 62% of those surveyed said that 10% of the producers they work with currently are having money problems. Thirty-eight percent said less than 5% of producers were currently financially stressed.
Respondents were also asked to identify the major factors contributing to farm financial stress. The top three were price/input cost margins, price volatility, and negative cash flows.
Inadequate business planning was identified as the fourth contributor to financial stress. Tightening credit availability was the fifth. Declining land value was a minor contributor, the last of 13 assessment factors identified.
According to the respondents, only 7% of producers are currently “well-equipped” in terms of financial management skills to manage their business through a period of financial stress.”
“It’s pretty gloomy (the report), but it’s better to acknowledge these risks now than it is to wonder three years later what happened to your operation,” says Jason Johnson, Texas AgriLife Extension Service economist and associate director of the Southern Region Risk Management Education Center at Stephenville, TX.
In Texas, 89% of ag professionals expect a sizable number of farmers to experience financial stress in the next three years, says Johnson.
“Producers are learning that managing for profit means managing both input costs as well as the selling price for their commodities. What happens is that when margins shrink, we have increased risk but reduced potential rewards at the same time. The margin for error shrinks and the consequences of mistakes are magnified. That’s not a good recipe for prosperity,” says Johnson.
Johnson suggests that with some assistance and maybe increased knowledge, producers have the capacity to adapt to the new market environment. Among these skills is the ability to produce the documentation needed to secure loans, Johnson says.