When the grandparents of today’s farmers picked cotton in the Delta, the harder they worked the more money they made. Their income and the number of acres they grew depended on how much effort they put in.
Their grandsons and granddaughters, on the other hand, “make money” with their minds, says Greg Cole, president and CEO of AgHeritage Farm Credit Services. Cole said that change is leading to a fundamental shift in what it takes for farmers to stay in business.
Cole was one of two speakers who addressed the implementation of the 2014 farm bill during a session of the Second Annual Mid-South Agricultural and Environmental Law Conference at the University of Memphis School of Law. Anne Hazlett, Republican chief counsel for the Senate Agriculture Committee, also addressed the conference.
“One of the emerging themes of agriculture is that the business model has shifted,” said Cole. “Decisions drive profits – it has become an intellectual business. I think about farm policy, and I think about this farm bill. I’ve been doing this for 30 years, and I see the trends, and one of those is that we just keep raising the bar.
“When kids come to an ag school to get a degree, and they’re going to become a commercial farmer, their new job description is that they’re going to be a CEO, and they have to learn the skill sets that go with that job description.”
Cole, who leads one of the largest ag lenders in the nation, said he would argue policymakers may not fully understand this shift or see the unintended consequences of some of the new farm bill’s provisions.
Addressing an audience made up primarily of attorneys, Cole said it’s like a lawyer saying you shouldn’t go to law school and finish in the bottom 25 percent. “My point is that if you become a farmer now, the bar is set pretty high. And I think that is going to be a differentiator going forward.”
The question, Cole said, will be “Do you have the intellectual capital to generate the financial capital needed? I see a trend where farm policy and, more importantly, economics is going to eliminate people who won’t be able to participate in production agriculture going forward.”
He described a “good news-bad news” situation for agriculture as farmers begin their second full year under a new farm bill. The good news, he said, is that many farmers have strong balance sheets due to the high commodity prices in 2011, 2012 and 2013. The bad news: Many farmers lost money on their crops in 2014.
The problem with sustainability now is not just how much money a farmer makes, but also the losses he prevents, says Cole. “Risk management has become paramount. A producer makes money by taking risks. He has to identify the risk, quantify the risk and reduce the risk. You’ve got to capture the upside and minimize the downside.”
Judging from the new farm law, Cole said some lawmakers don’t seem to understand the scale of today’s commercial farming operations.
“Anne (Hazlett) referred in her comments to the new AGI (adjusted gross income) limit of $900,000,” he said. “You look at that and think, well, that’s a lot of money. But some of my borrowers lost a million dollars last year. So how much do you have to make to offset that kind of loss."
To read more about the 2014 farm bill, visit http://www.usda.gov/wps/portal/usda/usdahome?navid=farmbill