U.S. Rep. Annie Kuster met recently with Yankee Farm Credit director Steve Taylor

 

U.S. Rep. Annie Kuster met recently with Yankee Farm Credit director Steve Taylor of Meriden, N.H., to discuss current matters of concern to the agricultural and the forestry sectors of New Hampshire Congressional District 2, most of which is served by Yankee Farm Credit. Rep. Kuster’s assignments in Washington include membership on the House Committee on Agriculture.

 

 

 

 

 

Five Short Term Strategies for Surviving Poor Cash Flow

by Joanna Lidback


Economists are indicating that recovery from low milk prices this year will be slow in coming and indeed may get worse before getting better. The first defense in making it through a down cycle is knowing your net cost of production and/or your breakeven milk price. When you have a solid grasp of where you stand financially, you’ll know more precisely how much cash will be needed to keep up.

The net cost of production is the amount you need to cover expenses, (including depreciation and family needs) less any non-milk income, expressed as dollars per cwt. Breakeven milk price hones in even further on cash, including cash operating expenses, debt payments and family needs, less non-milk income.

If you find you need to generate cash, consider these strategies:

1. Cut expenses
When it comes to cutting expenses, everything needs to be on the chopping block. There are generally two ways to cut expenses: cut back on current levels and defer certain expenses. Further, start with your biggest expenses. Review your feed ration with the nutritionist. Evaluate labor efficiency – cut hours if necessary. For deferment, prioritize capital repairs and put off non-essential fixes.

2. Accelerate/supplement income

Not everyone has to go get a part-time job, but there may be other sources of income that could be tapped. Beef prices remain elevated slightly. Can you continue a higher-than-normal cull rate? Do you have timber? What does your forest management plan allow? Was it a good crop year? Any extra crops? Any custom work available? Do you have any outstanding receivables that you could pursue payment on?

3. Finance previous capital purchases made out of cash flow

Last year was a great year. Many farms were able to replace or add new machinery, equipment or vehicles right out of the checkbook. Consider reimbursing those funds from an existing line of credit if one is in place or perhaps you can work with your loan officer to write a new loan. Another option is a “lease buy-back,” where again you reimburse funds spent in the current or previous year and finance via a lease.

4. Request deferral or debt restructuring

Take a look at your debt structure. What is your blended capital debt term? Is there room to consider restructuring your loans? A deferral of principal payments might be a consideration, however this method should be used sparingly. A conversation with your loan officer may go a long way.

5. Sell unproductive assets

What’s sitting out in the yard that isn’t getting you the return you need or expect for investment? Especially if it’s just sitting there, it’s not only costing you overhead, but potentially the opportunity cost of those funds being tied up in the equipment that may be more useful somewhere else.

Milk price volatility is nothing new in the dairy business. While it has increased dramatically over the past ten years, so has the potential for profits with record high milk prices. Recall from the last newsletter, “Financial success for dairy managers can often be traced to how well one uses the profits from a good milk price year to help them in a year with low milk prices.” While we are in the down cycle now, keep this in mind for when the roller coaster goes up.


This article was originally published in the Fall 2015 Association Insider of Yankee Farm Credit, ACA.

Developing the Next Generation - Transition Planning

by Liz Bayne

The skills needed to manage the successful agricultural businesses of today are not gained overnight.  Some skills are gained in school, some with “on the job training” and others through the “school of hard knocks.”

Most of our farm businesses have developed and grown over the lifetime of the older generation now running the business. They started small (at least by today’s standards) and developed their management skills as the business grew. Now, as the older generation is looking toward slowing down and transitioning to the next generation, the challenge is to transfer all the management skills learned in a lifetime to the next generation.

The best succession plans start early and allow a  gradual transition, slowly and continually providing opportunities for the next generation to develop the skills they will need to take over the business. At the same time, this transition allows the older generation to evaluate the potential successors; grooming and developing them based on their desire to take over the business, and their aptitude and skills to continue its growth and prosperity.

In working with farm businesses, I find that production oriented skills are often well taught, with the younger generation learning a great deal from their parents. They are also eager to embrace new technologies on the farm. The area that is often less emphasized is the financial management of the business. I would argue that this should be the most important skill transferred to the next generation. If the farm is well managed financially and is profitable, then there is a great deal of flexibility available for both the older and younger generation. If the financial management skills are not part of this transition, the farm can find itself limited and strained in other areas as well.

Following is a short list of ideas. The goal is to have the financial training start early and to be consistent with it. You can shift more and more responsibility over time. This will ensure that the younger generation has the skills necessary when it is time for them to take over the farm.

Some ideas for transferring financial management skills:

1)   Have regular meetings and discuss the farm’s finances.
2)   Involve the younger generation in the day-to-day process of paying the bills and managing the records.
3)   Allow the younger generation to take part in decision making, such as the purchase of equipment. Discuss your thought process and the pros and cons of the purchase. Have the younger generation do a partial budget on the purchase and present it to you.
4)   Talk about your goals for the farm - short,intermediate, and long term. Prepare a budget as a team to test your goals and then measure the success.
5)   Have the younger generation sit in on a financing discussion with your lender.
6)   Have the younger generation attend farm meetings with you - especially meetings where farm finances are discussed.
7)   Let the younger generation suggest and carry out a change on the farm. Have them present a plan and then be accountable for the results. This is a great learning tool.

Yankee’s consulting program works with farm businesses on transition planning, budgeting, estate and business planning, entity selection and tax planning.  f you would like to know more, please contact me at elizabeth.bayne@yankeeaca.com, or 800-370-3276, or Joanna Lidback at
joanna.lidback@yankeeaca.com, or 800-370-2738.


Originally printed in the summer 2015 Association Insider of Yankee Farm Credit, ACA.

Farm Credit 100, Fresh Perspectives Nominations

Calling for Nominations

Yankee Farm Credit, ACA is searching for nominees from Vermont, Clinton and Essex County New York, Cheshire, Coos, Grafton and Sullivan County New Hampshire for Farm Credit 100 Fresh Perspectives.

Farm Credit has been supporting rural communities and agriculture for 100 years, and to celebrate the promise and potential of the industries we support we’re on a quest to identify the individuals who are shaping the future of rural communities and agriculture. Farm Credit 100 Fresh Perspectives is a nationwide search to identify and honor 100 visionaries in agriculture and rural enterprise— while commemorating our centennial milestone. —Our experience over the last century gives us insight into how the future is shaped.  Yankee Farm Credit, ACA knows that there are individuals in our region who are extremely deserving of such an honor.

Please consider helping a Yankee Farm Credit region leader achieve this national recognition by sharing information about the search with your friends, family and colleagues. We are happy to connect you with a Farm Credit representative to discuss the Farm Credit 100 Fresh Perspectives, as well as the Farm Credit centennial overall. You can also visit farmcredit100.com for additional information.

The deadline is fast approaching, December 18^th 2015, so please if someone you know or know of deserves to be recognized, don’t hesitate to complete a nomination.

Many thanks,

Yankee Farm Credit, Staff and Directors