A view from Jeremy Ostrander, CEO of AgriVision Equipment & PrairieLand Partners - November/December 2024

Race Tracks, Recession, and Renewed Optimism. Farming has always been a challenging profession, but today’s producer faces a unique set of pressures that demand a shift in thinking. Gone are the days when simply maximizing crop volume was enough to ensure success. Thankfully, farmers in the Midwest are the masters of adaptation and innovation. They have always focused on what they can control amidst unpredictable circumstances, and as we enter the 2025 growing season, farmers will no doubt adapt again. So where should we focus in 2025? I will be the first to admit that I don’t have all of the answers, but let’s first take a look back at the last cycle. In 2014, those who made adjustments the soonest positioned their operations to better weather the whole cycle. 

A Healthy Balance Sheet. Early adjustments did not necessarily eliminate losses, but they absolutely reduced their losses. This provided the financial structure and working capital to have more staying power. This principle applied to farms, equipment dealers, and other ag businesses as well. I know farmers that sold a piece of low productivity ground to reduce debt or sold off a couple hog buildings early in the hog cycle so that they could use that capital to reinvest in a heifer yard that produced higher returns going forward. Others sold that “extra” tractor or truck to pay down debt and increase cash flow. Yes, there are tax consequences to consider, but reducing debt and keeping a positive cash flow are key in these times.

I will share a glimpse into our business as encouragement in making hard decisions early. In 2014 we swiftly reduced our used inventories, facing criticism at the time. However, many later acknowledged the wisdom of this decision. As most of you have witnessed, in 2024, the farm equipment industry has experienced the fastest decline in used equipment values in history. We opted to auction some equipment and reduce inventories in May/June. Although I wish we had done so earlier, the losses incurred in May/June were significant, but far less severe than they would be now. By significantly reducing our used inventory, we significantly lowered our debt and interest costs. This freed up some equity to reinvest in other segments of the business that have a better opportunity for return and offer new parts opportunities to our customers in a time that they will be keeping equipment longer.

Diversification. Given the potential longevity of this cycle, we are exploring diversification into complementary businesses that align with our customer base. This strategy aims to serve our communities better and mitigate risk. Recently, we have reinvested in the used market by acquiring late model used inventory. This approach allows us to offer our customers machines at attractive price points, backed by our dealership’s security and warranty, reducing their risk compared to the auction market. Although the initial bottom line losses associated with inventory liquidation were challenging, this strategy has maintained positive cash flow and enabled continued investment in our most valuable resource: our people. Are there opportunities for you to diversify into other complimentary businesses to your operation. Many dairies have diversified into cheese plant investments as well as methane and composting businesses to create more value out of the milk and the manure. I know of a couple farmers that have invested in road dust suppression, utilizing equipment that they already owned for their fertilizer storage and tendering. Others have increased revenue from the land that they own via hunting leases and multi use land agreements. There are opportunities out there if you need to find something.

Recessions and Race Tracks. We could discuss innovation and efficiency gains, peer groups and business benchmarking, carbon market incentives, cost management, and many other moves that can be made as we all adapt to the new economic environment, new President, or whatever curve ball that comes next, but let me share a quote that made me think differently back in 2014. It read, “Think of a recession as a sharp curve on a racetrack, it’s the best place to pass, but requires more skill than straightaways. The best drivers apply the brakes just ahead of the curve (they take out excess costs), turn hard toward the apex of the curve (identify the short list of projects that will form the next business model), and accelerate hard out of the curve (spend and hire before markets have rebounded). – Bain and Company.” Midwest agriculture producers have always adapted, which is why we are still the main supplier of food and fiber to the world. Where is your next move and what will put your operation and your family in the best spot not just for today, but for generations to come.

I pray that you had a bountiful harvest and that you have many blessings to be thankful for in this season of thanks. I am thankful for each of you and the resources that you invest back into your family, community, and others around you. I have confidence that agriculture has a bright future as long as we invest time in prayer, use a little wisdom, and learn from the past. May God bless your work in 2025.