This fall, many farm leaders are considering how the farm’s financials for 2024 are going to shake out. Many farms across the Midwest are currently experiencing challenges around profit margins.
Farm leaders might also wonder — or worry — about their lenders’ thoughts on the situation. If your lender understands the economic cycles of agriculture because they deal mainly with ag clients or, even better, have worked through multiple ag cycles, then they already know the situation.
If your lender is less familiar with the ag world and the various economic cycles that occur in the industry, it will be important to help educate them about that.
Consider working with your farm’s market advisers and financial advisers to get your lender up to speed about ag’s cycles.
Proactive Approach
Regardless of your lender’s familiarity with the ag world, it’s going to be key this fall to be proactive with both plans and communication.
The first step is to get a clear handle on what your farm’s 2024 financial picture looks like. Work to update your numbers with your farm’s financial adviser.
Then it’s time for proactive planning. Your lender will want to hear your ideas and your plans for what you’re going to be doing to improve your farm’s financial picture.
Prepare for that meeting by setting forth clear plans about exactly what you are going to be working on to improve revenues and reduce expenses.
Whether they have an ag background or not, lenders will gain confidence in your leadership ability and your operation’s viability when you show and share your plans.
Farm leaders will want to work closely with their farm business advisers to set up feasible plans with achievable goals. You can ask your adviser to help you practice for your banker meeting or even attend the meeting alongside you.
Strong Planning
The goal for you and your lender is ideally to get a strong plan in place that prioritizes the farm’s long-term future success.
Your lender wants to have confidence in you as a businessperson with a clear ability and plan for how to steer the operation, even during more turbulent times in the ag economic cycle.
Whether you’ve been through a tougher time in the ag cycle before or if this is your first time leading the farm operation through it, know that your willingness to be proactive and open with your lender goes a long way in their business relationship with you and your operation.
Make sure that when you create a plan forward for your operation, that you also commit to carrying it out and seeing the results through.
Try These Two
How can you build more resilience and resilient thinking in yourself, others in your farm and your operation overall? Here are two ideas:
1. Work scenario planning into your operation. Especially in parts of your operation that are impacted by swiftly changing conditions, whether that’s the weather, the markets, or anything else, scenario planning is one way to build greater resilience into your operation. Scenario planning is helpful in a couple different ways. The action of thinking through multiple different scenarios and then planning what you’ll decide to do if those circumstances come to light helps you be more prepared for whatever happens. Your brain has already run through and prepared for various options, so you can be more comfortable when approaching the situation.
2. Teach resilience through modeling. When you as the farm leader model resilient thinking and actions in your day-to-day leadership, you’re presenting that behavior as the standard and norm within your operation. As they say, “more is caught than taught,” and it flows out to your employees and everyone else involved on the farm. You can also take your future leader and key employees verbally through your thought process when building scenario plans. That way, they can hear exactly how you think through different scenarios and create flexible solutions for each possibility.
How are you navigating this market? Farmers have found that getting some third-party perspective from our market advisers has helped ease their minds.
The advisers help farmer clients with planning and execution around marketing decisions and help keep them up to speed on the rapidly-changing grain market situation — and how it impacts their operation.