Consider increasing working capital percentage in your crop budgets

An ag consultant recommends farmers increase their percentage of working capital when figuring crop budgets.

Dr. Steve Johnson, retired Iowa State University Extension Farm Management Specialist, says the old rule of thumb was at least 25% of normal expenditures are held back as working capital, but with inflationary pressure he suggests moving it to at least 50%.

“It’s giving you that flexibility in the summer, especially for energy prices we tend to get an August lull. I probably want to book my diesel at least six months out and I’m going to use my own working capital next summer, so possibly be buying anhydrous and prepaying expenses.”

He says planning ahead, in 2026 congress could decide to roll back the 2017 Trump Era tax cuts.

“We might be facing higher tax brackets when we get to 2026, so let’s be paying income tax and not putting all of our eggs in one basket by just pushing those expenses into the next crop year.”

Johnson was the featured speaker during a recent Ag Minded Hour webinar hosted by Farm Credit Illinois.

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