From Boom to Bust and Back Again: A Farm Family Rebuilds

The agricultural boom of the 1970's produced many farm management success stories. Fortunes were made with the help of low interest rates, galloping inflation, and advanced production methods. Management was easy. In fact, few farmers had to manage in the strictest sense of the word. But in the 1980's, the boom suddenly turned into bust. The decline in the farm economy caused many farming operations to collapse.

This is the story of a Tennessee farm family that rose with the boom, fell with the bust, and survived and rebuilt by incorporating effective management strategies. (Although the family's real name and location are not used, the story is true.)

Mr. and Mrs. Farmer and their two small children enjoyed the prosperity of the late 1970's and early 1980's. Their farming business included 400 acres of corn, soybeans, and wheat, along with 20 sows in a farrow-to-finish operation. The Farmers had good equipment, sufficient buildings, and on-farm storage; and they owned most of the land they farmed. Mrs. Farmer stayed home during the early years with their young children.

But in the early 1980's, signs of financial stress appeared. There were cash-flow problems, suppliers were pressing, and their two long-term creditors were concerned. In 1985, the creditors and the Farmers mutually agreed to a foreclosure, with some debt write-off. The family's net worth had declined rapidly to a negative $250,000. Bankruptcy was imminent.

With loans from their family, the Farmers were able to hold on to their homestead small in acreage, but it was their home and support buildings, including the swine buildings. After making an inventory of their resources and discussing their situation with an Extension Agent, the Farmers decided to go back into the hog business selling feeder pigs for cash flow. They also added tobacco to benefit from the high per-acre return.

They also made adjustments in their family lifestyle. Family labor was utilized heavily on the farm. Both Mr. and Mrs. Farmer began outside employment on a temporary basis. To be sure, times were tough, but their determination was keen to overcome these adversities.

The key factor in making the new farm operation work was the Farmers' adoption of a more disciplined and effective approach to management, which they learned through participation in the Extension Service's MANAGE program. They began to analyze each farm decision in a more businesslike manner than they had in the past. Every change in the faun operation had to produce a positive outcome with a low risk possibility.

This in turn required them to keep better farm records enterprise records, production records, cost records and to pay attention to detail as they never had before. Business decisions were based on effectiveness of production instead of on volume of production. In short, the Farmers realized that the success of their farm depended on their ability to be good managers as well as their ability to raise lots of hogs.

Plans were established and followed. If additional land was needed for crops, the Farmers rented it on a share basis. Existing facilities were utilized, with low-investment huts used for any expansion. Older, less expensive equipment was added on a piece-by-piece basis.

At a local Extension program on farm management in late 1987, the Farmers had the opportunity to analyze their operation and consider alternative plans using FINPACK, a computerized farm business analysis program.(See Part III, Chapter 8 for more information on FIN-PACK and Chapter 9 for a case study of a farm family using a computer to improve management.)

The plans indicated that the farm operation was ready to expand. The hog business was good, and their long-term plan called fora gradual reentry into a farrow-to-finish enterprise. But to expand meant that the Farmers would have to seek a loan to build a feeding floor. Given their past credit experience, they doubted they would be able to find a lender.

However, they decided to give it a try, and with the printout from the FIN-PACK analysis in hand, they approached an intermediate lender. The lender was impressed by the changes in their management style and the dramatic improvements in the business that had been accomplished through effective labor and family sacrifices. Based on the farm plans developed with assistance from the Extension Service, the loan request was approved.

The Farmers built the new feeding building, eliminated some acreage and crops, and concentrated on expanding the hog operation as planned. In short, they have succeeded in rebuilding. Mrs. Farmer has continued her part-time employment, in part because she enjoys her job. There appears to be less stress in the family.

The Farmers have praised Extension Service's MANAGE program and recommended it to other farmers, who have also received substantial benefits from the MANAGE farm management educational program. In the past year, the Farmers subscribed to a commercial recordkeeping system. Production records from breeding to market are being incorporated. Extension educational programs on production and management are an integral part of their plan.

Extension Agent, Agricultural Extension Service, University of Tennessee.