Communication is critical during these tough times
As we have passed the mid-point of 2022, uncertainty is the only thing that is certain when it comes to the financial world. Differing views believe we are already in a recession and other opinions are that a recession is unlikely given the low unemployment level and positive consumer spending indicators. Obviously, uncertainty is prevalent in agriculture as well.
Farmers in Southwest Missouri are battling high input costs in fuel, feed, and fertilizer. This, coupled with a rapidly expanding drought area, creates concerns for profitability and sustainability in our ag community. Many farmers have counted on herd size for cash flow and are now reducing herds because of the lack of pasture and the cost/availability of hay. Farmers who relied on crops have been hit by the double whammy of high-input costs and the weather influence of a too wet spring and too dry summer.
One thing that is certain for farmers is the need to communicate with everyone who is committed to their farming operation’s success. Success and survival in farming depend on a team of specialists you know and trust. The most critical first contact is your family and those reliant on your farm’s profitability. Challenging decisions may need to be made about expense control and even decisions about off-farm employment or liquidating the operation. Unfortunately, farmers tend to withhold information and concerns from the people that are most impacted by fluctuating farm income.
Second in line behind family should be your lenders. Lenders do not want you to have financial difficulties. Bankers are willing to listen to your concerns and often suggest how to restructure debt or whether you should consider selling some assets. If you have a banker who is unwilling to listen, you should find another. You may not always like what they suggest to you. Still, often, they have experienced similar situations with other customers and can provide beneficial insight into how your farm can survive.
CPAs and tax professionals are a critical part of your financial team that should always be consulted before making critical financial decisions. For example, farmers often have an unpleasant tax surprise because of herd liquidations or selling off other assets. Before that final decision is made, the farmer should always consult their tax teammate to determine the implications of their financial decisions.
University extension offices and government agencies can be valuable teammates for keeping current on available programs to help support the farming operation. Often this advice and recommendations are without cost to the farmer.
Other important people to consider contacting are your feed and fertilizer suppliers. They can often be a source of valuable information on how to reduce costs without sacrificing too much production. Likewise, for the beef producers, visit candidly with sale barns or feed lots where you market your livestock. For example, does it make sense to sell 500-pound calves just off the cows or retain and sell the calf as a 900- to 1,000-pound animal? They can help you analyze the feed costs and determine the true profitability of retaining those calves.
Insurance professionals are also important financial teammates to consult with when making decisions. Insurance experts can advise on crop insurance and discuss lesser-known products like rainfall insurance and insurance to support beef price fluctuations. Often, when cash flow is negatively impacted, farmers neglect to retain essential insurance coverages, both property and life. Not properly insuring your assets or life impacts your family and lenders.
Other examples of financial teammates are realtors and implement dealers. Suppose the time comes to liquidate or partially liquidate your farm assets. In that case, both entities should be able to give you a reliable and realistic evaluation of the potential value of your farm operation.
Farmers, remember you do not have to feel isolated. It is hard to be an expert in everything associated with farming, and numerous teammates are available to advise on navigating challenging times in our ag economy.
Kim Light is the president and CEO of Heritage Bank of the Ozarks. He may be reached at (417) 532-BANK.