First question: Is Y2K a problem?
Options: No (but why are firms spending millions to correct a scam?)
Yes (but will it be fixed in time)
-If yes, then there's no problem to prepare for.
-If not, then you can either do nothing or take action.
This depends on your answer to this question: will the power go out?
-If yes, then, can you survive without power?
--if yes, then there's no problem to prepare for
--if no, then you'll need food, heat, water, etc.
If the answer to will the power go out is no, but there will be some problems, then you need to answer more questions regarding food, fuel, communications, farm vendors, packing plants and processors etc.
"We've done considerable reading and investigation on Y2K issues. As I see it, there is no way around supply interruptions for the Year 2000," says R.U. Ready. "Some will start before 2000 and others could occur for an extended time. So we want to be prepared for at least a year."
R.U. Ready Family members have discussed Y2K and have developed some preliminary strategies. For the farm business, these involve purchasing enough supplies in 1999 to carry them through the year 2000.
"Since booking two years of supplies amounts to a major financial decision for most farmers," notes R.U. Ready, "we will review these plans as 1999 rolls around. While our operation is financially solid, we still have to be careful with expenditures. Currently, the plan is to have fuel and chemicals on hand in 1999 to farm another year. We'll also have some of our seed needs on hand."
Fertilizer: "We plan to apply all our fertilizer needs in the fall of 1999," notes R.U. Ready. "We generally follow a fall program anyway. And our fields test high enough that we don't plan to apply any extra for succeeding years."
Chemicals: "We'll book a two-year supply of dry chemicals in the spring of 1999," he continues. "Liquid chemicals must be kept from freezing, so we are still weighing options and looking for dry alternatives." For example, they may buy more Accent in 1999, then trade it for Surpass in spring 2000 if they can. They've considered renting a climate-controlled storage facility, but worry about the risk of a large inventory outside their control should the power system go down or become erratic.
Seed: "Due to the storage concerns, we won't be buying much if any additional seed," explains R.U. Ready. But they are concerned about seed supplies. Seed generally becomes available in the spring before planting, notes R.U. Ready. "This could a big problem in 2000, particu l a r l y for prod ucts coming from the Southern Hemisphere. Right now, we don't plan on ordering shorter season corn, though we may experience planting delays in spring 2000.
"If we would decide to tie up the dollars in 1999 for seed in 2000, we can't store it properly. But it might be worth the risk of poor germination compared to not getting any seed at all in the spring of 2000." If necessary, they would plant soybean seed out of the bin. And they could also plant hybrid corn out of the bin, but yields will be cut in half.
So, in 1999 R.U. Ready will plant a little open pollinated corn, which he expects to produce 500 to 600 bushels of additional seed stock for 2000. This corn must be harvested in the ear, so he has set up a hand sheller. And he's reading up on how to grow and harvest open-pollinated seed.
Fuel: They plan to contract for a year's supply (12,000 gallons) of diesel fuel at the cropping location. That's enough to supply their 11-kilowatt diesel-powered electrical generator over the winter as well as fuel the farm equipment for the year 2000 crop. Their generator links to either an inverter board (to charge a bank of batteries) or to 220-volt equipment such as dryer fans or a welder.
"The real Y2K issue comes down to energy supplies," states R.U. Ready. "I think frequent and widespread outages is a best case scenario. We'll stretch our power supplies as necessary and as far as possible."
Equipment: They've contacted Cat, Case-Cummins and Deere regarding microprocessor chips in their newer tractor and truck engines. "We traced the systems to the fuel pumps, but the manufacturers assure us there are no date-sensitive aspects to these systems," he says. He hopes they're right.
And they'll have to make a decision soon about their combine. "We normally trade very four years--and we're due to trade after the 1999 harvest. Either way, in 1999 we'll be laying in a supply of extra parts, filters, oil and other supplies," exp la in s R. U. Ready. Or maybe sooner. "By the time YOU hear about shortages and problems, it will be too late to do much about it because everyone else will also be scrambling," he notes.
Grain storage: R.U. Ready typically harvests and stores their corn and soybeans on the farm. He often air dries a substantial portion over the winter. They harvest this portion at 20% moisture then air dry with fans to 15%. "We may not have electricity in the winter of 2000 to do that," he notes. "We've considered additional propane drying to completely dry the grain in the fall of 1999."
So far, the plan is to book enough propane for 1999 harvest, plus fill up all the existing propane tanks after harvest--as they expect shortages and transportation problems later. "We may get additional propane tanks, but they cost about $1 a gallon to buy so it adds up."
Their 1990 grain drying system does not have microprocessors. "So as long as we have power we expect to be operational," says R.U. Ready. If necessary, they could run 7.5 hp fans on each of a dozen bins, and work out a schedule for their other electrical needs from the diesel generator, as well as getting power to distant locations. A tractor-powered PTO generator is another option they may utilize. They'd get about 12 hours of operation per tankful, and have a 300-gallon fuel trailer they now use for hauling fuel to the field.
