by Ben Cox

Being a farmer means being ready for anything.

Whether managing through unreliable weather, planning against volatile crop prices or adapting to changing consumer preferences, the life of a farmer is anything but predictable. Today, the agricultural industry must also contend with new technologies that change how farmers operate, as well as increasing pressure from consumers about how their food is grown.

What’s the trick to keeping up? One of the most important moves a farmer can make to prepare for and manage uncertainty and change is to cultivate a long-term relationship with a trusted banker. A knowledgeable advisor can help farmers evaluate the big picture, weigh the pros and cons of various options when making business decisions, and help take advantage of market opportunities – all of which are vital in navigating the cyclical nature of the industry and planning for the future.

Beyond loans and standard business banking services, today’s banks offer access to a wealth of resources. A trusted banker can assist farmers with a range of business issues – for example, by drawing on their contact networks to identify potential partners with specialized expertise, or by providing feedback on business plans based on broader insights into the market and peer businesses.

Whether you’re an established Columbia Basin farm evaluating your management style, a young farmer working to secure a line of credit, or a family farmer preparing to transition from one generation to the next, establishing a trusted banking relationship can help ensure you’re prepared for this season and the next.

Managing to a budget

Given the crop-driven nature of farming, agricultural income is often not spread evenly throughout the year, which can make cash-flow management a challenge. Given today’s low commodity prices, it becomes even more important for farmers to carefully set a budget and monitor progress regularly.

A banker who specializes in agriculture should understand how farmers set budgets and how the various expense categories can shift from one year to the next.

If needed, he or she can then help you establish a line of credit that manages the budget, ensuring that you are protected during cash-flow shortages, and well positioned for the seasons to come. Also, when times are hard and profits are lower than anticipated, a banker can help farmers honestly assess their expenses and understand whether they were necessary under the circumstances and if they contributed to the bottom line (or will do so in the future).

Capital planning

An agricultural banker also can ensure that farmers have quick access to capital when it’s needed, whether for keeping up the equipment fleet or for buying or leasing additional land.

Good opportunities can come during bad economic times, and access to capital will allow farmers to seize those opportunities and provide an appropriate finance structure for long-term investment. For example, if a neighbor’s property suddenly becomes available, your banker can help you evaluate the situation and determine whether it makes sense to purchase or lease the land despite the current low crop prices.

Planning for retirement

Retirement – whether or not a generational transition is involved – is another issue farmers should discuss with their banker. Most farmers rely on their land for retirement security, so it’s important to evaluate all your assets and make sure that you’re not left in a position where you aren’t able to cover your living expenses if markets take a downturn.

Likewise, early planning, including a thorough assessment of the tax implications of any potential land sales, can help put farmers on a stronger financial footing now and when they’re ready to retire.

In challenging times like the present, where commodity prices remain low, working with an advisor who understands the agriculture industry is more important than ever.

Developing a long-term relationship with a trusted agricultural banker and communicating regularly about your situation will allow them to gain a true understanding of your particular business – and thus provide more effective guidance and create solutions that are tailored to your specific needs. This relationship can be a valuable resource as farmers deal with the changes that the future will inevitably bring.

Ben Cox is an agriculture relationship manager and vice president at Washington Trust Bank in Kennewick. He has more than 10 years of experience in the commercial lending industry. He graduated from Washington State University with a degree in agribusiness. He manages a small farm and is passionate about educating the community about farming and where food comes from.