This is the third part in a four-part series running this week on FarmFutures.com. See links to the series at the end of this story.
The good news for cash-strapped farmers is that money is still cheap. Interest rates remain low, but will likely go up later this year, according to leaders at the Federal Reserve.
Borrow now if money is needed, but don't overdo it. High debt in times of lower cash flow can be a recipe for disaster. Talk to your lenders and devise a workable borrowing and repayment plan.
"Free up some cash, pay your bills. That would be my No. 1 recommendation," says Steve Johnson, farm management specialist at Iowa State University Extension.
Selling most of your remaining grain would be a first step, says Johnson, followed by getting a longer-term loan to reduce principal payments.
"You have the lowest interest rates in years, and we know there is the likelihood the Fed is going to increase short-term interest rates in June or September," he adds. "Re-amortize and stretch out those principal payments. Start thinking longer term, especially regarding your cash flow needs from the sale of the 2015 crop."
Bankers anticipate an increased need for non-real-estate loans and can meet that need, although their concerns about repayment have increased.
In its February "Survey of Agricultural Credit Conditions," the Federal Reserve Bank of Kansas City said banks will be able to issue more operating loans, but are worried.
"Looking forward … bankers are anticipating further deterioration in loan repayment rates," the report states.
Survivor's guide to low commodity prices: Cost cutting – Part one
Survivor's guide to low commodity prices: Communicate with partners – Part two
Survivor's guide to low commodity prices: Free up cash – Part three (current entry)
Survivor's guide to low commodity prices: Survey says – Part four