As growers make final plans for the 2018 crop, operating loans and lines of credit are also being finalized. After harvest, there was a good deal of concern that farmers would not be able to obtain the credit needed for the 2018 crop. However, better than expected yields and a slight moderation in prices have allowed most growers and their lenders to put together a financial package for 2018. Tom Sloma, Indiana VP of Farm Credit Mid-America, says most of their cusomers are in good shape, “We are about ¾ of the way through our operating renewals for 2018, and it is going very well. We have seen some challenges with working capital and fixed expenses, but we are working with farmers and, so far, have not seen anything that surprises us.”
Sloma says 2018 has a lot of unknowns and growers must plan on how to handle risk, “It really involves laying out a plan for what 2018 looks like and 2019 and 2020. That way, if thing do degrade, we will have a plan on what we are going to do and what options there will be to keep a grower solvent.” There is a good deal of uncertainty in agriculture right now with talk of trade wars and still no action being taken on a new Farm Bill that will provide a safety net for the future.
One factor helping many operations is some stability in land prices. “We have seen farmland prices remain stable for the past 6 months,” said Sloma. He added there has also been a decline in the number of land sales and auctions. This observation is corroborated by recent research by Purdue.
Sloma also encourages growers to lock in long term interest rates as rates are on the rise, “We expect several more interest rate hikes this year, so we know rates will not be doing down.” He suggested growers who have any long term loans on a variable rate move to a fixed rate, “This will save them some money and free up some working capital.”
For more details, contact your local FCMA office.