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New Report Recommends Adjustments for Efficiency Cycle
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​GreenStone recently released a new report with advice for crop producers to adjust to an agriculture efficiency cycle.


 

New Report Recommends Crop Producers Take Steps to Adjust to Agriculture Efficiency Cycle

GreenStone Farm Credit Services released a new report that finds most Michigan and northeast Wisconsin farmers are in a strong financial position, but crop producers may need to more critically assess their production costs as crop prices fall from historic highs into an agriculture efficiency cycle.

“Producers are always looking for the most efficient means of production in their operations,” said GreenStone President and CEO Dave Armstrong. “As crop prices continue to fall during this cycle, it will be of even greater importance for farmers to implement those practices that produce the greatest economic returns.”

The report also includes advice for producers to adapt to the current efficiency cycle, including locking in low fixed interest rates and using crop insurance to create a tailored protection plan. “Just as we have been for the last 100 years, GreenStone is here to support our members through all cycles of the farm economy,” said Armstrong. “Our team of experts is prepared to meet with customers and discuss the options that best suit that customer’s operation.”

Other items of note in the report include:

  • Net farm income falling. After the record $129 billion in 2013, the U.S. Department of Agriculture (USDA) projects aggregate nominal net farm income to decline in 2014 and 2015, reaching a five-year low of $73.6 billion in 2015.
  • Farm balance sheets strong but moderating. The U.S. farm sector debt-to-asset ratio, a measure of overall farm financial health, reached an all-time low of 10.6 percent in 2014 and is projected to increase only slightly to 10.9 percent for 2015—still well below the values that prevailed in the 1980s and 1990s. This compares to the high of over 22 percent during the height of the 1980s farm crisis.
  • Agriculture efficiency cycles require cost cuts. While strong balance sheets provide a window of opportunity for producers to adjust to changing market conditions, the expected decline in net farm income means producers must bring income and expenses in line. A solution in periods like this is to drive a higher level of efficiency into operations, which can reduce the cost per unit of production.

The report was compiled by AgriBank using data from the Agricultural Resource Management Survey (ARMS) and the United States Department of Agriculture. AgriBank is one of the largest banks within the national Farm Credit System, with more than $90 billion in total assets. The full report can be accessed at http://bit.ly/1JDHDYL (link opens to PDF).