Don’t be too hard on yourself and for heaven’s sake don’t think you’re a failure if the last eight or 10 years have dragged your farm down. Low grain prices in the early part of the decade, BSE, drought, storms and now flooding have been a pain in the butt and wallet for hundreds, maybe thousands of farmers in Western Canada.
I don’t mean to treat this lightly. And I’m not pointing any fingers. But I have seen this before, back in the early 1980s when high interest rates crippled the financial structure of many farms. Back then it was easier to get into financial difficulty because interest payments quickly ate big chunks of cash flow, and lenders often were more forgiving or more tolerant of delinquent loans, or loans heading that way.
These days, most lenders have a pretty good idea of how much money a farm can earn and how much debt it can service. In the early 1980s it was easy for lenders to allow some farmers to just keep going as debt piled up and net worth shrank. So they started to keep records and set up financial benchmarks and now they know a lot about how to spot troubled loans.
Now, if a farm’s numbers bump up against a lender’s benchmarks, red financial flags go up and lenders don’t wait for a farmer to call. They call the farmer.
Lenders understand how long it takes for a farm to recover from one bad year: likely longer than most farmers think. So lenders now ask for a meeting and a plan to down debt to more affordable levels. If the farmer can’t come up with one, usually the lender will.
Over the years farmers have told me what happens after that plan is in place. The farmers need to sell some land or livestock or cash out Registered Retirement Savings Plans or other non-farm assets. Sometimes a farmer has had to do two out of three, sometimes one of those will solve the problem.
How did this happen?
One key question is this: how did the farm get into this financial mess? Was it personal spending? Did you expand too quickly? Did you have a farm plan that made sense? Or did something happen that was totally beyond your control? Did Mother Nature cause the problem?
If something beyond your control caused this, then again, stop beating yourself up. If you made a judgment call that turned out wrong, stop beating yourself up. And even if a farmer or his family did some not so smart financial things and now the farm is short of money, hey what’s done is done.
But it still doesn’t mean you or anyone in the family is a failure.
Question: if you are faced with downsizing because of BSE, a poor crop, your health or something else, how do you keep the idea in your head that you are not a failure? It’s not easy. I know from my career as an employee that many people feel their job is their identity, especially farmers.
That’s okay up to a point. But over the years I’ve known many farmers who sold the cows, shut down a business or sold down their farm. And their life improved almost right away. I’ve also known people who hated their job and as soon as they quit it their life improved. How come?
First off, reality is usually less severe on a person’s mind than what might happen. As farm debt is paid down and becomes manageable, a big weight comes off a person’s back and mind.
This allows a person some “brain space,” or the freedom to think creatively and think of ways to make a fresh start. As long as the debt is there, often all the mental energy goes to trying to “save” the farm.
I have often asked farmers: “If farming is so hard on you, why are you fighting so hard to hold onto it?” There are other ways to make a living. Rural Canada needs good workers and farmers usually are good workers.
Second, the community likely already knows if or when a farm is in financial trouble. So it’s no use trying to hide that. In fact once it’s out in the open, another weight often leaves the mind.
Third, these days there’s usually a buyer for decent assets, especially land. Sure, that land might be gone from your family. But selling at good prices is better than selling at depressed prices. In the early 1970s after three years of wet weather and low grain prices, farmland was selling at fire sale prices.
These days there’s usually a lineup of buyers for farm land and cattle prices are decent, so maybe look for ways to get buyers bidding against each other.
Signs of trouble
People in financial trouble often show signs that all is not well. Some indicators are: they stop going to normal social events; they become quiet; they don’t talk about their farm; they might drink or smoke or eat too much; they are always tired.
Or sometimes they go the other way — suddenly spending a lot of money. I have seen both.
If you see such a change in character in someone you know maybe it’s time to go for coffee with that person. Be gentle.
Sell our or solve
Over my 40-year career of working with farmers, I have seen a farmer and his family decide to save their farm. They were young at the time, the rules were a little slacker then, but they changed what they had to do to bring cash flow in line with the needs of the farm. And they succeeded.
I’ve also seen and heard of other farmers who either did not have that opportunity, or did not get to choose to save the farm. That worked out too. They found constructive work. Some started a low cost business.
Often there is one more problem to face: the idea that next year will be a good one. I have seen it. The Red River Valley was very wet from 1968 to 1970. And grain was cheap. It was tempting to quit farming. Then that area had 17 good crops in a row. That might be the case with cattle too. After seven or eight bad years, suddenly the price of calves is back to nice.
You are not a failure
Whether the decision is to stay and fight or sell out or rent out, the important thing is that farmers and their families stop criticizing themselves, stop comparing themselves to others and start believing in themselves.
Most farmers have skills that are worth something in Canada. They can drive equipment. They can run livestock. Some can manage people. Very often the combination of a smaller farm and some off farm work can be the best choice.
Suddenly the farmer who had no time has time to visit can go to events in the community, and enjoy life more. Grandchildren, children, spouses, neighbours and friends become important and there is time for them. These are all parts of success not failure.
And I have to get this in: encourage your children to develop their overall financial plan. I call it the five-legged stool. We never know when the skills I stress in this free essay will come in handy. Just send me an email and I will send you a copy. †