Practical tips to stay financially fit
A good financial plan is important every year, but it’s especially important going into the 2014 planting season, with corn prices falling nearly $2 per bushel compared with this time last year.
"It’s critical going into this year with margins being tighter," says Andrew Melton, assistant vice president with Farm Credit Mid-America. "Farmers are doing everything they can to cut costs, but if you’re holding grain in the bin, cash flow can still be an issue," Melton says.
Still, credit quality in the farm arena remains strong overall and loan portfolio credit quality is sound, as loan loss provisions decreased and non-adverse loans stood at 99.8% headed into 2014, notes AgriBank CEO Bill York.
"Based on the district’s expected return to normal crop yields this coming harvest and forecasted demand, commodity prices for corn, soybeans and wheat have moderated from their recent highs," York says. However, crop producers are well positioned financially to meet this challenge. Producers and processors who purchase these commodities as inputs will see a positive impact from lower prices."
Top Tips. Melton shares the following advice for farmers looking to keep a financial edge, even in the wake of lower commodity prices.
- Leases: "This year, leases have been a hot topic," Melton says. "We have options that can give you cash flow to extend and structure a payment to get you through a tight year."
- Farm Improvements: Enhancing your existing acreage base is a way to expand your profitability without adding more acres, Melton says. "We’re seeing a lot of farmers doing better with what they have by increasing production on existing acres rather than acquiring new ground," he says. That includes adding center pivot irrigation, implementing better tillage strategies and nutrient management plans, and even incorporating cover crops.
- Transparency: The more your lender knows, the better he or she can develop a solid plan, Melton says. So while yield history drives much of the conversation, any production practices you adopt that might drive yields higher will be useful information for your lender. "Communication, period, is critical," he says.
- Immediacy: Update your year-end balance sheets and meet with your lender as soon as it is convenient, Melton says. Be sure to share your goals and your strategy for meeting those goals.
- Patience: It’s a virtue especially important in a year like this, Melton says. Farmers are spending more time on purchase decisions, which Melton sees as positive. "Be deliberate," he says. "Spend some time thinking about it."
- Operating Lines of Credit: An operating line of credit is a critical tool that can be used to improve cash flow and provide flexibility in an operation. This is particularly true when crops are stored and expenses need to be prepaid.
Find a Lender
A newly designed AgriBank.com
website offers interactive tools and information about farm lending available through AgriBank and the AgriBank district-affiliated Farm Credit Associations. The redesigned site features a fresh look and user-friendly navigation that helps visitors easily
find detailed information about the bank and the resources it provides across its 15-state district in the Midwest.
includes a new tool called "Find a Lender," which helps you source ag lenders in 15 states based on location and needs, including crop insurance or other financial services. Visit the website and click on the "Find a Lender" tab to start your search.