Market News & Headlines >> Brock Consultant Katie Hancock's Blog: 5 Encouraging Thoughts During a Down Cycle
Insights from Brock Associates Consultant Katie Hancock
Are you discouraged and feel unrewarded for your efforts? If so, you aren’t alone. It’s easy to feel hard work is not paying off when profits are minimal. There is a silver lining at the end of the tunnel though. Here are some tips to get you through:
Size does not determine profitability. We have all seen neighbors that use old equipment and minimal labor. From the outside they appear to be struggling. In reality, you will often find these individuals have the lowest debt and expenses. This does not mean they’re making more net money necessarily, but the small operations have the potential to shine- especially if market prices mixed with expenses result in a loss per acre. You don’t have to farm 10,000 acres to be successful. For example, a 2,000 acre farm could be making $30/ac whereas a 10,000-acre farm may be making $10/ac. It’s all about how well you do with what you have.
There is no silver bullet. There were a few years that seemed too good to be true and they were. Good years average out. Many days I feel I’m not being rewarded for my efforts. Some like to blame my generation, but I like to see it more as a learning curve. The younger farmers like me see the success of others, but we weren’t around to see them struggle on their way to the top.
Cycles don’t last forever. All businesses have cycles. Simply put, economic activity has periods of recession, recovery, growth, and decline. You don’t have to be an expert on macroeconomics to understand high prices cure high prices. Supply, demand, and available capital influence the reaction of the market. While it’s impossible to accurately predict the term of a downturn, many experts use an average of 6 years. It takes planning and flexibly to work through ups and downs. We have to wait it out and hang on- possibly through 2018.
This is an opportunity to work smarter. It’s easy to let management slip when profits are high. There’s a sense of invincibility. Most operations tend to have a mix of conservative and aggressive personalities- which commonly reflects spending habits too. I see this as a great opportunity for the conservative individuals to take advantage of the aggressive operator’s agreeability to fine tune the entire operation.
No one is getting a free ride. The Ag economy is not the only line of business that’s struggling. Unemployment is 5.1%, compared to 10% in October 2009. Though it appears to be cut in half, that’s not counting those that have completely given up on finding work. And the ones that have found work may not be content. Recent college grads, for example, aren’t finding the opportunities they expected, so the grass may not be greener on the other side.
Recently, my dad told me it’s not a quick game. The goal is to build net worth and be patient. Successful agriculture operations will dedicate more time focusing on finances and marketing. They may not cut back on the operations side, but find it pays to have a dedicated financial employee or hire the help. Don’t be discouraged and know that hard and smart work pays off in the long run.