At 65, Les Imboden recently retired from farming after selling his operation that ran through a fair portion of southern Ohio. He is among the most financially successful farmers from Ohio in his generation and many of his successes (and failures) are rooted in the hard lessons he learned battling through the 1980s.
“When I started farming, it was a way of life and when I said it was a business many people were offended by that statement in the 1980s,” Imboden said. “Farming is a wonderful way of life but you also have to pay the bills by treating it like a business. That seems like such an obvious statement now, but back in 1980 that is not how some people were looking at it.”
Imboden’s hard advice for facing the present tough times in agriculture may still offend some in 2016 as a new generation of farmers face prices dipping below production costs, but sometimes those hardest-to-hear lessons can be the most valuable in challenging times. So, those who read on should prepare to be challenged.
“I get calls and they are heart-wrenching. They are from people you would never expect. They don’t want people to know their farming operation is in trouble. I feel for these guys and their families and what they are about to go through. I totally empathize with them. I remember the thought of having to bail out of farming was terrible,” Imboden said. “People said the 80s couldn’t come back and I hope they don’t. I know most farms are financially better off heading into this, but still, it is going to be tough.”
Imboden, who did not grow up on a farm, started farming in 1980.
“I started farming at a really bad time and had no cushion. I was married and we had babies. I faced the humiliation of having to get hand-me-downs and buying thrift shop clothes for the kids. A man feels pride in providing for his family and when you can’t do that it hurts really bad,” he said. “I had young kids and I wondered how in the world I was going to make the $119,000 farm payment twice a year. Nobody should live like that. It consumed me. The tail was wagging the dog. The stress in the 80s was horrible. I was trying to make my farm work that financially needed $4 per bushel corn prices when market prices were $1.74. It just didn’t work. The era of massive consolidation had begun.
“I learned several life lessons during the eighties that saved me financially. While scared to death, I am grateful that I survived the experience of that decade. So, here we are 36 years later, low $3 corn and high inputs. Cash flow is really challenging once again. The $7 corn and $16 beans are just a memory of the past golden years. Remember those statements about how we were in a new era? A new plateau? There were those of us with gray hair quietly saying, ‘Remember the 80s?’ Well, it depends if you survive the next few years if these are the very best of times or the worst of times. Some of you will survive and prosper; others will have to move on to a new life. Embrace the changes coming and prepare yourself. Survival of the financially fit wins out.”
Address core issues first
Imboden’s first piece of financial advice is not really financial at all.
“It is extremely difficult to enhance your finances when core issues are at risk — your health, your relationship with your spouse and children. Have a core of solid friends that will tell you when you are headed in the wrong direction,” he said. “Have farming be a good part of your life but not your entire life. Did you get that?
“I remember all too well not sleeping at night, worrying about how I was going to pay the bills. I was a young married guy with two children and I was mentally paralyzed about my finances. I was fighting depression. Depression is real and if left unchecked, it will ruin you, the farm and most importantly, it will destroy your family. Yes, I will never forget those days. Back then I certainly was not thankful that I was going through financially tough times. Additionally, that stress carried over into my relationship with my spouse and children. I regret that so very much. Selling out seemed like the worst possible option and I would be labeled a failure. So, I stubbornly pressed on. Everything we do has consequences, some good, some not. So, what can I offer as advice for those of you concerned about your financial future during these challenging times? Take a deep breath. Be thankful for what you have. Be realistic. Think faith, family and farm and in that order. I mean that!”
With this as the basis for change and decision-making, here are more tips from Imboden’s “Times and change will surely show: History does repeat itself.”
When I was at Ohio State, Carl Zulauf told the class: “You cannot afford to buy farmland.”
Nobody loves to own farmland more than I do. But you must understand the price of farmland does not have to go up. Around the world there is plenty of ground that is able to sustain crops. Improved genetics have opened up new areas to produce viable crops. That is why we have $3 corn and it may become the new normal. I treated buying my farmland as a separate entity and I made sure that the cost of owning the farmland, including principle and interest, should never exceed what I could rent that land for. If you can do that it is a good investment. If you are paying more to own the land than what you can rent it for, you are better off renting it.
