After completing the acquisition of Legacy Seeds Inc. in August 2018, Tillerman Seeds LLC aims to continue executing on its growth strategy and supporting its portfolio of seed companies. President Jim Sheppard said the goal is to find the right fit when acquiring new companies. “My biggest fear is that we’re going to go in and think we know something that we don’t, and get screwed up and go backwards.” Looking ahead to 2019, Sheppard believes trade issues continue to weigh heavily on the agricultural industry.
How important was the passage of the recent Farm Bill for the industry?
The Farm Bill … is huge. We really needed the Farm Bill to be approved to give stability to producers in the U.S. That’s a very positive thing.
What’s weighing on your mind as we head into 2019?
Michigan has the second most diverse ag product commodity offerings behind California. We’ve got over 300 different crops or ag product lines, which include milk and beef and hogs and so on. And right now it contributes over $100 billion to our state economy. Very important to us is the export market. About 33 percent of our production goes to export. And guess what? Number one is Canada. About 40 percent of our stuff goes to Canada. And number two is Mexico, third is Japan, and fourth is China.
When we have trade issues like we have right now, it impacts our state tremendously. That is a big concern. Hopefully we can get through these trade issues with Mexico and Canada and China, and it’ll help the whole ag economy. But particularly with Michigan because of the amount of exporting that we do to Canada and Mexico, NAFTA was very important to us.
In a perfect scenario, what would you like to see happen in the upcoming year?
We need to get back to free trade agreements as quickly as possible. China is our biggest soybean customer. You’ve got issues with what’s going on with Canada and Mexico, and tensions there. We just need to get back to where we’re trading and not fighting with our biggest customers. The scary thing for me is what our competition in South America is doing to ramp up and take our business. We’ve made our trading partners angry, they have dollars, and those dollars vote, and they’re setting up production contracts in other areas of the world that we have traditionally had. So even though it’s impacting our business today, potentially it’s impacting our business for the next five, 10 years — if their new relationships hold. To me, that’s the scary part.
We did the same sort of thing with the soybean embargo under Carter’s guidance, and when we did that, we opened up South America to start planting soybeans and exporting. Now they raise more than we do.
Is this a case of history repeating itself?
Yes, it is. When you talk to farmers, they don’t want a government handout, they just want free trade. Different parts of the country are going to get hit in different ways.
With declining farm incomes, rising debt and low commodity prices, how does this added trade challenge set up average farmers in the year ahead?
There’s a tremendous amount of uncertainty. I think credit is going to be a huge thing for farms. The farm credit system is very robust, especially if you’re in Michigan. They do an incredible job supporting that, and I know that their portfolio, they’re watching very closely and trying to work with guys and making sure they’re going to cash flow. But farmers will cut back where they have to or where they can. They might put less fertilizer on there and try to mine the soil for a while, if they can. They might go with non-GMO seed because it costs less versus the genetically modified. They’ll have to manage for pests accordingly, so there’ll be challenges there.
Is there any silver lining to the current situation?
The one good thing about low prices is that it challenges people to be a better manager, and usually what happens is the management practices that they put in place under low prices, they continue to keep those in place when prices get better, and it ends up increasing their profitability down the road.
How else are the current trade issues and tariffs affecting the industry?
The other side would be machinery. Because of the steel tariffs, things have gone up, there’s a lot of uncertainty there. I know we were working on a project that we had priced out before the tariffs went into effect, and the piece of equipment we were going to have built almost doubled in price, and the price quotes that we got were only good for 48 hours because of the uncertainty. You can’t blame them. They didn’t want to order a bunch of inventory in to take care of our needs and then the tariffs go away and then they’re left with high-priced inventory that they’re going to lose money on. It’s impacted a lot of pieces of our business.
With all the uncertainty you mentioned, what’s your overall sense for next year?
I’m optimistic that the farmers will figure it out. They’ll know what they need to do to weather this storm. I just hope that the administration gets it figured out so that the farmers aren’t the ones that take a bullet for the team.
Interview conducted and condensed by Joe Boomgaard.