With cash rent payments looming in March, many farmers are finding themselves needing an infusion of cash themselves. Unfortunately, in a downturn, that can be hard to come by.
But Ryan Bristle, an Iowa corn and soybean farmer and farm business consultant for Russell Consulting Group, says there’s one place you can look on the farm to generate cash quickly: your grain bin.
“There’s still a lot of crop owned by farmers (and it’s) sitting in bins or in commercial storage,” Bristle says. “If you’ve still got old crop, there are three ways to use it to quickly generate cash.”
Here’s what you can do:
1. Sell it. The easiest way to generate cash right now is to sell off old-crop grains, Bristle says, as unappealing as that may sound with December corn futures at $3.76 on midday Friday. “Farmers are still thinking about a couple of years ago when we were selling $5 to $6 corn, and now the cash price is in the low $3 range,” Bristle says. But if you need cash, you’re doing to have to get over it, he says. “It is just a tough business decision you’re going to have to make to stay afloat.”
2. Enter into a basis contract. If you’ve got old crop stored commercially at a co-op or elsewhere, you can set the basis and enter into a basis contract to get some cash fast. Bristle says many co-ops will stop the storage charge on your grain and you can take up to 80% of its value up front as cash. “You’re setting the basis part of the price today,” he explains. “You can set the price later. For example, they would take whatever today’s Board of Trade price is and forward you 80% of that as cash.” Bristle says this is a good option for farmers who think prices might rally, because you can get cash now while retaining ownership of your grain.
3. Sell grain and buy it back. The third way you can generate cash from your old crop is to sell it and then look for opportunities to re-own it. “Opportunities for ownership could include buying it on the Board of Trade or using options contracts,” Bristle says
Whatever your situation might be, Bristle encourages farmers do their best to remove the emotions from this decision, especially when it involves generating cash to pay bills. “I think it becomes a mental thing,” he says. “You don’t want to sell $3.50 corn because it used to be worth more, but that’s just the reality right now.”
What are you doing to generate cash right now?