Owning farmland is wonderful and I love it, but you have to separate out that emotion. If land is costing $4,000 or $10,000 or $12,000 an acre you still have to cash flow. If your main focus is to farm and produce crops or livestock, you need to control the land, but you don’t have to own the land to control it. I get that we want to own the land, but that comes with a huge cost. When things are like they are right now, your banker will want to know how you are going to pay for it. I went through that. I sold everything I owned to make some farm payments. Did it work, yes, but it was a good thing we had government supports or I wouldn’t have made it. Controlling the land is the important thing, and you can do that by leasing it.
But, you have to put an asterisk with this. On the other side, you should understand there will be times of negative returns and sometimes you need to find a place of financial safety for your money. Where can you put money that is safe? It is not only the return on your investment; it is the return OF your investment. Farmland can be a safe place to park your money. You may not get a positive return within five years, but it still should be a relatively safe place. Everything is cyclical and we have started the slide down. How far it goes, I don’t know. My guess is 30%. Farmland may have a negative return for a while, but it is a safe haven for capital investment long term. You have to decide if you are a farmland investor or a farm production operator. They are two very different things. You can be both, but you have to realize that is what you are doing when you buy farmland.
And when you do own farmland, you must communicate with your banker. That really helped me. Bankers wanted to work with me. They had a portfolio of non-performing loans. They wanted me to farm as efficiently as I could and pay them what I could. It got to the point in ‘87 or ‘88 that I had people asking me to farm their land without even paying rent because they couldn’t get anyone else to do it. Will we get to those days again? Probably not. But it was a wakeup call for me.
Don’t get me wrong — I love owning farmland and ownership served me well, but that was not planned, it just happened. Treat land ownership as an investment, and it must compete with renting land, or you might get into trouble. You approach land ownership like owning commercial real estate, it either cash flows or not. Understand farmland cap rate.
Farmers are materialistic. Sorry guys, but we are. Should you own, rent, or lease equipment or maybe hire someone to do that particular operation rather than tying up capital? I like nice new paint as much as anyone else. My accountant, who is not from a farm, asked me if I realized how much I had tied up in equipment. She asked me how much I used the 4240, because it looked like I had only put 15 hours on it last year. When you start looking at things like that it makes you think.
I came up with a general, simple set of rules. If I haven’t used something in the last year, it needs to go down the road. What are the absolute must-have pieces of equipment on the farm? For me it was the planter, sprayer and combine. I left out tractors. Those big honking four-wheel drive tractors are wonderful, but you might lease them for a month with warranties. We used to rent Caterpillar tractors in the spring for 30 to 60 days at a time with a full warranty. That hands down made more sense than owning one. It cost maybe $4,500 a month or something. You don’t need to spend $300,000 for something you’re going to use 200 hours a year.
Does it take away the pride of ownership? Yeah, it does. But what is your goal in life? Is it to have a bunch of equipment in the shed or is it to have a good return on your investment, take a vacation and send your kids to a good college? It’s about choices. I know people who have more equipment than a John Deere dealer. I know one guy that had more than $25 million in equipment at one point. I asked him why. “Because I like it.” Well, that is an answer, and if that works for you that’s fine, but if you want to be efficient, that might be a problem.
Moe Russell pushed me to get more efficient with my ratio of equipment cost to production. The first time he challenged me I said there was no way to do what he said. He gave be some numbers and I think at first I was at something like seven times the ratio he wanted to see. He got my attention. I argued and said there was no way but he gave me names and a phone number to call. After that, it actually became fun for me to get that ratio down as low as I could. I think my goal was to get my harvest cost per acre down to $7 and we did it. But we had to get more acres off per hour and it actually meant buying more expensive equipment — like an 18-row head for example.
We did look at sharing equipment, which looks good on paper but was not very realistic. There is some value in the efficiency of ownership. I own a boat, which is a horrible investment. I would be better just to go rent one. I understand that becoming more efficient with owning equipment is really hard, especially if you’re an antique tractor owner like I was and you like to go out and polish that stuff. But it is all about getting the job done and deciding if you need to own that stuff or not.
Embrace change and failure with a positive attitude
In farming we have to have a positive attitude to plant a seed and hope it makes it into the grain bin and
doesn’t rot. But sometimes we can get a little too complacent and we’re a little too sure of ourselves. We need a failure now and then. Getting knocked on your butt every once in a while is not a bad thing, if you learn from it. What just happened and why did that happen? How do I keep that from happening the next time? You need controversy to shake you up a little bit so that you can think differently. It is a choice to be negative or positive. Being positive takes a lot less energy and makes life so much easier. You have to not only be ready for change, you have to embrace change and enjoy change. It is going to happen so you may as well use that change to make things better.
