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n. Illinois | I have a front row seat and I see underneath the dress. Lots of red ink in 2023. Lots of working capital destruction, Lots of new debts taken on with increasing annual debt payments that have to be repaid with lower farm incomes going forward.
you should never make decisions based upon broad generalizations. You should only make decisions based upon your operations individual specific circumstances.
But its when the big boys tip over in your local community that there is a ripple effect where you all think How did they fail? they were so successful etc.
The rules of the game have changed once again and those that react quickly to lower cash returns will survive and those that do not or can not will not. There were operations that were on the financial edge after 2019 (no working capital, losses in the majority of the last five years inadequate repayment capacity vs debt payments) that were given a break in the returns of 2020-2022 giving them an opportunity to improve Working capital paydown debt etc. What did they do with that break? Did they work on correcting their financial risks? did they defer or delay income taxes via capital spending on new Sec 179 eligible items? I know what the majority did and now they have another $300-500K worth of new debt payments that they did not have in 2020 and yet their income and therefore their repayment ability is significantly less. How does this resolve itself? I do not know nor does anyone. But I do know if your payments are $1,000,000 per year and your capacity based upon the last five years (knowing that three of those years were some of the best ever) is only $900,000 someone is going to have issues going forward.
Yes there are those operations that were well capitalized going into 2020 and they are even stronger now in 2024 even with the small operating loss that they had in 2023 but those operations are more of the exception than the rule. on the bell shape curve those are out on the far left end of the curve.
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Inflation and recession.
