As I write this article, my family’s cattle business is right in the middle of the spring calving season. It’s my favorite time of year, seeing those new calves hit the ground running, sometimes almost literally. In order to have a successful calving season, though, there has to be preparation beforehand – selecting the right bull, providing adequate nutrition for the cows, administering necessary vaccinations and pregnancy checking. The same process can be applied to preparing for a successful year for your operation – selecting the right financial partner, figuring out the right financial input and protecting against complications, foreseen and unforeseen.
It cannot be stressed enough how important the right financial partner is in order to have a successful operation. To paraphrase a popular commercial, would you want your banker to do your job? Then why are you doing his/hers? No one knows your operation as well as you do – that one cow who you don’t go near when she has a calf, that spot in the field that becomes a bog with just a couple hours of rain, the best days to sell at the stockyards or haul grain to the port. The right financial partner listens, advises, recognizes opportunities and pitfalls and will do his/her best to keep you in business and growing through thick and thin. Just as your expertise is in the grain or livestock markets, his/her expertise is the financial market.
Figuring out the right financial input can be tough, especially in today’s economic times. This is where you need to keep your goals in mind and where your financial advisor’s expertise comes into play. Just as with a feeder calf, in order to grow your business, you need to feed it, and what works for you may not be the best option for someone else. Depending on your goals, your “ration” could mean long-term debt (real estate purchase), short-term debt (working capital), a partnership (cash investment or asset pledge), a lease agreement (share crop) or finding new cash avenues (farmers’ markets, private sales, agritourism, timber sales). Be creative; the finances are out there but finding the right fit for you and your operation is unique to everyone. Work with your financial advisor to find the best for you.
Lastly, you should be able to protect yourself against future complications. Maybe it’s protecting the future generation from the dreaded estate (or death) tax. Consider talking to an estate lawyer or investment professional to see what options are out there for transferring ownership to that grandchild or beginning farmer.
Remember the effects BSE (mad cow disease) had on the cattle market a few years ago? Should a similar event happen again, are you prepared financially? Consider starting a savings account for such an emergency or keeping other capital available. Thinking about your options now and setting a plan in place before something happens can save a lot of headaches later.
There’s a lot of change happening in agriculture – some good, some not so good – but, it’s still in our hands to continue to make this the best and most successful industry in the nation. Let’s do our best to make sure that remains true for years and generations to come.
Jessica Bailey is a Credit Analyst in the Agricultural Loan Division at Arvest Bank in Neosho, Mo.