Here we are at the start of a new year. For many, that means New Year’s Resolutions, reflecting on the past year and making plans for the new year. The agricultural community has had a couple of tough years. A continual drought, uncertainty in the political climate, high input prices… the list could go on. A year ago, most in agricultural were looking toward a good year, which did not materialize. Plans for expansion were scrapped for alternatives to just survive. Now, plans made for the 2013 year are being made on the assumptions that the drought will continue, Washington politics will remain stagnate and prices will continue to go higher. By the time this article is published, most farmers and ranchers will have a fairly good idea of their 2013 plans, if they have not already finalized them. If there is one thing those in agricultural must be, however, is flexible. A periodic review of one’s plans and the progress made towards them can assist an operation to know if goals are being achieved or derailed.
Step One: Do you know what your goals are? Have they been written down anywhere and put where you can see them on a regular basis? (A piece of notebook paper taped up in the feed room works just fine.) Most students going through college today have to write down their life goals in at least one class, if not all, and those goals have three categories: less than a year, one to five years and more than five years. Have you done the same for your farming or ranching operation? The first step to getting where you are going is knowing where you are going.
Step Two: Now that you have your goals in mind, do you know what it will take to get there? What is done today on your operation will not just affect the operation this year, but will have a residual effect in the years to come. Plans made for this coming year will affect the plans for the future. Perhaps you want to buy the neighbor’s farm five years from now. What is the trend of land prices over the past five to 10 years? That will give you an idea of what prices might be in the future. How large of a down payment will be needed or do you want to make? Very rarely in today’s economy can one finance 100 percent of the purchase, therefore it is very likely that one would need to start saving now for that down payment in the future. What can be done on your operation today that will provide you the cash flow you will need in the future? Quite often, just a few relatively minor changes can add up to quite a bit in the long run, such as: locking in input prices early rather than waiting until you actually take possession, culling those indifferent cattle now rather than waiting to see if they produce just one more calf, or if you have multiple long term notes, refinancing those into one long term note at a lower rate.
Step Three: You have your goals and you have a plan, but do you know if it will work? Consulting with your financial advisor and/or lender should be a priority. Having a knowledgeable lender who is interested not just in your bottom line but in the future of your operation can be nothing but good for you and yours. That lender can help you develop a plan that will be profitable to you both. Consult with your financial advisor, your peers, and find what will work for you to achieve the goals you’ve set for yourself.
Knowing where you want to be in the future can help you shape your plans for the here and now, so that you will be there in the future.
Jessica Bailey is a Credit Analyst in the Agricultural Loan Department at Arvest Bank in Neosho, Mo.
