As you approach the harvest finish line for 2020, turn your attention to next year. Review the season and schedule meetings with your lender. Take these steps to simultaneously make your 2021 agronomic and financial plans.
1. Record the highlights and lowlights of the year.
Review the year and document what went well and what challenges you faced, suggests Ashley Arrington, founder of ag consulting firm Agri Authority. “Write it down and relay it to your banker. People think the more information you give a lender the more they’ll ask for, but the truth is actually the opposite. If you give them more information, they will have less questions.”
2. Update your marketing plan.
Record or estimate your 2020 crop production so you can adjust your break-even costs and marketing goals, says Jessica Lehman, director of agribusiness banking at First Financial Bank. Then you can make financially driven decisions about whether you should store your crop or sell at current prices.
3. Plan out your input purchases.
The fall and early winter can provide smart buying opportunities for inputs. “Fertilizer prices are as low as they have been in the last four or five years,” says Ben Pagel, president and CEO of Northeast Security Bank. “Talk through your options with your lender. Maybe you should borrow a short-term note and lock in a good price on your cost side.”
4. Think through ways to increase working capital.
The low-margin environment farmers have been facing looks to continue, Lehman says. Ask tough questions: Should I offload some equipment? Is there a piece of land I could sell, trade or swap? What are ways I can increase my profit margin?
5. Open the lines of communication.
Your goal is to have an honest and proactive relationship with your lender. Remove surprises with strong communication. Be honest about challenges you are facing, Pagel says. “We don’t care how good it is or bad it is, just tell us how it is.”
For a checklist of the key points to cover, in writing, when requesting a loan, visit AgWeb.com/loan-request
