As we move into the new year of 2023, agricultural producers across the U.S. face unique risks and challenges in their business ventures—making it more important than ever to have a well-informed outlook on the forecasted farming market environment. Alongside these predictions is an equally as paramount aspect: financing for farmers and how this can potentially give them greater control over pricing power and production efficiency within their operation.
It’s imperative that farmers understand what options are available to them when navigating through loan programs, credit lines, and equipment financing solutions. Hence, they have access to the working capital needed throughout the 2023 farming season and onward, with financial stability already secured in hand. Forward-thinking farmers are exploring various strategies in order to stay competitive. One of these is securing financing solutions tailored specifically for agriculture producers.
With our agricultural finance programs, qualified borrowers may be able to access funds ranging between $300K and 50 million dollars with repayment terms of up to 30 years on a variety of agriculture-specific loan products that help provide flexibility based on individual needs, including working capital lines of credit, real estate loans, equipment purchases or refinancing, all designed specifically for agricultural enterprises. This means farms will have more financial options available when it comes to securing the resources they need while mitigating risk in uncertain times.
The Impact of Changes in Weather Patterns
In addition to the complexities of financial planning, another challenge for producers in 2023 is being able to predict and manage changes in weather patterns. While the costs of natural disaster events declined in 2022 compared to years prior, the estimated damage of nearly $30 million still had a negative impact on farms throughout the U.S. Droughts and wildfires have caused soil moisture and yields to be impacted negatively in the western parts of the U.S., while other parts of the country have been affected by flooding and severe storms.
It is important for farmers to be aware of these risks and weather changes and to have a disaster management plan in place should the unexpected occur. This includes having the appropriate insurance coverage and loan products available to help reduce potential losses. In addition, producers should consider utilizing technology such as smart irrigation and soil sensors to help gauge their farm’s water needs in order to reduce water usage and costs.
The Impact of Energy Markets on Agriculture
Farmers need to be mindful of global energy markets. Inventories for diesel fuel were at near-record lows in 2022, with the war in Ukraine, a threatened railroad worker strike in the U.S., and low water levels for the Mississippi River transportation route, all contributing to a spike in diesel fuel costs — an essential input for many farmers and ranchers.
According to the Organization of the Petroleum Exporting Countries (OPEC), the production reduction of two million barrels per day, announced in October 2022, is expected to have a lasting impact on fuel costs in 2023. Therefore, being proactive in reducing fuel needs now will pay off in the future. Strategies such as no-till farming, keeping radiator screens clean, and proper engine maintenance on farm equipment can all help reduce fuel needs.
Managing Risk as Input Costs Rise
A proactive approach to budgeting, energy costs, and loan products can help manage the uncertainty of input costs in 2023. Producers should have a solid foundation in place when it comes to managing their financial risks and staying profitable. This can include seeking out loan products that help reduce overall risk from unexpected events or having a plan in place to manage weather-related challenges. Additionally, being mindful of where energy costs can be reduced helps farmers stay competitive in a time of rising input costs.
Financing Solutions for Farmers
For farmers looking to finance their operations in 2023, there are multiple solutions available that can help them manage risks and challenges while allowing for continued growth. From traditional loan structures like USDA’s direct and guaranteed loans to portfolio loans designed specifically for the agricultural industry.
These financing options have been tailored to meet farmers’ needs. Financing programs provide advanced capital resources based on creditworthiness and collateral positioning with competitive fixed-rate or variable-rate interest rates over 10-year terms up to 30 years in some cases, depending on the type of operation, cash flow history/projection(s), and purpose of funds.
Additionally, many lenders now offer specialized risk management strategies. Which include yield protection insurance products along with other forms of crop insurance that protect against potential loss due to weather-related events or natural disasters. Thus, ensuring sustainability throughout difficult times ahead.
Financing can be a challenge for any agricultural producer, and the outlook in 2023 is no different. With input costs continuing to rise; particularly labor, fuel, and fertilizer; many producers will struggle to keep pace with their expenses. Fortunately, there are financing options available through firms such as United Farm Mortgage that provide tailored agricultural financing programs specifically designed for farmers’ changing needs.
With an understanding of current realities facing growers across America today, these programs offer competitive loan products ranging from term debt up to 30 years. Bridge loans, operating lines of credit, equipment leasing and purchases, capital improvements, and expansions all provide flexible repayment terms on both secured and unsecured loans. These services could prove invaluable when it comes to the next season for farmers making critical investments or decisions related to production activities on their operations.
2023 is shaping up to be a year of significant change and complexity for agricultural producers. Despite the risks and challenges, it’s important that farmers focus on making smart business decisions, diversifying investments, setting goals, and taking advantage of available programs. United Farm Mortgage’s agricultural financing program can help mitigate risk and provide farmers with the financial resources they need to ensure success in the year ahead. With the right strategies, 2023 can be a year of growth and success for all agricultural producers.