10 Ways to Manage Your Farm Finances for the "Down" Years

FBN Network

May 23, 2024

Farming is an unpredictable business, and farmers are no strangers to the ups and downs of the market. 

While it's important to enjoy the good times, it's equally important to plan ahead in preparation for the potential bad times at your ag operation. Here are some recommended strategies to help proactively manage your farm finances for the "down" years.

1. Keep a Cash Reserve Cushion

Before using capital with higher costs, it's helpful to have a cushion of cash reserves that can help you weather any financial storms that might come your way.

2. Know Your Production Costs

By having a strong grasp on your operation’s production costs, you can make informed strategic decisions about when to sell and at what price.

3. Refinance Existing Debt on More Favorable Terms

Refinancing can often help you lower your total annual payments in order to increase the cash you have readily available for other operational needs. 

4. Reduce Your Costs

Selling equipment you don't use often, buying generic crop inputs instead of more expensive branded options, and purchasing machinery in partnership with other nearby operations can help you reduce your overall operational costs.

5. Diversify Your Income

Consider incorporating value-added crops, growing alternative crops on non-productive land, or pursuing other new revenue streams like livestock, trucking, partnerships with local businesses and markets, or other unique alternatives to diversify your income sources and potential bring in additional revenue. 

6. Consider Custom Work

By doing more custom work at your ag operation, you can potentially add revenue without additional capital requirements. However, it’s important that you charge enough for this work in order to be profitable. Spend time researching and considering a fair rate to ensure your new strategy will be profitable before pursuing this approach. 

7. Consider Off-Farm Income

Providing additional income and access to benefits can help keep your farm finances in good shape. Evaluate off-farm jobs that can provide a steady stream of income.

8. Lower Family Living Expenses

It's important to look at how much of your farm income is used to support personal expenses. Reducing family expenses can free up money to use for your ag operation.

9. Maintain Positive Lender and Landlord Relationships

Staying in consistent communication with lenders and landlords (and maintaining a strong relationship with them) can be beneficial in the event you need to renegotiate terms in the future.

10. Seek Advice

It's a good idea to ask people who have expertise in areas beyond your scope of experience for their guidance. For example, talk to older generations of farmers about how they successfully managed downturns and seek out advice from professionals in the industry.

Financial Solutions from FBN® Finance

Without a doubt, managing farm finances during the “down” years can be challenging. However, these tips can hopefully serve as useful tools to help your ag operation stay prepared for any financial hurdles that may come your way. 

With an average of 15+ years’ experience each in ag finance, FBN loan advisors are ready to talk to you regarding any questions you may have related to your farm finances, potential financial solutions or other financial strategies for your ag operation. Click here, complete the brief form below, or call 866-619-3080 to speak to a member of our team today.

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The material provided is for information purposes only. It is not intended to be a substitute for specific professional advice. Neither Farmer’s Business Network nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in the material and any liability therefore is expressly disclaimed. 

Financing offered by FBN Finance, LLC and its lending partners. Terms and conditions apply. To qualify, a borrower must be a member of Farmer’s Business Network, Inc. and meet all underwriting requirements. Interest rates and fees will vary depending on your individual situation. Not all applicants will qualify.Terms and conditions apply. Land financing offered by FBN Finance, LLC, provided in connection with Farmer Mac and our underwriting partners, and is available only where FBN Finance, LLC is licensed. To qualify, a borrower must be a member of Farmer’s Business Network, Inc., and meet the underwriting requirements of FBN Finance, LLC and its lending partners. All credit is subject to approval and underwriting. Interest rates and fees will vary depending on your individual situation. Not all applicants will qualify.

FBN Network

May 23, 2024

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