2012 Risk and Profit Conference Breakout Session Presenters. 15. History By The Numbers: A Look At Kansas Agriculture s History Using KFMA Data

Transcription

1 212 Risk and Profit Conference Breakout Session Presenters 15. History By The Numbers: A Look At Kansas Agriculture s History Using KFMA Data Kevin Herbel <kherbel@ksu.edu> Kevin Herbel has served as the Administrator of the Kansas Farm Management Association (KFMA) program since June of 27, providing leadership to the state-wide KFMA program. He has extensive experience assisting Kansas farm decision makers manage their resources efficiently, primarily through one-on-one contact with farm families and individuals. This work has included record keeping assistance, in-depth whole-farm and enterprise analysis, benchmarking, labor management, tax planning and transition planning, with a goal of improved decision making. He received his B.S. degree in 1988 and his M.S. degree in 1991 both in Agricultural Economics at Kansas State University. Abstract/Summary Kansas agriculture has changed in the last 4 years. This presentation looks at some of those changes, as well as some of the similarities and parallels which can be seen in financial characteristics of farms involved in the during the last four decades. The presentation will include some thoughts regarding managing in today's volatile environment, using history as a guide.

2 History By The Numbers A Look at Kansas Agriculture s History Using Kansas Farm Management Association Data Kevin L. Herbel i Department of Agricultural Economics Kansas State University A Look at Kansas Agriculture s History Using KFMA Data Why spend time with this? History is interesting to some of us KFMA Databank was computerized din were good ( boom ) years for agriculture in Kansas Past boom s in agriculture have been followed by a bust Where are we today, what comes next and can we know what to do about it? The 197 s to the 198 s Oil price shocks volatile and high oil prices Dramatic appreciation iti of land values in 7 s Increased financial leveraging Sharplyrisingreal rising real interestrates rates, following a period of low interest rates in the 196s and early 197s Planting fence row to fence row due to high demand for grain and high grain prices Much chresearch and development elopmentin 7 s leading to higher yields and improved efficiency: equipment, pesticides, seed, irrigation The 197 s to the 198 s Strengthening value of the dollar Increasing production costs Russian grain embargo and other world events Ag exports decrease 6% from Tractorcadesto Washington D.C. DC Drop in farmland values 4% from Profitabilityof 7 s followed by strugglesof 8 s

3 Today Strong global demand for ag products Rising incomes in developingcountries Exports in 211 close to double 25 levels World population 9.1 billion by 25? Tight supplies of ag products and inputs Ethanol Production Roughly 4% of 211 corn crop for ethanol Low interestrates rates Increasing land values Budgetary pressures affecting gov t programs Today Increasing use of technology GPS, yield mapping Auto steer, auto shut off, variable rate applications and seeding Bio tech seed Alternative cropping practices Much investment in machinery and equipment Debt levels up but debt/asset ratios down Much volatility of input costs and output prices Drought conditions Value of Farm Production (%) % 8% % of Valu ue of Farm Production 7% 6% 5% 4% 3% 2% 1% % Since 1931 Your Farm - Your Information - Your Decision Govt. Payments Livestock Income Crop/Misc Income

4 3% Livestock Income Sources $5, Value of Farm Production $45, Percentage of Gross Farm Income 25% 2% 15% 1% 5% Beef Income Dairy Income Swine Income $ of Valu ue of Farm Production $4, $35, $3, $25, $15, $5, % Govt. Payments Livestock Income Crop/Misc Income roduction $ of Valu ue of Farm P $45, $4, $35, $3, $25, $15, $5, Value of Farm Production Govt. Payments Livestock Income Crop/Misc Income $9, $8, $7, $6, $5, $4, $3, Value of Farm Production KFMA Farms By Net Farm Income Quartile Top Quartile Bottom Quartile

5 45, Income and Expense History $225, Accrual Net Farm Income, Inflation Adjusted 4, 35, $175, 197's Average $83,6 2's Average $77,423 3, $15, age $ Per Farm Avera 25, 2, 15, $/Farm $125, $75, 198's Average $29, 's Average $46,267 1, $5, 5, $25, Net Farm Income Value of Farm Production Total Expense ($25,) Five Year Average Labor Factors Value of Farm Production per Worker, % $4, s or Workers r of Operators Number % 9% 85% 8% 75% 7% Percent of Labor $35, $3, $25, $15, 197's Average $152, 's Average $135,62 199's Average $144,419 2's Average $233, % $5, Number of Operators Number of Workers Percentage of Labor Devoted to Crops 6% Annual Average for each decade

