Improving cash flow and reducing stress

Jordan Howe
Like many growers, Jason Rowe, who oversees a diversified corn and soybean operation in southwest Wisconsin, faced a dilemma last year when fertilizer prices began to skyrocket.

Like many Wisconsin growers, Jason Rowe faced a dilemma last year when fertilizer prices began to skyrocket. Rowe, who oversees a diversified corn and soybean operation in southwest Wisconsin, was excited about opportunities to expand his farm, but with that came added concern about the market and assuming more financial risk.

With input prices rising and market volatility around interest rates, Rowe knew he needed to find ways to maximize his cash flow to take advantage of a rare opportunity to pick up an additional farm and add about 10% to his total acreage. His story is an example of the benefits that await Wisconsin farmers who align their financial plans and cash flow with their agronomic plan.

“Lately, farming has been a lot of fun,” Rowe said. “I’ve seen, first-hand, the benefits of lining up my agronomics with my finances. Chief among them, it’s taken some of the stress out of decision-making, which means I can stay focused on the fun part of farming.”

To find your financial footing and see results as Rowe has, it's crucial to manage your cash flow and create some financial flexibility to capitalize on growth opportunities. Here are a few steps to do that:

  1. Take a holistic view of your financing options and shop around. Consider all your financial options and the true value of your dollar while you develop your agronomic plan. It’s great to have the right inputs, but if you’re paying for those products without terms, or cash flow to match your financial needs, you’re missing an opportunity. Wisconsin farmers can put themselves in a better position - as Rowe did - by exploring options to reduce input costs, save on interest, and other related capital expenses. In many cases, there’s a strategic advantage to leveraging your bank operating line of credit, cash on hand and supplemental lines of credit, which provides added flexibility.
  1. Get ahead of the game and lock in input pricing early. For Rowe, he wasn’t totally ahead of the game, but he also wasn’t at the backend, and says he knows folks waited and ended up paying 30-40% more than he did for the same inputs. The lesson here is not to wait on building your financial plan. Going in to harvest season with an accurate view of his finances made it that much easier to prepay on next year’s inputs, locking in early-season discounts without overextending himself while Rowe was simultaneously expanding his operation. As your crop plan comes together, seek a total acre solution and do the work to know your costs. This approach provides the most accurate insights to build a flexible financial plan for your specific operation.
  2. Develop a financial plan that aligns with your crop plan, and can flex when things change. Wisconsin farmers already manage countless variables beyond their control - whether it’s interest rates, pricing volatility, weather fluctuations, variable crop conditions - nothing is guaranteed. Rowe’s financial plan had built-in flexibility and gave him an advantage when the opportunity to pick up an additional farm presented itself. Instead of using cash to prepay his inputs, he used it for land acquisition. He had the financial freedom to make that decision quickly, which gave him the advantage on the real estate transaction, and without a lot of stress knowing payments for his inputs would follow harvest.
  3. Seek expert insight to maximize peak cash flow periods and add value to your dollar. Farmers earn revenue once a year at harvest time, so it’s critical to maximize the return to cover expenses throughout the year. Working with advisors who have specific financial expertise and agronomic sensibilities can help growers find more wiggle room to market and sell when it’s most advantageous to the bottom line. Small adjustments to your cash flow can help you avoid financial stress when you have to sell because you need cash immediately to pay for something - whether it’s an opportunity to expand, or an unexpected expense. Strategic use of financing programs for input purchases can free up other sources of capital and provide a bridge to sell when it’s most advantageous.

For Rowe, adding this layer of support to his annual planning made a critical impact to his bottom line. Not only did he save on his input purchases with early discounting, but financing his inputs freed up cash to invest in his operation, both of which increased his profitability.

“The last few years have been hectic and hard to predict,” said Rowe. “We’ve been blessed with good crops with good cash flow, but cash is eaten up by higher prices, so it’s really helpful to work with folks who can help you see the big picture. It makes a difference to have that insight to make the right decisions.”

At a time when everyone is reviewing their expenses and looking for savings, sound and comprehensive financing solutions that work in tandem with your crop plan will provide some much-needed relief.

Jordan Howe

Jordan Howe is a senior territory sales manager for Nutrien Financial. He provides financing expertise to growers across the midwest to increase their buying power and maximize every opportunity for success. Learn more