Time To Cut Back On The Extras For 2014

One farmer says break-even won't be as enticing with $4 corn. Make sure the extras actually pay off.

Published on: Nov 8, 2013

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Even with lower prices on the horizon, Erickson and Schnitkey say this is nothing like the downturn of the 1980s.

First off, Schnitkey says most famers were very responsible during this period of profitability. Many paid off debt and built healthy cash reserves. Farm family living costs increased only marginally, Schnitkey adds.

If reduced profitability creates hesitancy, what's the best use for those cash reserves? Schnitkey says drainage is still a terrific investment.

"Especially on wet farms, we still see really good payback on drainage improvements," he adds.

As long as farmers don't have to take on significant long-term debt, land is still a great place for cash, Schnitkey says.

"Land is still a real asset," he adds. "Those are good to have when we're unsure about inflation."

Speaking of land, Erickson and Schnitkey do not anticipate a reduction in cash rent. That said, Erickson notes many landlords likely left cash on the table once the 2012 drought had fully played out. However, Erickson expects the high end of cash rents will soften a bit in 2014.

Schnitkey says growers should be careful to avoid picking up new rental ground at the high end of the spectrum.

"Those higher cash rents won't cash flow with $4.60 corn," he says.