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Sask | The path forward is still the same for the last 40 years. Nothing has changed, nothing.
We just came off some of the best years in that period also, and is probably a very good example why nothing has changed the path forward.
Farming is a business of variable revenue with fixed costs. That has never changed. Yes, there are places that can count on a fairly stable revenue and likely have a different management style, but the path forward here is drawn with the understanding income can vary 50% year over year due to weather and prices. 25% swing is a yearly occurrence. And there are many factors coming into play to create that variation and it isn't just prices and weather. World events, government policy/programs, tax changes have always moved the sticks - when did that become a "new" thing in the last 18 months.
If people are now thinking they need a new path forward it is likely time to assess why they didn't change their path forward 20 years ago. People getting over their wheels thinking equity always goes higher and profit will always be the same as they were 3 years ago are people who have made bad business assessments. People who make bad business asses0tend to run into problems with their business.
So what is the real issue? What has really changed in the last 20 years? High debt load? High expenses? Low grain prices? What has changed?
I do 100% agree that government subsidies distort the reality. But it has always been that way. I would like to see changes there but the reality is that this has been reality for generations. So the business plan has never really changed, if ones business plan is now suddenly realizing that government programs are creating a difficult operating environment, what was your plan based on 20 years ago.
Debt is fixed. Equity is variable. Revenue is variable. A person can make up a long list of why he is a victim and his business plan is shredded. The reality is to figure out why the business plan didn't allow for these basic realities.
Land always goes up - until it doesn't. This has never changed. You can think someone will always step in to buy, but if land starts going down and it is not a worthwhile investment because of a 30 year payback scenario, why do you think someone else will automatically burn capital to buy it. Debt is always a fixed expense that doesn't change with equity. So if you saddled your operation with a much higher debt load in recent years, in a business of variable revenu/profit, how did that business plan become a "good" plan, when for generations a high fixed debt in a variable profit scenario was always a bad business plan.
I really don't see the path forward being different than any other year. Low fixed costs to offset the fact that revenue is variable. If ones business review isn't fitting this, then in my opinion the path forward is to get that business plan in to place.
I suppose that is why guys with owned land can do okay. The more accurate summary is they have lower fixed expenses. Although if they have spent lots on equipment and that is all operated with debt I suspect those guys too are seeing trouble ahead. So the reality is it is not about simply owning land - it is about low fixed costs.
It is up to each guy to make his business plan. Some have good business plans and some don't. But it isn't up to the government or the market to make every business plan all work for all revenue scenarios. It is up to the business manager to do that.
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What is the way forward?
