Knowing how much working capital your farm needs is one of the most critical financial decisions you'll make — and in 2026, it's more urgent than it's been in years. Farm sector working capital is projected to drop 9.2% this year, from $154.9 billion to $140.6 billion, according to USDA's Economic Research Service. With input costs still elevated and commodity prices compressed, the gap between farms that weather the year and farms that struggle often comes down to working capital reserves.
This guide covers what working capital is, how to calculate it for your specific operation, and the benchmarks ag lenders actually use to evaluate farm financial health.
Working capital for farmers is the difference between a farm's current assets — cash, stored grain, supplies, prepaid expenses — and its current liabilities — accounts payable, rent, and taxes due within the year. It represents the liquid funds available to cover day-to-day operations and short-term financial needs without taking on additional debt.
A farm with strong working capital can absorb a bad crop year, act quickly on a land or equipment opportunity, or bridge the gap between planting costs and harvest revenue. A farm without it is one weather event or market swing away from a financial crisis.
Working capital is essential for two reasons:
Absorbing unexpected shocksuh — drought, yield loss, interest rate spikes, or sudden input cost increases
Seizing time-sensitive opportunities — a land parcel coming to market, discounted equipment, or favorable input pricing
There are two approaches to calculating your level of working capital:
Working capital, which can be calculated as current assets divided by current liabilities, is often expressed as a ratio. Current ratios of 1.7 or above indicate a strong financial position, while ratios of 1.2 or below illustrate potential financial risk.
Current Assets / Current Liabilities = Current Ratio
Current assets can include cash and checking accounts, supplies and equipment, stored crops, or prepaid expenses. Current liabilities can include accounts payable, rents or leases, credit card balances or taxes.
In this calculation, “current” refers to assets that can be converted into cash within one year and liabilities that must be addressed within a year; this does not apply to intermediate or long-term assets and liabilities, which are categorized differently when calculating working capital or other balance sheet figures.
Current Ratio | What It Signals |
2.0 or above | Excellent — strong financial cushion |
1.7 – 1.99 | Strong — favorable position |
1.3 – 1.69 | Adequate — monitor closely |
1.2 or below | At risk — may affect credit access |
Another approach to calculating working capital, which some financial institutions consider to be more reliable, is to compare working capital to gross revenue of the operation. By dividing working capital by gross sales, farmers can assess their ag operation’s cash needs more accurately based on the exact scale and size of their unique farm.
Calculate your assets and liabilities using the free Balance Sheet template from FBN® Finance.
Having a reserve of cash on hand positions farmers to be agile in their response to market shifts, unexpected weather impacts, and other unpredictable changes to their operation. Interest rate increases, drought conditions, rising input costs, and other shifts can all quickly affect ag operations. Having working capital empowers farmers to handle these unforeseen challenges.
In more positive scenarios, having working capital also positions farmers to take advantage of unique deals on land sales, equipment purchases, or other opportunities that require quick action and immediate access to liquid funding.
Farm sector working capital is projected to decline 9.2% in 2026, dropping from $154.9 billion to $140.6 billion, according to USDA's Economic Research Service. Crop producers face the most pressure, with more operations likely to need working capital support or debt restructuring. Building and protecting your working capital buffer now is one of the most proactive financial moves you can make heading into the year.
Most ag financial advisors recommend a 20–40% working capital buffer — meaning working capital equal to 20–40% of gross annual revenue.
But the right target depends on your operation type:
Crop farms — Target 30% or higher. Cash grain operations with longer revenue cycles should aim for 40–50%.
Livestock operations — 20% or higher is generally considered strong, given faster inventory turnover.
Mixed or diversified farms — Aim for 25–35%, adjusting upward if you carry significant commodity price or weather risk.
Operations with narrow margins — Target the top of these ranges or above. When volatility is high, many lenders look for 35% or better before extending credit.
Note: These are widely used benchmarks. Your lender may apply different standards based on your credit history, collateral, and market conditions. When in doubt, target 40% — that's where most ag lenders set their preference.
The amount of working capital farmers need hinges on a few common factors, including the operation’s:
Size — Larger operations require more working capital in absolute terms. A $2M revenue operation needs $400,000–$800,000 in working capital at a 20–40% ratio.
Volatility — Operations with narrow margins or heavy commodity exposure should target the upper end of the range. A single bad yield year can wipe out a thin buffer entirely.
Risk Outlook — A more financially conscious, risk averse farmer may want to have additional working capital to be prepared against any potential shifts in the market. In uncertain markets — like 2026 — risk-averse operators and most lenders prefer 35% or above as a minimum floor.
Even in secure financial times, it’s generally a good idea to maintain a strong working capital position to remain prepared for the next stage of the agronomic cycle, potential growth opportunities, or unanticipated financial changes in the future.
If your working capital ratio is below your target — or you're not sure where you stand — an FBN Finance loan advisor can help you evaluate your position and identify the right financing tools to strengthen it. Most conversations take under 15 minutes and there's no obligation.
Backed by great rates, flexible repayment terms, and exceptional service from loan advisors with hands-on ag experience, financing solutions from FBN Finance help offer stability to many farmers just like you across the United States. We offer several solutions, including:
Land Loans — FBN Finance offers land loans to help farmers start or expand their operation with a new land purchase. Land loans can also be used to refinance existing loans.
Equipment Loans — Farm equipment loans from FBN Finance can help farmers buy the equipment they need without putting a strain on current budget or operational cash flow.
Talk to a member of our loan advisory team today by completing the form below or calling 866-551-3950 to see how FBN Finance can support your ag operation.
How much working capital should a farm have? Most agricultural lenders recommend maintaining working capital equal to 20–40% of gross annual revenue. Crop farms generally need 30% or more; livestock operations can operate with 20% or higher. In volatile market conditions — or if your operation carries narrow margins — target 35–40% or above.
What is a good working capital ratio for a farm? A current ratio (current assets divided by current liabilities) of 1.7 or higher is considered strong. A ratio between 1.3 and 1.7 is adequate but worth monitoring. A ratio of 1.2 or below signals potential financial risk and may affect your ability to qualify for operating credit or land loans.
What counts as working capital on a farm? Farm working capital includes current assets — cash, checking account balances, stored grain and livestock, prepaid expenses, and accounts receivable due within a year — minus current liabilities such as accounts payable, short-term debt, rent due, taxes owed, and credit card balances. Long-term assets like land and equipment are not included in the working capital calculation.
How do I increase working capital on my farm? Common strategies include: reducing input costs through cooperative or group purchasing, avoiding over-leveraging on land or equipment, locking in favorable commodity prices through forward contracts to improve cash flow predictability, and using operating lines of credit strategically rather than drawing down cash reserves. An FBN Finance loan advisor can help you evaluate your current position and identify the right tools.
Is working capital the same as farm profit? No. Working capital is a measure of liquidity — what's available right now to cover short-term obligations. Profit measures income over a period of time. A farm can be profitable on paper and still have a working capital problem if cash is tied up in long-term assets, unpaid receivables, or recent large purchases.
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