September 25, 2012
Guest blogging today is Mark Smither, VP, strategic director.
If you want to know what farmers in the Midwest are really thinking, just visit Husker Harvest in Grand Island, Nebraska. Summer is winding down. Combines are already in the fields. Producers are walking the show with a sense of confidence or caution, depending on how their crops are doing.
Paulsen Marketing was there to talk with farmers and the myriad companies hoping to sell them something newer, bigger and better. The question on everyone’s mind seemed to be, “How will the worst drought conditions in nearly 60 years affect future purchase decisions? “
The weather at Husker Harvest served as a stark reminder that the drought still held a firm, punishing grip on Nebraska. Mid-September temperatures approached 100 degrees. Relentless 30 miles-per-hour winds blasted grit and dust from recently combined cornfields. It didn’t go unnoticed that the show seemed to be a microcosm of what farmers had been enduring all summer long.
One of the most popular attractions at Husker Harvest turned out to be the food service buildings, where farmers gathered to seek relief from the intolerable sun and wind. (Images of weather-weary cattle huddling under a shade tree came to mind.) This is where the Paulsen team was able to speak with several producers about the drought and their purchase plans for the upcoming year.
“So how’s your corn looking this year?” is always a good way to start a conversation. A Nebraska farmer in his early sixties responds with a shrug of his shoulders, “Could be worse. Could be better.” Later in the conversation he reveals more detail, which clarifies the difference between worse and better. “One hundred twenty-five bushels on the irrigated acres. Twenty-five on the dry acres.”
Naturally, the discussion transitioned from bushels per acre to purchase decisions. Producers, flush with cash after near-record harvests in 2011, purchased several big-ticket items last year. The Nebraska farmer used his windfall to buy two irrigation pivots—which were obviously put to good use this summer. Other famers took advantage of Section 179 tax deductions by making large capital expenditures on new equipment. (This deduction is scheduled to expire on December 31, 2012.) Other producers put more of their profits back into their own retirement funds.
For most farmers, the best purchase decision turned out to be crop insurance. This year’s drought confirmed their decision to have a sound risk management plan in place. With crop insurance checks in hand, farmers will be able to survive this drought and plant again next year.
However, as a young farmer from northwest Iowa noted, “All that crop insurance money comes out of agriculture one way or another—either in the form of premiums or crop prices.”
Planning for 2013 has already started. The band of farmers gathered beneath the protective cover of the food service building were thinking about what seeds to plant, how much fertilizer to apply and what equipment needs to be purchased. Some will be more cautious based on this year’s performance. Others will be more aggressive hoping to make up for it. But they all shared a common belief that nature has a way of righting itself, sooner or later. These farmers firmly believed that next year would be better. Most were planning on it with a healthy balance of determination and hope.
So, how will this year’s drought affect next year’s purchase decisions? It’s easy to predict that farmers might spend less or forego any large capital expenses. However, that may not prove to be entirely correct. Farmers are optimists. Farmers are resilient. And, don’t ever forget, farmers still need to feed 7 billion people next year.
We look forward to attending next year’s Husker Harvest—just to see how our newfound friends respond to the challenge.