Along with harvest planning, pre-harvest is a critical time of year for farmers to assess their marketing and financial situation. It’s a good time to review your crop projections to see how they align with your pre-planting estimates and turn that into a fall harvest cash flow.
Instead of worrying about the unknown and your ability to make all your debt obligations, spend your energy checking yield and price estimates, as well as expected cash outflows for the rest of the marketing year. Cash outflows should include repayment of the operating loan, payment of payables, cash rent, and scheduled term debt payments.
Below, I share some considerations for farmers during pre-planting, harvest, and marketing.
Don’t wing it: planning is crucial
Agribusiness is not a “wing it” industry – a crop projection and fall harvest cash flow are extremely useful tools that farmers should use regardless of the size of the operation. We strongly encourage farmers to work with their banker in preparation to make sure it works for the year, and the next one. If you and your financial advisor can identify potential shortfalls in advance, you can have a strategy in place to address the cash flow issue—if and when it appears.
Keeping a keen eye on your projections, obligations and harvest estimates helps ensure you aren’t surprised once the yield is in. And, if your tax and financial professionals are well-informed, they can start developing a tax strategy plan for the current tax year well in advance of deadlines.
Marketing and pricing
While farmers are working on the cash inflow section of their fall harvest projection, it’s also a good time to review your marketing plan. Evaluate prices and decide if additional contracting should be executed prior to harvest. Additionally, if you have concerns about yield loss due to a challenging planting and growing season, review the current contracts to ensure you can fulfill them. If not, talk to your local grain elevator for alternatives or options.
For future seasons, make sure to develop a marketing plan early in the year and assign someone as accountable for selling a specific amount of grain at a set price to ensure all debt obligations can be met. Making someone accountable to execute the agreed-upon marketing plan can help take the emotional side out, as long as you stick to the plan.
Facing challenges
Given the current challenges facing agriculture, having a strong grasp of your cash flow is just as valuable as having a robust marketing plan. And, finally, it’s important to always compare the cash flow projection to the actual farm income for that year. This will help you adjust your expenses moving forward, which enables you to have a better handle on the financial side of your operation. With market instability, inflation and interest rate movements, expense control is extremely important – even more so during challenging times.
Our Agribusiness Division serves all areas of agriculture, including producers, processors, suppliers and manufacturers of equipment and goods, throughout a 12-state area. We will work alongside you on your harvest planning and priorities for the coming year.
