A financial expert talks about planning for the 2025 crop year and keeping the long view on your business.
By Chris Torres
With many farmers coming off a tough growing season, the time to plan for a better 2025 starts now.
“This year has been devastating for a lot of farmers, with drought and high inputs and low commodity prices. I think this is the year we as farmers plan for. The lesson is, put a little back, have a little padding to be prepared,” says April Tutor, territory manager with Nutrien Financial who covers the East Coast from Maine to the Carolinas.
Tutor works with hundreds of farmers throughout the region, ranging from large row crop operations to specialty crop farms in Pennsylvania and New York, and even potato operations in northern Maine.
While each of those farms are different, planning for next year starts with knowing the basics: looking at the balance sheet, seeing cash reserves and looking at what needs to be financed.
Many farmers Tutor talks to are looking for flexibility and options when it comes to interest rates and payment terms, whether that involves an operating line loan or prepaying inputs.
"They don't just want a standard fixed-rate option,” she says. “They really want to have some flexibility, and they're taking advantage of all of their options, not just the operating lines from the bank that we saw several years ago.”
The key, Tutor says, is to be open and flexible with your financing, and remember how everything affects your farm’s bottom line. She explains further using the following example:
“Say your budget is $50,000 for inputs in 2025. You could pay cash and negotiate for a product discount, and you'd save on interest expense. But this also leaves you with $50,000 less in your bank account that could be useful for other operational expenses, investment opportunities or to have cash on hand for contingencies. There’s an opportunity cost you must weigh in spending or preserving cash.
“Another option is that you could finance your input purchases with promotional offers and favorable due dates aligned to your crop schedule. By carefully considering a promotional finance offer versus a traditional bank line of credit, you may be able to achieve an interest rate below prime, which is currently at 7.75%.
“Banks typically charge 1% to 3% over that prime rate, so anything less than that can save you on interest expenses. Plus, you get the added benefit of financial flexibility to leverage your cash and bank lines in other ways that might offer more long-term value, like a down payment on buying or leasing additional acres.”
The bottom line, Tutor says, is don’t be afraid to shop around for the best rate and terms.
"Consider your capital management strategy and what it is that your operation needs in regard to cash flow,” she says. “Research those payment options and look for the best features of cash, prepay and finance programs. And more importantly, know your breakeven point, and know what that looks like for your operation.”
Look at whole picture
Tutor says the best farms she works with have a long-game mentality. They don’t just look at the price they are getting for their cash crop — milk or fruit — they look at what’s going to get them to profitability.
"We can have really high commodity prices and have a bad year as far as yields. And then we can have low commodity prices and have great yields. And maybe during the year when commodity prices were lower, your yields were high enough that it was one of your better years,” she says. “So, I just think it's really important to not put all your eggs in one basket and make sure you are diversified. It's not just the finance piece; a lot of times it's the product piece as well.”
Also, be strategic with your financial plan and use all the “tools in the toolbox,” including talking to your finance manager, loan officer or consultant.
Several universities, including Iowa State, have online breakeven calculators and enterprise budgets that can help you strengthen your financial plan for 2025.
And remember, this is a cyclical business. Take the long view and be ready for the peaks and valleys.
“You have very good years, and then there's a downside to it,” Tutor says. “And I feel like back in 2022, we were kind of at the peak. Toward the end of ’23 and now ’24, we are kind of seeing a downslide where commodity prices are lower and input prices haven't come down to match that yet.
“Farmers are in a very stressful situation right now. It doesn't matter their crop mix. They find themselves looking for the best options for their farm whenever it comes to their capital management strategy and just trying to figure out where they can get the best options, the best rates, the best packages for their operation."
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