Commentary. 

I am a glass half-full kind of person and am often accused of over-optimism in many things, but I do not believe in “luck.” I believe that opportunity meeting readiness results in what many people identify as “luck.” I think it is important to take risks to be successful in business, but to be prepared, with every risk, for failure.

What is the saying about putting all of your eggs in one basket?

 Agriculture overall is enjoying some pretty amazing prices. Corn, cattle, hogs, wheat, and soybean prices in Chicago are making news almost every day. But the price farmers are paying for the tools, equipment, services and inputs they need to grow these products are climbing at record pace as well.

One of the reporters at Brownfield Ag News recently did a story quoting Brian Briggeman, an economist with the Federal Reserve Bank of Kansas City. What he said should come as no surprise to anyone reading this column. He said America’s farmers have greatly increased their debt levels over recent years and could be at risk of more financial stress.

If incomes fall or interest rates go sharply higher, the fed economist believes that producers will face even more financial stress in a short amount of time. Especially vulnerable, he says, are livestock producers and younger operators.

A report issued by the bank says real farm debt has risen nearly five percent a year since 2004, the fastest increase since the years leading up to the 1980s farm debt crisis.

Unlike the accumulation of farm debt in the 1970s, the report says the recent run-up is concentrated in real estate and within a small group of producers. Real farmland values have risen 40 percent since 2003.

Briggeman says “low interest rates and robust farm income” have kept “financial stress from spiking for the average farm operation” but that could quickly change.

 Another Brownfield reporter recently interviewed University of Nebraska livestock marketing economist Darrell Mark who said that although record feeder cattle prices are positive in the short-term, he is concerned about the impact on the overall cattle market structure. Mark says in an attempt to satisfy the short run demand for beef with a smaller cattle inventory, the industry has been slaughtering more females—both cull cows and bred heifers.

 The impact of a continued decline in the nation’s cow herd reaches beyond the cow-calf sector. Mark says if the long run trend towards fewer cattle continues, there will likely be fewer feedyards, and fewer beef packers and processors as well. He says that could have a significant impact on the communities where they are located.

I am no economist and I’ve never met an economist who gets it right every time, but what Brian Briggeman and Darrell Mark have to say sure seems to make a lot of sense to me.

I don’t buy lottery tickets. The only time I’ve ever “played the slots” was on vacation in Colorado with my grandma and at the airport in Las Vegas at 5am years ago, waiting for a 6am flight back to the Midwest. I guess I believe, as I’ve heard for years, that farming and ranching is enough of a gamble, so why go to the boat?

 All I ask is that you keep your eyes open and remember that although the winnings are greater with greater risks – so, my friends, are the losses.