Livestock: The other major portion of the operation is a large diversified livestock-grain operation with hogs and cattle. "The main concern is to keep the livestock alive," notes R.U. Ready. "But the question is for how long. Most of the animals are raised on contract, so have set schedules of receipt and delivery. A lot will depend on how operational are the elevators and packing plants and transportation systems."
The R.U. Ready family stores about 1,000 acres of crop at the livestock operation location, along with silage and ear corn for their 2,000 head of cattle. They c oul d a lso fi ll a Harve store if necessary. They have a diesel generator at this location too, and will stock up on fuel. They plan to fill all their propane tanks in 1999.
"We should have little effect until it comes time to sell the livestock," points out R.U. Ready. "If things are really bad, we may be bartering for butchers--or worse, trying to protect the herd from bandits."
"We won't have these problems in our own operation, but we're also concerned about embedded chips and controllers in feed mills and environmental controls in confinement buildings." They also have questions about veterinary supplies, along with the rest of the infrastructure of the economy.
Markets: Currently all their bins are empty, but they'll be full after the 1998 harvest. "We hope to be able to get rid of our 1998 crop and have room for the 1999 crop. This could be a problem due to high carryover, low demand, and lo w prices," relates R.U. Ready. "Many farmers in our areas are building bins. We're seeing a horrible basis and export market. But livestock megafarms find it hard to shut off their contract schedule, so they'll have to continue feeding livestock."
"If we are able to move the 1998 crop and harvest the 1999 crop, we'll likely store most of it on the farm. We'll take our lumps in the market as they come in 1999 and 2000. However, we have serious questions about the infrastructure for both grain marketing and transportation. We can always eat the grain, or burn it (we'll have a biomass stove, too), and if we can't get any other seed we can plant it," he adds. Barter for neighboring livestock farmers might also be an option.
Leases: "We considered putting clauses in our cash leases so we could cancel them if we cannot obtain inputs to farm the ground," explains R.U. Ready. "However, we don't want to raise questions in the minds of our landlords. And this will be okay if any Y2K problems end up being short-term--less than a year. But there are questions about the status of the banking system for lease payments due in 2000. And farmers renting marginal or high dollar ground may decide to drop some farms to reduce their expenses."
Government: Will the government decide to enact martial law "to secure domestic order? Will this involve "appropriation" of supplies, such as fuel? Their fiscal year starts in October 1999, and as of now it appears that government services systems may not be fully operational. "So that is real possibility for the fall of 1999. But if the National Guard is going to do the farming, we'll all be in big trouble for sure!" he quips.
Finances: "For many farmers, the financial aspects of farming in the spring of 1999 will be a bigger issue than the year 2000 questions," projects R.U. Ready. "Not everyone will be in a position to farm in 2000, though we expect to be prepared."
R.U. Ready notes many landlords still want to hold rents steady, but farmers are looking at $50 or more less income per acre. He thinks many farmers will not want to fight it and will exit agriculture before 1999 even if they're not currently in financial trouble. Others will stay in--and look for bargains in the next couple of years. "If you expect a bad case scenario, you'll want to preserve your purchasing power and get better deals on the other side of 2000 than you can currently get on this side," he points out.
"If stockholders see their equity plummet with falling stock prices, farmers should R.U. Ready to pur chase farmland at depressed prices over the next couple of years," suggests R.U. Ready. "We may be surprised at how much pressure backs off land values if stocks do go down. If investor demand goes out of the market, land prices could go down fast."
"Guys that need money the most may not be able to get it in 1999 or 2000. Many financial statements don't look so good right now, considering $2.40 grain under loan that is now worth less than $2.00 per bushel--that's a big hit," he points out. "Guys that are in good financial shape can borrow money for the next year--and may do that to fund stockpiling. If nothing much happens with Y2K problems, the most they're out is another year's interest. Still, you could get hit with price changes on inputs, or stuck with something you're rather not use. But this will be a minor problem compared to the alternatives.
"Still, I expect farmers with dollars on hand to prepare their business for the coming uncertainty -- and spend more on personal preparation for their families," he concludes.
Personal preparations: "It's important to have a game plan--and a budget," he points out. "Someone has pointed out that 'you can't put so much into preparation that you can't afford to NOT have the problem'!" he adds.
"I have finally reached the point of realization that I am going to do these things based on the situation as I see it developing and can no longer be talked out of it by any one else's best case scenario. It took me over a year to get to this point. I don't want to have to buy anything for at least 6 months after 1/1/2000, and maybe we will have to start before 2000, because I'm pretty convinced we will have bank runs. If we don't have panic before the bank runs, we will have panic at that time."
CONTINUED with Part Two: "A farm family prepares for the Year 2000"
For more information on agriculture and Y2K, see USDA Food Supply Working Group at http://www.aphis.usda.gov/oa/y2k/
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From http://www.agriculture.com (800-366-7450)
-- Jon Johnson (narnia4@usa.net), April 30, 1999