Take every chance you get to become more efficient
Farming is a cycle of ups and downs. Yet regardless of which way the markets are moving, business-minded farmers can cash in on opportunities.
“Most farmers’ balance sheets are in strong financial shape,” says Jerry Lehnertz, vice president of lending at AgriBank Farm Credit Bank. “But farmers will need to focus on risk management and become more efficient now to be prepared for 2017/18.” While you’re harvesting this fall, keep in mind these business strategies.
6 To-Dos To Improve Financial Standing
- Protect Working Capital. “Working capital is your first defense against low prices, not real estate or machinery,” says Curt Covington, Farmer Mac senior vice president of agricultural finance. Refinance land or machinery to fixed-rate loans to increase liquidity.
- Ensure Input Returns. “Every year, you should review the top 20% of your business expenses,” Covington says. Conduct a cost review with your vendors to verify you are getting the best price. “Make sure relationships aren’t getting in the way of good business decisions,” he says.
- Resist Machinery Purchases. “Farmers have been aggressive in purchases during the last several years,” Lehnertz says. “They are in a position to not have to purchase new equipment for quite a while.” Be sure to evaluate the return on investment for any fleet expansions.
- Reevaluate Land Rents. “Sell to your landlord why you need a lower rent,” advises Mike Mock, senior risk manager at The Andersons, Inc. “I’ve attended three meetings with farmers and their landlords to explain the current situation.”
- Assume Value Fluctuations. When interest rates eventually rise, land values will decline. “Interest rates can have as much—if not more—impact on the value of land than the value of the commodity being grown on it,” Covington adds.
- Aim To Improve. Visit with your banker, vendors, CPA and attorney to find out what you should be doing that you’re not doing, Covington suggests. “Your vendors are servicing hundreds of your competitors and could provide you advice and new ideas.”
(Source – http://www.agweb.com/article/fall-management-checklist-NAA-sara-schafer/)