Financial Strategies for Midwest Farm Operations Impacted by Extreme Weather
The 2024 crop season is raising several challenges, particularly for Midwest farm operations. While “rain makes grain” can certainly be a true and accurate statement as reflected in an $.80 drop in corn and a $1.65 drop in soybean price from mid-May to mid-July, many farmers and producers have been dealing with extreme weather that has presented more challenges than expected going into the crop season.
Many parts of South Dakota, Minnesota, Iowa and Wisconsin have experienced excessive rain events that have caused flooding and will see significant production drops across relatively large geographic areas. Other parts of the Midwest had difficult planting seasons due to delays; in some cases, acres were never planted.
Due to the impact of these rain events, increasing input costs (including total interest costs), and a 2023 crop that saw losses for the first time in several years, there will be a need for some rebalancing with a segment of lenders’ farm clientele this fall and winter.
Analyze all options with Agri-Access
Most of the time, agriculture real estate transactions focus on purchasing real estate or refinancing because interest rates went down. However, ag real estate can also fund carry-over debt in some cases. For ag clients in a difficult position this year, utilizing equity in real estate to help rebuild working capital could be a potential, proactive approach to help establish a new baseline going into the 2025 crop season and empower farmers to take control of their financial situation.
While Agri-Access requires a primary lien position on real estate loans, utilizing existing collateral from existing Agri-Access participation to add new loans in a junior position is an option to allow existing attractive interest rates to remain in place. In the case of new relationships, Agri-Access offers competitive short-term fixed-rate options that allow for extremely flexible rate conversions after the first anniversary of the loan has occurred.
This will be a difficult year for most grain farmers, but every producer and farmer will experience challenges in the years to come. While not everyone will be a good candidate for real estate loans, lenders who analyze all options for their clients can help ensure they make confident, future-forward business decisions.
If you’re interested in learning more, we’re here to help. Reach out to discuss all options and discover which solutions will work best for your clients needs.
