MBAg by Adam Erwin            02/14 09:54

   What a Farmer Can Learn from Manti Te'o 

   Agriculture's artificial reality bears many parallels to imaginary internet 
girlfriends. Now is the time to assess your risks. 

By Adam Erwin
DTN Special Correspondent

   You are a grain farmer. Your crops hover near record prices. Crop insurance 
erases the potential for a hard landing. Long-term fixed interest rates are 
benign. Land has never been worth more and your used equipment fetches back new 
prices when traded. 

   Is this a time to: (a) Take some risk off the table and enjoy the good 
times; or (b) Go for broke?

   I thought so. You don't have to go hog wild on risk right now to enjoy 
prosperity. And in MTV-speak, this is not a point to get "catfished" by what is 
probably an artificial reality.

   At the moment, the world's greatest authority on "catfishing" is Notre Dame 
linebacker Manti Te'o. Yes, the all-American player whose internet girlfriend 
died, fueling a sympathy tale of ESPN proportions, only to later fess up that 
the truth had changed, and that the e-girlfriend was at best a hoax.

   But I don't see Manti as either a victim or a liar. In my mind Manti is 
currently the world's worst risk manager. And farming, like real or virtual 
girlfriends, always involves some level of risk.

   Just about all accounts of how this former Heisman Trophy candidate got 
himself into a bind boil down to one of three theories, each which have 
profound messages for grain producers.

   1. MANTI WAS JUST AN UNWITTING VICTIM. 

   Okay, say Manti sincerely believed this cyber-woman was his hubba-hubba 
soulmate, even though they had only touched souls through an iPad screen. What 
does this have to say to early-career farmers? Don't underestimate the risk 
that what we have seen so far is just a fake. And if it's fake like Manti's 
heartthrob, there's a real hard downside.

   If you entered grain farming in the 1990s or later, you have never bought a 
farm or a tractor that really went down in value. You have never paid a cash 
rent that inflation wouldn't fix. Interest rates have always trended down, so 
borrow all you can to buy what you want today because delayed gratification is 
for wimps! And keep rates variable, because as rates get less expensive, so 
does the cost of holding all those inflating assets, like your 
ever-more-valuable grain inventory!

   2. MANTI THOUGHT HE HAD AN e-PEN PAL AND THINGS GREW OUT OF CONTROL. 

   Imagine this, Manti clicked on the icon of a cute girl and agreed to be 
social media friends. They correspond, sparks kindle into a little fire and the 
press asks if he has a gal pal. No guy wants to admit he can't get a date, so 
he says there is "someone special," but he skips over the part about never 
meeting in person. Nonetheless, the press dotes on the love story, and the 
"catfisher" goes to work, weaving a tale of the girl's illness and death. Manti 
is then on a slippery slope. The attention feels nice, but how do I tell them 
now?

   This describes me, loving my current situation but failing to appreciate how 
much of it is accidental prosperity. I always wanted to farm, grow crops and 
buy land. At this moment, it's pretty cool, but it sure wasn't in 1987. Am I 
lucky? Or am I smart? 

   More or less, my fortune has improved just for sticking with the crop 
farming I love. For all I know, PSY's hit song and video "Gangnam Style" about 
the lavish life may remain in full gallop longer than $15,000 farmland. 
Remember when hogs were the "mortgage lifters?" I remember when seed corn 
farmer friends who practically printed money wished they had invested in 
dairies a decade ago. So how long do I get to ride the magic carpet before the 
reality changes?

   Want other examples of grain farmers with a risky disconnect with reality? 
How about going into repeated harvests with absolutely no marketing plan 
because a bigger rally is always coming? Or farmers rolling combines just to 
avoid skinning their knuckles getting a combine out of storage for another 
season? Gasp! Am I really saying that trading for all new equipment every year 
or two might not be the new "long-term normal"?

   3. MANTI DID IT FOR ATTENTION AND DIDN'T THINK ABOUT RISK. 

   The current world certainly has its fair share of asset-light, cash-rent 
cowboys with highly speculative business strategies. Bankruptcy courts are 
cluttered with operators who went for broke and appeared to make it. In 
football and farming, don't be these guys. 

   Regardless of the actual scenario, what Manti didn't identify was the risk 
specific to him. Know your own unique risks. Buying a $15,000-an-acre farm is 
not a big risk for a farmer with 3,000 acres bought and paid for, but it is for 
a buyer who is using a beginning farmer loan. At the moment, grain farms are 
highly susceptible to mismatching the risks with rewards. Take some risk off 
the table. Don't get "catfished."

   Editor's note: Real Midwest farmer Adam Erwin is a former banker who writes 
under a pseudonym. He farms more than 10,000 acres of corn, soybeans and wheat 
in several states.


(MZT/CZ/SK)

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