The Economic Outlook for U.S. Agriculture

Potential Solutions:

• Combine futures contracts or forward contracting with periodic cash sales in the case of nonperishable commodities to manage price risk.
• Purchase revenue insurance for both crop and livestock enterprises as opposed to self-insurance to address both price risk and production risk.

Potential Solutions:

• Use forward pricing of seed, chemicals, fuel, and feed acquisitions can be used to avoid unwanted surprises.
• Consider keeping an inventory of spare parts normally needed during the year rather than run the risk of them not being available locally when you need them.

Potential Solutions:

• It is recommended that operating costs comprise 30% or less of total liquidity.
• If it exceeds this, additional capital may be required to keep your operations secure, in the form of a line of credit, debt restructuring, or equity cash out.
• Liquidity also provides flexibility in negotiating prices for inputs. A negotiated line of credit or refinance to lower loan payments can help you manage liquidity needs.

Potential Solutions:

• Noncurrent farm assets can become very illiquid in times of farm financial stress, making stress testing investment decisions key.
• Plans for expansion of existing operations in the coming year should be analyzed in a “what if” context.