• Home
  • Consulting
  • About
  • Cotton
  • Contact
  • Sign Up
  • Extras

Agri Authority

The Future of Ag

Real Talk – Shortages

Crop Shortages Agriculture

 

Do you see a shortage on the horizon?

It gets to a certain point of the year when you can really see how your crop is going to turn out. You will start running all the numbers in your head to determine how much revenue the farm will produce this year. If you have some doubts of whether you will be able to make all debt payments or pay your operating line back the real worry starts to set in. If you know you are going to be tight or maybe a little short, you should start game planning ASAP.

The first step to take would be to put your current crop on paper. A lot of times farmers are so hands on in the harvest process they keep their revenue and yields projections in their head and estimate. However; if you are a farmer with multiple fields, multiple crops, and a mix of dry land and irrigated you should start writing it all down before you accidentally over or under estimate a certain crop or field. Start by listing all of the acreage and crop types. From there list the projected yield based on harvest thus far and a conservative selling price (unless booked), and come to a total estimated revenue figure.

 

Look At Your Open Accounts

After you know how much income you expect to come in, take a look at what invoices or open accounts you will have left to pay. Once you subtract the left to pay figure from the income figure you will have a total of what you will have available to pay your annual debts and operating line. If you do not have enough left to make all of your debts payments inevitably you will short… so what now?

Well, now is the time to bust out your most recent personal financial statement (or business if you farm in an LLC or other entity) and make a few observations. First look at your assets and determine how much equity you have in them. Can you borrow additional money against those assets? Will you be over-leveraged? Then take a look at your debt. Based on your typical revenue streams from past years, could you afford any additional payment on a shortage loan?

 

Write down everything you know

Once you browse over this information write down everything you know about your current position. Make detailed notes on how much you will be short, why you are short (weather, insects, unexpected expenses etc..), and how you think some ways to solve the problem would be. Take this information to your banker sooner rather than later. Of course your banker does not want to see you come up short, but they will be impressed by your proactive approach and appreciative of the detailed information. I can’t tell you how many times I have sat down with a farmer that had no idea why they were short and really didn’t even know how short they would be.

 

Distinguish yourself

Many farmers worry the bank will lose confidence in their operation if they are short and not finance them any longer. This is often not the case, if the farmer understands why they have the problem and are an active part of the process of solving the problem it actually adds more confidence to the relationship. One of a banker’s biggest problems is a customer that hides information from them and this can be a huge deal breaker. If you distinguish yourself as an open book and active problem solver you will gain more respect than you lose during your rough patch.

The End of Harvest Checklist should help you gather your thoughts and get ahead of the game.  The checklist can be found here.

 

Ashley Arrington - Agri Authority
Ashley Arrington
Agri Authority
AgriAuthority.com

Filed Under: Agriculture Articles, Ashley Arrington

Ashley Arrington

About Ashley Arrington

Ashley Arrington is the Founder of Agri Authority

Agriculture Podcast
  • LinkedIn
  • Facebook
  • Twitter
  • Email
  • Privacy
  • Terms
COPYRIGHT © 2016 AGRI AUTHORITY