Most producers can al-ways imagine themselves facing something difficult in the next season, whether it’s been a tough or a good year for prices.
I think that is largely because of the risky nature of the business.
Those who are permanently optimistic might tend to over-invest in capital when times are good. They tend to need a bigger portion of luck in their financial formulas.
Farmers who are constantly pessimistic about the future tend to avoid investments, even when times are good. They fail to realize the importance of business growth when the markets will support it. Luck doesn’t help them as much when it comes along.
However, how does a producer decide where to position the farm when it comes to balancing investment and expansion with asset protection?
For example, analysts are speculating that current prices are either at the bottom and going up, at the bottom and flat or in a position where new lows are yet to be set. A few are suggesting that there will be two quarters of significant growth before the year ends.
Farmers come in many configurations, but the closer one is to leaving the business, the less likely they will personally invest in capital, unless it is part of a family transition plan. One needs only look at the slow renewal of the cattle cycle for evidence.
Farm operator demographics show that there is a growing number in this camp.
However, one could imply from the now slightly stale data from Statistics Canada’s last agricultural census that many producers are still in the one-more-time-club when it comes to large five to 10 year investments.
Their decisions are influenced by feelings about where the markets are headed. If it’s up, then it makes sense to invest, If it’s down, one might want to preserve cash and capital, which would make this next-year-country, one more time.
However, too many next-year- country seasons in a row will tke a large number of growers that much closer to the exit and reduced in-vestment.
On the upside, no matter what the market is like, experienced growers invest in inputs, and a good crop makes everyone optimistic next year.