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The Big Picture: Sound Financial Planning; Strategic Advice From FCMA can Make the Difference


Sound financial planning; strategic advice can make the difference through market ups and downs

The last year has blessed grain farmers with high commodity prices and better-than-average yields. Still, the continued rise in input costs, threat of adverse weather events and other uncontrollable variables could present future challenges for the market. So, how can producers capitalize on the positive opportunities in today’s marketplace and prepare for the future?

Having a good handle on the operation’s financial situation, looking for contracts that can be locked in now, protecting profits with crop insurance, and working with a relationship-based lender like Farm Credit Mid-America are all steps toward a sound strategy for financial success.

“It’s all about helping operators have a plan,” says Matt Oberlies, Vice President of Commercial Agriculture for Farm Credit Mid-America. “With our knowledgeable team, fixed rate loans, flexible operating loans, crop insurance and other tools, we work hand-in-hand with operators, taking a proactive approach to managing their risk.”

With more than 100 years of experience working with agriculture professionals in Indiana, Kentucky, Ohio and Tennessee as part of the Farm Credit System, Farm Credit Mid-America has the resources and expert guidance producers need to plan, mitigate risk and maximize opportunity in both good and difficult times. More than a lender, the cooperative’s team members are industry specialists that stand side by side with customers to navigate the ever-changing marketplace.

The basics: Know where you are to set a solid foundation

Heading into the end of 2021, marketing crops is at the top of everyone’s mind – as it should be, says Farm Credit Mid-America Senior Financial Officer Max Niespodziany.

“Marketing should be important every year – whether it’s a prosperous or challenging one,” says South Bend, IN-based Niespodziany, who has worked alongside Farm Credit Mid-America’s customers for 10 years. “During the good years, successful marketing enables the producer to build both capital and liquidity. A strong liquidity position is essential to be able to bear risk when challenges arise.”

Farmers can put themselves in a strong liquidity position by knowing the break-even point for their operation.

Both Oberlies and Niespodziany encourage their customers to know their true costs of doing business, from crop inputs to principal and interest cost, to tax, insurance, depreciation and cost of living. Keeping a detailed balance sheet allows producers to make sound short-term and long-term financial decisions. That includes knowing when they need to sell to cover costs and make a profit. That way, operators can sell when they achieve their business goals instead of trying to “outguess the market” and hold onto grain in hopes of a higher price.

“Make your marketing plan about a business decision and not an emotional decision,” Oberlies says. “This is about the stability and longevity of your operation.”

He also advises producers to focus on the margin and not just the profit. Farmers have seen high prices for fertilizer, fuel, cash rents and equipment, which is not only more expensive but harder to come by due to supply chain issues. Operators can try to control these factors by pre-paying for seed or fertilizer now, if they have cash on hand, and looking at their contracts to find the best solution for their operation.

Farm Credit Mid-America’s products and services can help ensure farmers have access to the credit they need when they need it. The cooperative offers fully fixed interest rates on intermediate and long-term loans with competitive numbers and terms.

“With a properly structured line of credit, you’re able to sell when you need to – not because you have to in order to pay a bill,” Oberlies says.

Protecting against unknown variables

Healthy working capital is important because even with high yields and prices, uncontrollable factors remain. Exports to China may not return to the levels of last year. In South America, the anticipated La Nina could impact production, driving prices up or down significantly.

That’s where Farm Credit Mid-America’s crop insurance experts can help. With a range of crop insurance products and resources, the team works closely with operators to manage risk.

“When we know what the break-even is, we can ask the question ‘What do we need to do to protect your operation and make sure you’re able to come back and grow your crop again next year?’” says Cody Maudlin, Crop Insurance Specialist.

Farm Credit Mid-America offers a variety of crop insurance products from federally affiliated and private providers. Specialists educate farmers on what’s available and then tailor plans to their specific operations.

“This is why it’s so important that we know our customers” Maudlin says. “Having our crop insurance team in-house allows us to better serve our customers because we see the whole picture. We’re helping our customers sleep at night – giving them peace of mind.”

As farmers head into 2022, Farm Credit Mid-America’s advice is straightforward: Focus on your operation. Focus on what you can control. Create a marketing plan and stick to it.

“We call them farmers, producers and operators, but these are businesspeople,” says Niespodziany. “Our customers are business men and women with significant capital investments in their operations, and they think outside the box. They understand marketing and know what they need to do to make a profit. We’re here to stand with them every step of the way, giving our best advice and best resources to help them make the best decisions for their business.”