Learn from others
Networking with successful people is contagious and life enhancing. People from far away often offer the best perspectives about your farm, your life and give the best suggestions. I had to go outside my state and outside of the industry to find solutions that would work for ag. Networking and peer review groups with people who were business-serious really helped me. Talk to people you trust who push the envelope hard. A geographic separation was helpful. I met with a peer group three days a week, twice a year, and we would tear a place apart with a SWAT analysis. We’d interview the owners and the employees and the wives. People wanted to tell their stories and share them with us. We’d have employees tell us things like, “Yeah my boss is an idiot. He doesn’t know what he is doing and he won’t do this and he doesn’t get it.” When you do things like that it makes you think and look at your operation a lot differently.
Alan Lines, an OSU ag economist, entered my life in 1985. He tactfully told me I had to change or I would not financially survive. I certainly did not want to hear that and I fought it for a while before I admitted he was right. OSU LEAD I in 1985 and 1986 pushed my buttons and really made me uncomfortable, but that’s what I needed. That was the beginning of me networking with people possessing much different values and perspectives about life and farming. It was the beginning of a new way of thinking for me. Thank goodness. It was a close call and I almost didn’t make it.
TEPEN Group — a Top Producer peer review group — created a tremendous networking and a brotherhood that was absolutely life changing. Ironically, it was that group that brought me to the idea that it might be a good time to sell out. They were right. The success of TEPEN was in part because our members lived and farmed far enough away from each other as to not pose a threat. We were not competing for land, or employees, and we promoted openness and honesty and most importantly, trust. Honest assessment and vision made healthy growth possible.
Make a network of friends that last a lifetime. Have family meetings away from the farm. Reach out for suggestions. Have ag-related mentors and non-ag mentors as well. Learn to think differently — outside the box. Be respectful and considerate of others, especially those with opinions different than your own. “Yes men” are your enemy. Seminars are often really good. Take good notes. Type them up and review them every once in a while. Continuing your education, both in agricultural and culturally, is vital to seeing the future and adjusting for challenges.
Finding new and different attitudes makes a huge difference. I often learned from people several states away or from people in completely different occupations, especially those from outside of agriculture. Traveling really opened up my eyes to seeing things differently and it tore down my thinking that I was always right and that this was a world of consumers who must buy my corn, at my price. They don’t. Get away to hear different perspectives. It is business healthy!
Business plan/life plan
We Americans want instant fixes. Just add water and stir. But instant fixes rarely are permanent repairs. Long-term successes come from foundation building that we often are in too big of a hurry to concentrate on.
Think several steps ahead, several years ahead. Think several strategies and have a plan B and an exit strategy. Yes, have an exit strategy. As a pilot you are taught to always scan for a safe place to land even when things are going well. Believe it or not, there is life beyond farming.
It always comes down to basics. Design a plan and execute the plan. I am always looking for the next thing. Think strategically.
Make a conscious decision to improve your future. Be realistic. Write down goals and improvements that need to be made. Review them. Make adjustments. Life has curves and setbacks. Don’t dwell on them. Work through or around them. Communicate them with your farm family.
There are so many types of risk to manage. Everything you do is about how to minimize risks and how much it costs to protect against those risks.
The most valuable areas of risk management depend on your situation. I had the largest irrigated farm in Ohio. Most of my farms were very drought-prone soils. I managed my drought risk by investing in irrigation, which increased yields and lowered weather risk.
Have a marketing plan to address price risk. You’ve got to get over the idea of hitting the market high and avoiding the low. Nobody does that every time. You’ve got to have help. I don’t need the bragging rights of always hitting the top. I just want to be in the top third. How do I defend my position in price risk? Futures and options are how I did that. I knew what the worst-case scenario was and I knew exactly what it would cost me to lower my risk. It was so much better for me to do that than to be on futures or just wait on cash for when I felt it was a good price. I did basis contracts too. Marketing should be a top priority but seldom is.
