Good planning is the key to finishing out the year heading into the next crop season as agricultural producers utilize sources of credit to purchase seed, livestock and supplies.
Cattlemen need to take a hard look at their financial situation in the face of the nation’s credit crisis. Farmers and ranchers are already feeling the effects of the financial crisis and need to make smart management choices in order to cut operating costs.
“Make sure inputs generate sufficient income to justify the expense,” says Danny Klinefelter, AgriLife Extension economist. “Remember that maximum profit and maximum yield are not the same thing.”
Shoring up loans is another consideration, which encompasses long-term loans such as land and real estate, intermediate loans such as equipment and short-term loans used for operating expenses.
“Make sure you’ve got your loans structured correctly,” says Klinefelter. “You might even want to consider restructuring some of your current debt. It may be good insurance to convert some short-term debt to a fixed rate, even if it’s at a higher rate.”
“The objective is to improve your working capital position and to become more flexible,” adds Klinefelter. “You don’t want to get caught with a lot of carryover operating debt for the next year.”
Farm Service Agency offers a guaranteed loan program. Borrowers who expect to face restricted credit may want to get ahead of the curve and start looking into this program before crunch time this winter.
Contact your banker and your local Farm Service Agency to review your options for operating loans in the upcoming year.