Last month, we addressed tax planning and purchasing inputs for the next crop cycle. I would like to expand on the importance of having an update on your financial position. Between potential purchases of both land and equipment along with inputs, we have been busy talking about plans for 2022.
As of this writing, wheat harvest is pretty much complete, and some are getting started on the later crops. Farmers who have been in the fields have an initial idea on what yields will be; however, corn may still be an unknown target depending on the area. The more information we have on how the year will shake out, the better we’re able to tax plan and get a good idea how of how to handle the upcoming year. If yields do turn out differently than what we thought, we can always alter our plans fairly easily.
Looking ahead to the future is necessary in our industry. At AgCountry, one way we get an early jump on future planning is by scheduling a meeting between the customer and their loan officer. Here, we’ll receive fall updates, which will be used to analyze your working capital position. As needed, we’ll get an early projection for 2022. As plans change, we can alter it throughout the year. A meeting like this can also help plan out the purchasing of inputs or potential other items that might be on your wish list.
As we discussed in the last credit article, purchasing prepaid inputs can be beneficial to tax planning while retaining the commodity in a cash position to keep working capital at an adequate level. Beyond tax planning, another reason to look at buying inputs for 2022 is the volatility in the price of fertilizer and chemical. With production and transportation issues brought on by the global pandemic, it is impossible to know what will happen in the future with these input prices. It is for this reason that some experts are pushing farmers to purchase inputs now. By locking in a price at the end of 2021, we take the mystery out of the equation. On top of that, it is also good to discuss selling some crop to offset a large amount of input purchases if that happens.
Having a financial update meeting early provides many benefits for the farmer/rancher and loan officer, alike. This meeting demonstrates more than just knowing how your working capital has changed. It puts you in a position to make quick decisions when something comes up. Contact your local AgCountry office to schedule a meeting this fall. We can meet in person or even over the phone while you are harvesting.