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Beginning farmers: How the financial picture has changed since your parents started farming
Several financial factors are changing as new generations try their hand at farming.
Naturally young and beginning farmers turn to their parents and grandparents for farm financial advice, and while they are qualified mentors, Paul Stoddard with the University of Illinois encourages both generations to consider how dramatically the financial picture has changed.
“The first item is we are in a period of increasing inflation, which we haven’t had in 40 years. So, we don’t know how the current generation will respond and ultimately neither do they because they haven’t lived through that.”
On the same note, he says interest rates may start increasing as well.
“Interest rates have been trending down since 1981. For many farmers under the age of 50, they don’t have a time in their memory when interest rates did anything other than decline or be very low. So, in a sense, they don’t have experience either on what will happen when interest rates go up.”
His advice is to do farm stress testing by outlining different scenarios on spreadsheets. For example, determine what your farm’s financial standing would be if say, interest rates went up 10% and commodity prices fell 10%.
Brownfield interviewed Stoddard at the Farm Credit Illinois FreshRoots Forum in Effingham.
