Given the state of the farm economy, it will not come as a surprise that farm operating loans are on the rise for 2017. Gary Coleman, Regional VP with Farm Credit Mid-America, told HAT that they have seen a much higher demand for operating loans, “Three years ago farmers were holding their loans for 5 or 6 months, but in 2016 more operating loans were held for 8 months or more.” Economists have reported many farmers began the current downturn with good cash reserves, but those reserves have been used up over the past few years.
While many farmers are having to turn to operating loans in 2017, Coleman says not all producers really need one. He said it is important to realize if you need such a loan or not, “Like many financial decisions, an operating loan is one you should seriously discuss with your loan officer to see if you really need one or if you can pay it back.” He added failure to pay back an operating loan can increase interest charges and can hurt your chances of getting another operating loan in the future.
This is also the time of year when farmers are making their crop insurance decisions. Coleman says crop insurance and operating loans go hand in hand, “Taking out an operating loan without crop insurance or without the right level of crop insurance, can add risk to your operation.” He said having crop insurance is the guarantee that you can pay off your operating loan if mother nature turns against you.
Farm Credit Mid-American has a number of on-line resources to help with operating loan decisions. Visit www.e-farmcredit.com.