As most of you have put your planters away and are busy wrapping up spraying, tending to livestock, and picking up the pieces from the recent storms, you’ve probably already begun to think about harvest this fall.
Recent rains have most likely improved the yield outlook for many producers, and grain prices remain strong, which creates some optimism about the immediate future — and for good reason. This year is certainly shaping up to be tremendous for many of our FNB producers.
However, it seems that there is still some pessimism on the producer side of the desk, and I can certainly appreciate where the hesitancy is coming from given the inflated price of nearly all of our input costs, the geopolitical headwinds abroad, the current interest rate environment, and whispers of a recession already floating in the news media.
None of us know exactly what lies ahead, so this is a time to stay prudent with marketing disciplines and take advantage of the markets that are presented. The adage that you “can’t go broke taking a profit” rings especially true now, as grain and livestock markets may be more volatile than ever in the coming months.
Remember to keep that potential volatility in mind when making capital purchases. The profits earned over the past two years may not be indicative of future profit if/when commodity prices fall and input price decline lags behind. We will most definitely see margins tighten in the years ahead.
Finally, always keep your updated break-evens in mind when renewing cash rent leases. It might be a wise decision to let go of your cash rent that is at a premium based on dollar per acre versus quality of ground.
The First National Bank in Sioux Falls is prepared to help you navigate the environment ahead, and we have a dedicated team of lenders, crop insurance specialists, analysts, and professional lending assistants to provide you with guidance when you are making decisions for your operation. We’ve been in ag lending since 1885 and don’t plan on ever changing that!
Farm Food Facts:
- The typical American farmer feeds nearly 152 people worldwide each year.
- Food costs account for only 12.6 percent of American households’ disposable income, leaving approximately 90 percent of their income for other consumer purchases and expenses.
- Less than one dime of every dollar spent on food goes to farmers for producing it; the remainder goes toward processing, packaging, advertising, transportation, and other wholesale and retail activities.