2020 can be described in many ways, and not many are too flattering. However, for many farmers, 2020 can be described as profitable. Ad hoc government payments contributed to that, but an unanticipated and surprising rally in the markets are driving it as well.
Tim Koch, Chief Credit Officer at Farm Credit Services of America, says the opportunity is there to make 2021 a profitable year as well by locking in some of these high prices.
“For some that have struggled these last 2 or 3 years with lower commodity prices, 2020 was an opportunity to pay down some debt and to replenish some working capital. For that segment, they probably should more strongly consider taking some opportunities to lock in a profit for 2021. For those that are more financially stable who can take a little more variability, that option and opportunity exists. There’s also an option of pricing some of your crop. It doesn’t have to be an all or none scenario. I think far too often people think of it that way.”
Koch adds that, if you haven’t already, you should be talking with your lender about these low interest rates.
“Whether that’s repricing their existing loans or even encouraging producers to look at re-amortizing some of their long-term debts locking in these levels of interest rates for a longer period of time. What we’ve seen is that can have a very significant impact on their overall cash flow demands and really lower their overall cost of production.”
Learn more about farm loans at www.fcsamerica.com.