The latest USDA farm cash receipts forecast has corn, soybean and wheat prices driving a 2.5% decrease for 2025 crop receipts compared to 2024, and the agency’s forecast shows an 11.2% increase for total animal/animal product receipts. Pair that with production expense increases calculated at 2.6% for crops and 21.5% for livestock. Farmers are financially pinched.
“Good decision-making, good risk management are always differentiators in any market, but they’re especially true today,” says Jase Wagner, president and CEO of Compeer Financial.
This fall into the winter, farmers will meet with their lenders to discuss operating loans, cash flow and capital expenditures. And the risks feel higher than ever. While greater transparency may reveal vulnerabilities in the business, it is the No. 1 thing lenders say will help them get farmers through what could be a very tough series of years.
“Really be open and honest with your lender,” Wagner says. “Being honest with yourself about where you are and what your abilities to execute over the next couple years will be really important as things get tighter.”
To prepare yourself for working with your ag lender, Kelly Hardy and Jim Halvorsen, with CLA, share these tips from the accountancy perspective:
1. Build a team of outsiders that work together. That should include:
- Banker
- Accountant
- Attorney
- Grain Buyer
- Marketing Advisor
- Crop Insurance Agent
- Mentors
- Successors
2. Be proactive in who you work with.
“Work with lenders who understand farming,” Halvorsen says. “You should expect to give them information about [the] farm, answer their questions and have them understand your goals.”
As for how often to meet with your lender, Halvorsen says it’s a best practice to meet with your financial partners once a quarter.
3. Know the type of information needed to make the best decisions for your business.
“If your banker only wants your tax return, it’s a red light,” Hardy says. “You need to provide a financial statement.”
She says tax returns are not a measure of the business’s profitability or assets.
“Tax returns don’t say how much grain you have in the bin,” she says.
Also, she advocates for the financial discussions to be centered on investments in the business — not taxes.
4. Transparency is the quickest way to establish a long-term, successful strategy despite any short-term challenges.
“No lender wants to take your farm. They are there to help you,” Hardy says.
She says having honest discussions with the full set of information is what reveals opportunities, even if the discussions may show weakness in the current business.
With lower commodity prices, Hardy says the drop in income will be evident on balance sheets this year. Having a true state of the business discussion will also unveil a strategy for how to manage the current farm economy.