Think total risk management all the time — financial risk, marketing risk, liability risk, public relation risk, employee risk, regulation risk, family relationship risk, health risk, spouse risk. Could you end up with a divorce? Better think about it. Never take your marriage for granted. Do marital enrichment classes. Date your spouse. I may have been smart on some things, but I was dumb in this department. As Clint Eastwood said, “Just find someone you hate and buy them a house. It’s easier and a lot less painful.” Never in my life did I ever expect the biggest threat to my farm career would be a divorce. Better take this risk seriously. It was never going to happen to me. After 35 years of marriage, all of a sudden, I was divorced. Never say never.
Do not rely on the government
Fortunately, in the 1980s there was help from USDA programs, but relying on government help was a huge mistake. We farmed for the program and that was the wrong reason. I remember various segments in agriculture did not have the financial safety net that grain farmers enjoyed. I remember seeing non-farm business such as equipment manufacturers and the steel and auto industries close up in the mid-80s. Farmers were graced by the public then and there were other segments that went out because the public did not endear them. Not fair, but true. That was the wakeup call for me regarding global economics and the politics of international and domestic subsidies. Rely on your abilities. Be honest with yourself. Ask yourself, “What do I bring to my farm operation? Could someone else do it better?” If so, your days farming are numbered.
Set priorities and define success
Always put things into perspective. Remember, your farm should not be running your life. Your farm operation should be a part of your life, but not all of it. Some of us German-blooded farmers tend to love land more than our families. Not kidding! Better step back and prioritize what is really important in your life.
Many people say I am successful, but that depends on your definition of success. Define your definition of success. Separate successful farming from success as an individual. If your goal is being a certain net worth or farming so many acres or serving on several boards — fine. It’s a personal choice not for me to decide. I had certain goals written down and unfortunately they were all financial. Big mistake. I neglected more important goals. When you take your last breath, hopefully you made a difference for those left behind. Make memories that last. Life is short and unexpected things change the landscape quickly.
I never wanted to not be farming. I wanted to drop in my field. That is how I wanted to die.
Recently, I had many life-altering challenges. Many shook my core foundation. Sometimes, I dwelled on the negative and reacted poorly. In the past two years I have been divorced, faced cancer and radiation, multiple major back surgeries, kidney surgeries, and several other health issues. I sold the last of my farms last month. I have moved out of state and am starting another, very different, phase of my life. Some things I look forward to, others, not so much. Hopefully I will be able to pilot my plane again. I love touring on my motorcycle. But my health has suspended those activities at least for now. I did not expect any of these things that hit me in the last three years, but nonetheless they consumed my life.
I waited too long to address some of these problems because it wasn’t a convenient time. I told myself I had to plant. I had to harvest. I can’t have an operation now. I kept putting things off. Well your body and your relationships can only take that for so long before you go too far and then it’s not fixable.
I have a grand piano in my house and for me to not feel the ends of my fingers and not be able to play the piano is devastating. I love to do that but my stubbornness in not taking care of myself when I should came with a huge price.
I am in Tennessee now. I have a boat, jet ski and a plane and I enjoy life. But my most enjoyment ever, other than the thrill of having children, is standing out in a perfect, beautiful blue-green corn field three days after putting nitrogen on it. That is heaven to me. To stand out there watching the irrigator go around and almost hear the corn go, “Ahhhhhh” — that is the best of the best. I am so grateful that I had that opportunity.
Don’t start your bucket list when you are 85 or when you find out you have cancer. Smell the roses along the way. Don’t be afraid to change your life. Make corrections. Health and happiness are fleeting. Never take them for granted. Love your spouse like she may not be there tomorrow. Encourage your kids to live THEIR passion, not yours. Life is short. Don’t waste it dwelling on negative times or negative people
Just because you work hard 20 hours a day doesn’t mean you are going to survive. In Brazil, I met people who will work all day for a bottle of booze and $6. People tell me that’s not fair. Well, it may not be, but that is reality. You can’t whine your way out of a problem. You have to face reality and figure out how to compete. If I had not hit that wall in ’85, ‘86 and ‘87 and had I not been scared as badly as I was, I would have just been average, and inevitably I would have been weeded out.
Concentrate on your core competencies — the things you do better than anyone else. If you are not among the best in something, you better change, or get out. Exceed expectations for yourself, for suppliers, customers, employees, investors, and most importantly, for your family. Become the very best you can be. Never let down from that horizon. Never.
May your rows be straight and the rains come at just the right time. Good luck and God bless.