will dictate how soon the supplydemand shift occurs.
Overall, the effect of
these economic changes will
significantly pressure farm
incomes. With that will come the
challenge of adjusting family living
expenses that have risen right
along with corn prices, he said.
Land values will also react,
Henderson predicted, explaining
that farmland is currently very
expensive relative to cash rent.
With multiple factors affecting
land value — interest rates, energy
prices, urban expansion — he
stressed that land values are largely
based on expectations.
And farmer expectations for
cash rent and interest rates will
have an impact on the price of the
quarter down the road.
Although U.S. agriculture is
in very good financial health with
the lowest debt-to-asset ratio since
the ‘60s, both real estate and nonreal-estate debt has been rising
since 2011, Henderson said.
Farmers should be on the
lookout for higher interest
rates and increased debt service
brought on by inflation, he added,
explaining that, for inflation to
occur, the global economy will
have to strengthen to bring on
increased demand.
The Fed, Henderson said,
expects interest rates to begin to
rise this year.
“What are you doing to get
ready for a 3-4 percent rise in
interest rates in the long-run?” he
asked. “
With the shifting agricultural
cycle, Henderson urged farmers
to stayed tuned-in to the global
economy with an acute awareness
of rising inflation and higher
interest rates — and to maintain
the liquidity needed to deal with
both.
“I think agriculture is going
to sail smoothly,” he concluded. “I
think we’ll adjust to this. It’s going
to be fine as long as you don’t have
too much debt. Isn’t that the lesson
of the 1980s?”
Texas A&M Honor Professor
and Regents Fellow Danny
Klinefelter discussed some of the
business
philosophy
lessons he’s
learned
from the
nation’s
top
farmers.
Dr. Danny Klinefelter
The
economist has been involved for 25
years with The Executive Program
for Agricultural Producers
(TEPAP), which helps peer groups
of farmers share their knowledge
and experience.
The most successful
agricultural managers share four
important patterns, he said:
• They anticipate and adapt to
the changing needs of their
markets. Recognize the future
will always belong to those
who see the possibilities before
they become obvious to the
average pr