Farmers Urged to Dive Deep into Their Farm Financials
With harvest chores complete, it is time for growers to hit the books — the financial books. This year bankers are urging producers to get a head start on making farm program and crop insurance decisions for next year as there are many new choices farmers have to make. The new Farm Bill allows for updating yields, re-allocating base acres, and choosing new crop insurance coverage options. Jason Alexander, with Farm Credit Services of Mid America, says a deep dive into the financial side of an operation is needed, “Farmers need to take time to understand how their current operations will be impacted by the new farm programs and crop insurance options.” He said they need to use the tools that are available to get a good understanding of what the future holds for their bottom line, “In a year like this when market prices are down and margins are tight, and there is a squeeze on working capital, they need to studying, reading, talking with experts.”
Alexander recommends growers pencil out a 5 year plan before making farm program and crop insurance choices, “There is more to it than in the past, and you don’t want to be left behind and find yourself next March saying ‘I am still confused and don’t know what to do’.” He added now is the time to updating your yields and consider changing your base acres, “There are a lot of moving parts to these programs, and we are advising guys to look at the whole picture: farm programs, crop insurance, and even your loans.”
There are many tools to help growers evaluate their options under the new farm programs. Alexander says evaluating your crop insurance coverage should also be part of this planning process, “If you are at the 75% coverage level, you may want to consider pushing that up to 85% just to cover your cost of production on a crop insurance guarantee. Then you need to select the right farm program to back that up.” He said it is important to look several years down the road and use some worse case scenarios on crop prices, input costs, and cash rents to make sure you are positioned to withstand the uncertainty of the next few years.
Hoosier Ag Today will provide some help in evaluating your farm program and crop insurance choices during the IN/Il Farm show. On December 17, Dr. Chris Hurt and Jim Mintert from Purdue will present a special seminar. It will not only feature an explanation of farm program options, but also an outlook for prices and profitability for 2015 and beyond. The seminar is free and will begin at 11am at West Pavilion of the Indiana State Fairgrounds.