6 Family Living Analysis, $225, Crop Value and Cost Trends, $6 $5 $175, $4 $ / Acrre $ / Fa arm $15, $125, $3 $75, $2 $ $5, $25, $ $25, 1971 Income Tax Family Living Expenditures Gross Crop Value Net Farm Income 211 Income-Expense Comparison by Net Farm Income Crop Production Costs Crop Machinery Costs 211 Crop Value and Cost Comparison By Net Farm Income $5 $1,4, $45 $1,2, $4 $1,, $35 $3 $/Acre e $/Farm $8, $6, $25 $2 $4, $15 $1 $5 High 25% High Middle Low Middle Low 25% - High 25% High Middle Net Farm Income Group Value of Farm Production Value of Livestock Produced Total Farm Expense Low Middle Net Farm Income Group Net Farm Income Gross Crop Value Crop Production Costs Crop Machinery Investment Crop Machinery Costs Low 25% 21

7 $6, Comparison by Net Farm Income Quartile $6, Comparison by Net Farm Income Quartile $5, $5, $4, $4, $3, $3, $ / Farm $ / Farm High 25% High Middle Low Middle Low 25% High 25% High Middle Low Middle Low 25% Acres Per Farm Five Year Average Acres Per Farm Five Year Average 2,5 2,5 2, 2, 1,5 1,5 Acres Acres 1, 1, Total Acres Total Crop Acres Total Pasture Acres Total Acres Owned Acres

8 Historical Crop Acreage Per Crop 12. Historical Crop Yields Non Irrigated 45% 4% 1. 35% Percent of Total Crop Acres 3% 25% 2% 15% 1% 5% cre Bushels/Ac % All Wheat All Corn All Grain Sorghum All Soybeans All Hay and Forage Non Irrigated Wheat Non Irrigated Corn Non Irrigated Grain Sorghum Non Irrigated Soybeans 2. Historical Crop Yields Irrigated 14. Historical Grain Prices Bushels/Ac cre e $/Bu Grain Price Irrigated Wheat Irrigated Corn Irrigated Grain Sorghum Irrigated Soybeans Corn Grain Sorghum Soybeans Wheat

9 25. Historical Grain Prices Inflation Adjusted d 1 9 Historic Livestock Prices in Kansas u ain Price $/Bu Inflation n Adjusted Gra Livestock Price $/cwt Corn Grain Sorghum Soybeans Wheat All Beef All Swine Milk (avg fat) 18 Historic Livestock Prices in Kansas Inflation Adjusted 16. Historical Hay Prices in Kansas rice/cwt Inflatio on Adjusted Pr Hay Price $/To on All Beef All Swine Milk (avg fat) All Hay $/Ton Infl Adj All Hay $/Ton

10 Historical Other Expense Items Historical Crop Input Expense Items 3, 25, Machinery Repairs 6, 5, Seed and Other Crop Expense rage $ Per Farm Aver 2, 15, 1, Fuel and Oil Interest t rage $ Per Farm Aver 4, 3, 2, Fertilizer and Lime 5, Cash Farm Rent 1, Herbicide and Insecticide , 5, Historical Expense Items Seed and Other Crop Expense Fertilizer and Lime Agricultural Interest Rates: Real Estate and Operating Loans Federal Reserve Bank of Kansas City Tenth District rage $ Per Farm Aver 4, 3, 2, Herbicide and Insecticide Machinery Repairs Fuel and Oil ate Interest Ra , Interest Cash Farm Rent 2.. Annual Interest Rates: Real Estate Annual Interest Rates: Operating

11 $6, Liquidity Trends, Inflation Adjusted $35, Liquidity Trends, Inflation Adjusted 3.5 abilities, $/Farm ent Assets & Lia Curre $5, $4, $3, / Farm rking Capital, $ Wor $3, $25, $15, o Current Ratio $5, Current Assets Current Liabilities Working Capital Current Ratio abilities, $/Farm tal Assets & Lia To Solvency Trends, Inflation Adjusted 2,5, ,, ,5, ,, , Total Assets Total Debt Debt/Asset Ratio o bt to Asset Ratio Deb A Look at Kansas Agriculture s History Using KFMA Data Why spend time with this? History is interesting to some of us KFMA Databank was computerized din were good ( boom ) years for agriculture in Kansas Past boom s in agriculture have been followed by a bust Where are we today, what comes next and can we know what to do about it?

12 Do we need to manage differently in these interesting times? Good management doesn t change as risk ikand volatility change..it just becomes more important! t! Know and understand your resources Plan and manage within that plan but..be prepared to adjust to change Continue to look for ways to improve cost managementand and production efficiency Do we need to manage differently in these interesting times? Strengthen th your financial i position be prepared to move on the opportunities presented to you Identify your competitive advantage..what is it that you can do best? Enjoy the opportunity to be involved in agriculture at this time in history! For More Information: (KFMA) Extension Agricultural Economics Kevin L. Herbel Waters Hall kherbel@ksu.edu Manhattan, KS 6656