Lessons from the 1980s: working capital, part 1

Today, every news program mentions the impending dreaded “recession” – by any definition of recession. There may be a recession, however, in hindsight, the agricultural economy of the 1980s was a depression.

How those of us who survived that depressive, diabolical, deadly decade (I learned alliteration at Murray State) with our dealerships intact is still a mystery. It took two hands to turn the door key every morning as it was a daily nightmare waiting. Bankruptcies, falling land prices, overdue customer accounts, overdue machinery accounts, floor plan cutbacks, dumping of new and used equipment at huge losses, pressure from manufacturers to order new equipment for keep factories running (thereby exacerbating the problem), grain prices below production costs. And the trigger was an American president who turned the American farmer into a foot soldier via a grain embargo on Russia.

Oh, and I forgot the repossessions (which we used to resort to) that flooded the used market and our lots. The rests were worth on average about half of what the payout was. Farm property sales were weekly.

Then rural banks began to fail or exit the agricultural loan market and Producer Credit Associations (PCAs) seized delinquent farmers with positive net worth while unfairly laying producers upside down . Sometimes there were two auction seizures or abandonments per week.

Interest in our floor plan has reached over 20%. Farm programs tried to limit production by asking farmers to reduce acreage by 10%, farmers took the worst land out of production and AGAIN produced more grain which further flooded the markets.

Read the full article on the Rural Lifestyle Dealer website here.

About Donnie R. Losey

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