A well-known agriculture market bear has released a farming position paper that sounds quite bullish, but the positive tone is reserved for the long term and for operators who make the right management decisions now and in the future. Bob Utterback of Utterback Marketing Services says ownership is one way to weather a coming storm.
“If any weather event occurs that could develop a very bullish outlook for us domestically, so having ownership of inventory I think is going to become increasingly important,” he told HAT. “So I’m suggesting that farmers build grain bin storage so they can maintain ownership. That’s one of the big things I’m pushing, but you’ve got to manage that elevator inventory position. You just can’t build a bin and forget about it. There’s management to managing your bin.”
Utterback says those farmers need to know the farming business, but also the elevator business.
“Once you produce the crop you’re no longer a farmer, you’re an elevator. An elevator has learned over time there are certain things you do which is basis and spread management rather than flat price.”
The coming storm will result from very low commodity prices combined with the high cost of production, and difficult decisions for many.
“We’ve had several years of good prices and guys have had a really good time farming,” he said. “And now it’s going to get back to serious time, and they’ve got high machine payments coming, high cash rents coming, and the prices that are being offered are offering out of pocket loss returns. There will be some hard decisions that have to be made. Do I farm this year? Do I continue to deficit-spend hoping it will eventually bounce back? How long can I survive the correction phase?”
Young farmers will have some outstanding opportunities in the future since some longtime operators will choose to exit, but the young farmers will have to pay their dues with a lot of hard work while making the right management choices.
Utterback’s paper consists of four primary factors affecting economic activity over the next 15-20 years. It’s available free by contacting his office at 800-832-1488.