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August 10, 2019

Power of 10: Top 10 Takeaways for Farm Financial Management

Learning from America’s farmers and the smart farm financial management decisions they make.

There are numerous variables farmers can’t control like the weather, commodity prices, disease, and pests. However, as your premier land lender, AgAmerica advocates that farmers instead think about the variables they can control: contracts, crop insurance, planting mix, machinery, and scheduled repairs. “It’s smart to pro-actively manage risks,” Bryce Philpot, AgAmerica Lending SVP/Co-owner, observes. “We believe this to be true: you really can’t underestimate the power of planning.” To explore the challenges behind a farmer’s decision-making process, the AgAmerica team surveyed growers from across the country to learn what sources they count on to research their most critical decisions, especially those of a financial nature (buying land, taking out a loan, selecting a bank, etc.) and how that process works within agribusinesses today. Review the top 10 takeaways from this research survey below.

 First Stop in Farm Financial Management: Research

  • When farmers conduct research for their farm business operation’s financial decisions, they generally involve multiple people inside and outside of the business. Just over one-third of the respondents said the farm owners conduct research by themselves. Others, 22.7% of the respondents, said that the owners limit the research to key members of the business. For those farms engaging people outside of the business, 76% got input from current business relationships like attorneys, accountants, and bankers for their expertise.
  • Of the eight steps involved in effective decision-making, three threaten to hinder farmers’ decision-making process the most: setting goals, considering alternatives, and recognizing the problem. Florida A&M researchers identified eight primary steps for effective decision making which include setting goals, recognizing the problem, obtaining information, considering alternatives, making the decision, taking action, accepting responsibility, and evaluating the decision. Of the farmers surveyed, the same three challenges were most prevalent regardless of how the audience was segmented (family and non-family farms, large and small operations).

Business Planning and Defining Goals

  • Farmers strongly believe in the value of a business plan. It’s no surprise that of the respondents surveyed, more than 83% agreed that having a clearly defined business plan that outlines their goals and their plans to achieve them will help those goals become a reality.
  • Unfortunately, believing in the value of a business plan does not guarantee a farm will have one. The respondents were fairly equally distributed across three groups: farms that have a clearly defined business plan, farms that have long-term goals for the operation but not a formal business plan, and farms that get bogged down by the day-to-day challenges of running the farm business.
  • Female growers appear to put more emphasis overall on planning at their operations than male growers. Simply put, women appear to be much bigger fans of the plans. This was concluded from the fact that more than 96% of the women surveyed said they believe having a clearly defined business plan helps them meet their goals compared to 81% of men.
  • For family operations, multiple generations are involved in the business planning process. Multi-generational planning accounted for more than half of the respondents surveyed. These farmers reported that the older and younger generations are equally involved in driving the planning process compared to one-third who said the older generation solely drove the planning process for their operation.

Who Makes the Farm Financial Management Decisions?

  • Farming operations generally fall into one of two key categories: Farms where decisions are made solely by one person – the owner/patriarch or clear leader of the farm; or, Farms where key decisions are made jointly by ownership and top management. Of the total respondents surveyed, 39% fell under the first category and 35% in the second. Interestingly, family farms primarily fit into the second category at 39% while non-family farms responded 62.8% in the first category.
  • Female operators repeatedly described a much more inclusive decision-making process than male operators. When asked ‘who makes the farm financial management decisions at your operation?’ less than 15% of the women surveyed said the decision was made by one person, compared to the 43% of male respondents who said this.
  • Younger farmers (those 44 or younger) consider decision-making a joint effort between ownership and top management. Of the research respondents who were 44 years of age or younger, 53% fell under this category. This contrasts sharply with the respondents who aren’t part of a family farm, where more than 60% said key decisions are made solely by ownership.
  • At the end of the day, each farmer has to determine the process that works best for them and their farm – but an established business plan can only benefit your operation. Not only should farmers be focusing their operations toward achieving their business goals, but having a farming business plan and a complete set of financial records can help these landowners in the loan application process.

“We’re more comfortable lending a farmer money if they have a well-written and carefully thought-through business plan for farm financial management in place. Seeing that the farm has a plan gives us more confidence in that business and helps mitigate our risk as the lender.”

Read the full research study whitepaper, Decision-Making Success: Making Smart Financial Management Decisions for Your Farm, in full here.

AgAmerica is committed to working with farmers and their families to help finance the future of their increasingly diverse operations. Whether you are expanding your existing ranch, buying a farm, or making long-term improvements to your agricultural land, we can custom-build a loan solution that fits your needs. Contact us to speak with one of our expert land loan team members about agricultural land financing today.


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