Pay Down Your Debt
Farmers are enjoying fairly low short-term and long-term rates right now (that is assuming you can borrow the money). With the government continuing to pump large amounts of liquidity and stimulus into the economy, it is very difficult to predict that these lower rates will continue to last much longer.
Much like, fertilizer, fuel and seed, interest costs is another input cost that you can hedge or lock in. I believe that these lower rates will continue for awhile longer, however, I would not be comfortable going out too far into the future with this projection. I would certainly be looking at converting variable rates to fixed rates, paying down your most current debt with highest rates as soon as possible. You also may be able to hedge on the futures markets by selling short long-term bonds, etc. to lock in lower rates.
Bob Utterback of the Farm Journal in their November issue had a very good article on this subject. I would take a look at it and try to implement these strategies into your operation where it might make sense.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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