Being in the cattle business, you’re well aware of the increasingly tight U.S. cattle supply and the epically high cattle prices that have followed. These extremely high prices boast good news, including record profits. Cattlemen were getting double, but now are seeing triple, what they got before.
The present conditions are quite favorable, but it’s what you do about these conditions that matters. It’s important to direct your thinking to the future needs of your operation, evaluating what you can do at present to promote even more promising results later.
At your business’ core, should be a 3-tiered structural support system: business management strategy (economics), a production plan, and financial backing.
In short, economics is all about how your business will generate profit; it’s the “engine” or design that pushes the production plan forward. Finance is the fuel for the engine. Without fuel, the engine doesn’t start. Without financing, the business doesn’t profit. Financing is a powerful force that has the potential to breathe new life into your business.
Even though market prices are at record highs – a factor that can cause wide swings in your farm’s income – it’s still important to invest in your business’ future. Including financing into your risk management plan now can reduce negative financial effects later.
Here are 5 reasons to finance your cattle business now to reap benefits later:
1. It’s smart to invest now while the financial market will yield a higher rate of return than your cost of capital.
2. By pursuing other financing options, your personal capital is left free and clear, which leaves you with the ability to invest in building improvements, equipment updates, diversification, etc.
3. If the market takes a downward turn, you still have your own capital to utilize on your current payments.
4. A long term Line of Credit can be used for any farm or business purpose – even buying land. Utilizing this product allows you the flexibility to purchase what you need for your cattle operation, when you need it.
5. Finance expansions to production capacity. Though it currently costs more to purchase cattle, securing additional cattle now will reap the benefits of a stellar investment as prices do not look to be heading down anytime soon.
Don’t lose sight of your future competitive edge in the cattle business. Invest now to profit later.
AgAmerica Lending finances all phases of the cattle industry, from cow-calf operations to stocker calves to feedlot financing. Contact us today to learn more!