As farmers and ranchers prepare for 2018, many are busy looking at year-end finances. However, it’s a time that one ag banker suggests using to reflect on 2017 while preparing for the new year. Alan Hoskins, CEO of American Farm Mortgage, has four ag lending tips to help farmers navigate the new year.
- #1: Assess land—is it draining your cash? “My first tip for farmers out there is to really look at each piece of land that you're operating. Determine if it is a cash flow positive or cash or negative to you. Don't just look at this year; go back and look at multiple years so that you really see the trend. Look at the rent that you're paying and determine if it really makes sense to continue to have that in your operation.”
- #2: Reevaluate living expenses. “Go back and look at living expenses. Sometimes you can be surprised by what the real number actually is. So I think it's really important to study that. We’re not saying that you have to cut it, but at least know what it is to make sure that where those dollars are going are indeed the best use of those dollars.”
- #3: Have a Marketing Plan. “If you do not have a marketing plan, make sure that you have one in place before 2018. I think if you look historically over the last couple of years, that has been the determining factor between profitable operations and individuals or operations who have struck gold from a cash flow standpoint. So, the marketing plan truly is imperative in order to make sure you know when those good opportunities are presenting themselves. The marketing plan is not something the banker provides for someone. And lastly don't try to do it on your own. There are great professionals out there that have different ideologies of marketing. I would urge people if they haven't had a marketing plan before talk to two or three before they move forward with it because at the end of the day, it's their marketing plan and they need to be comfortable that the way they're moving forward is the best for them.”
- #4: Use All Your Resources. Make sure that producers are using all the resources that are available to them. Make sure that you have the discussions with your banker, with your accountant, with your attorney, with your crop insurance person and with your merchandiser. None of those individuals are going to tell you how to run your operation, but what they can do is give you insight into their area of specialty because the farmer is the CEO of the company, and it's always wonderful when a CEO reaches out for input. Farmers get to make the final decision, but it's going to make them sleep a lot better at night knowing that they have utilized input from individuals who have areas of specialty to formulate the final plan for how they're going to move their business forward.”