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Ag economy supported by interest rates, land values

Source: Wikimedia Commons

The United States Department of Agriculture (USDA) – Economic Research Service (ERS) expects net farm income to rise in 2020. Early forecasts suggest a three-percent increase, bringing total net farm income to $96.7 billion. 

Chris Behrens, who represents a full service agriculture lender, speaks to factors impacting today’s farm economy. He also shares how producers can excel in production agriculture.  

Low interest rates and steady land values strengthen today’s farm economy, says Chris Behrens, business development manager with Rabo AgriFinance. 

“Interest rates have stayed quite low. There is still 20-year money available under four-percent. That’s been a strength when other things have been tougher. Land values have stayed solid/steady, a real underpinning of the Ag economy,” Behrens said.

Behrens traces strong balance sheets to strong land values. One way to improve a balance sheet is by maintaing working capital and improving marketing efforts, according to Behrens.

“One thing we talk about a lot is maintaining working capital, so you have that cushion for (the) tough times. The other thing is marketing,” Behrens said. “There’s been some opportunities to sell crops at good prices. And when margins are tight, that success in marketing, or lack thereof, is what determines top producers from those breaking even or losing money.”

Behrens also recommends adjusting cost structure to accurately respresent today’s working environment.

“We’re in a tougher margin environment. Guys that are successful have gotten their cost down, and that cost of production to where they can still make money. The cost you had when corn was five-dollars doesn’t work today. If you (can) get it down, there’s still margin to be made,” Behrens said.