Home Indiana Agriculture News This Unusual 2020 Will Require More Financial Prep and Planning

This Unusual 2020 Will Require More Financial Prep and Planning

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As 2020 moves into the second quarter, there’s no doubt we are looking at an historic year due to the coronavirus pandemic. Farmers have many unknowns yet to come, even before planting begins, but this year it’s not just about the weather.

Purdue’s Center for Commercial Agriculture hosted their Spring Crop Outlook Webinar Wednesday to try and shed light on facing the unknowns. Dr. Jim Mintert, director at the Center, said be ready if there is a seasonal rally, but that is a big if.

“There’s a strong tendency to see a spring planting season rally in both corn and soybeans, and if that materializes take advantage of it,” he said. “That’s your opportunity potentially to make some clean up sales of the 2019 crop and perhaps make some sales on the 2020 crop as well. We don’t know if that is going to happen. This is a very unusual year.”

Strong corn basis bids have deteriorated recently, and it seems too unlikely that a normal seasonal strengthening would occur this year.

“The eastern corn belt did benefit from some really strong corn basis for most of the 2019 crop year so far, but weakened ethanol demand has really changed that dramatically,” Mintert explained. “I don’t see basis bids strengthening, unless something changes from now as we head into the summer months.”

Mintert says take advantage of locking in some of the soybean basis strength that still remains.

“As you look at the 2020 crop, that basis strength goes away, so that strength is really tied to what was taking place in the 2019 crop. Don’t let that get away from you.”

Michael Langemeier was also on the webinar, and he says as you weigh the financial picture on the farm, be sure to look at working capital.

“Do some contingency planning,” he said. “Use some proforma financial statements. We’ve got an example of a spreadsheet on the website you can utilize or develop a similar spreadsheet yourself but do some contingent planning. What do these prices mean for working capital next fall. Use that along with your marketing strategy to make sure that your liquidity doesn’t get very weak as a result of these low prices.”

He said planning ahead could help better define your ability to repay debt based on current price levels. Langemeier said this pandemic has created a very important environment for work on financial projections.

Also in the webinar, the two ag economists have an in-depth evaluation of USDA’s March 31st reports. The link to the webinar replay is here.