The following is a story from the September 2021 edition of our First on the Farm Newsletter.
With harvest right around the corner, I would like to take the opportunity to thank you for your business throughout the years and wish you a safe and bountiful harvest. With that said, I know many of you will likely rely on the crop insurance safety net due to a dry growing season and untimely storms. Fortunately, we have an expert on our team, Tyler Urban, who can help you navigate through any crop insurance questions.
Even with the weather concerns, this year appears to be shaping up to be profitable for many of you. As you are working on your year-end balance sheets and are tax planning and preparing for 2022, please keep in mind the importance of retaining working capital. Your operation’s Current Ratio (Total Current Farm Assets/Total Current Farm Liabilities), or your farm’s ability to meet current payment demands with current cash, crop, and livestock inventories, is one of the “FIRST NATIONAL Five” ratios. This ratio is used in our analysis and is widely recognized as a key ratio in the agriculture finance industry. It is what gives your operation a buffer to weather the cyclicality in Agriculture.
When pondering year-end purchases of real estate, machinery, or other capital assets, please be mindful of your own operation’s working capital and overall leverage position, and not what the neighbor is doing. Our Ag Banking experts are happy to help you walk through any strategies you may have to tailor solutions that are the best fit for your operation. For reference, FNB likes to see the current ratio at or above 1.25.
The financial health of our Ag customer base is the best it’s been since 2014, and the outlook appears to be rather positive for many. This obviously brings a smile to most as the success of our state and nation relies heavily on the Ag industry. However, there will be challenges ahead with increased competition on real estate purchases and cash rent, along with tightening margins due to crop input cost increases. Please keep in mind that FNB got our start in Agriculture over 135 years ago. We intend to be a trusted advisor for your operation today and as you transition the farm to the next generation.
I’d like to close by encouraging each of you to be a lifelong learner. Our industry is extremely dynamic, and it is paramount to adapt with the times. Please take advantage of the education that FNB provides. These programs and seminars range from the Farmers ‘N Bankers Training, Hutterite Banking Institute, Cultivate Your Future event, small group insurance updates, and many more. If you don’t know about these offerings reach out to me or one of our team members for more details.