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Ag lender: working capital biggest concern for Missouri farmers

An ag lender says many farmers are heading into spring in good financial shape, but tighter margins have created more stress.

Brian Zimmerschied with FCS Financial in Missouri tells Brownfield the row-crop sector is dealing with lower commodity prices, high input costs and declining working capital.

“A lot of farmers, particularly in northern Missouri, have been impacted through these lower commodity prices on corn and soybeans. And so it is a different conversation this year than maybe what that looked like in the past.”

Zimmerschied says the biggest balance sheet concern is working capital, the cash farmers have available to pay bills and cover expenses.

“We would like to see farmers maintain 20 percent of their gross revenue and working capital. We probably had that in the row crop sector five years ago. As margins have gotten tighter, there are times when profits are not available.”

He says that can put more strain on debt payments, family living expenses and overall financial flexibility.

He says some farmers have financial cushions to help get through, and when farmers don’t have that cushion, there are options, like restructuring debt.

“There are times when farmers have made cash investments into purchases like maybe grain bins, machine sheds, and in good times, they were able to pay for that out of liquidity. When working capital gets more strained, there are times we go back and do what we call a rebalance, where we take those funds that they had invested with cash, and we actually reimburse that through a real estate loan to provide the liquidity or the working capital that may have gotten depleted.”

Zimmerschied says farms that are more diverse, featuring crops and livestock, have fared better in these tough times.

And he says the situation is different in the Missouri Bootheel and Delta, where farmers face more significant economic challenges, due to a heavy reliance on cotton and rice production.