Strategies for Farm Debt Management in 2025
When inflation enters the conversation, most people think about rising prices at the pump or the grocery store. But for farmers managing farm debt during inflation, the effects run deeper, and often more quietly. Inflation reshapes how borrowing works, not just in terms of what you owe, but how your operation navigates risk, cash flow, and future opportunity.
Fortunately, there are ways to stay ahead of the curve. The strategies below are designed not just to preserve your financial footing, but to strengthen it, so your operation remains resilient, even when economic conditions aren’t. These aren’t silver bullets, they’re real-world tools that work when applied with discipline and clarity.
🔗 For a broader look at how inflation is influencing ag finance, from interest rates to economic signals, read the full article on what inflation means for long-term farm debt strategy.
Review and Refinance Existing Loans:
Before inflation forces your hand, take the time to thoroughly review your existing debt. Not all loans age well, especially those with variable interest rates tied to shifting benchmarks like the prime rate or SOFR (Secured Overnight Financing Rate), both of which tend to rise when the Fed tightens monetary policy.
As interest rates climb in response to inflation, variable-rate loans can quickly become financial liabilities. Even if you’re currently managing payments without issue, incremental rate hikes can compound over time, eroding your margins and tying up capital you could otherwise reinvest into your operation.
- Conduct a full audit of your loan portfolio. Know which loans are fixed, which are variable, and when rates reset.
- If you hold variable-rate loans, talk to your lender about refinancing into fixed-rate terms to lock in predictability while rates are still manageable.
- Consider consolidating smaller, higher-cost debts into a single, structured product with a clear amortization path.
Refinancing isn’t always about chasing a lower rate, it’s often about adding long-term stability to your financial plan. A proactive approach here can shield your operation from interest rate volatility for years to come.
Optimize Cash Flow:
Inflation pressures margins from multiple directions, diesel, feed, labor, insurance, repairs, and even land taxes. When expenses rise faster than revenue, your operation’s cash flow can get pinched quickly. “When margins tighten, every dollar going out needs to be reviewed. We’re helping farmers get clear on what’s essential and where they can make small shifts to keep cash flow positive,” commented Joe Erickson, Conterra VP Relationship Manager.
That’s why it’s essential to treat cash flow management not as a reactive tactic, but a daily habit.
- Build or revisit a rolling 12-month cash flow forecast, factoring in seasonal expenses, capital needs, and inflation-adjusted costs.
- Look for hidden inefficiencies, redundant input orders, subscription creep, or underutilized equipment, that can be trimmed without compromising yield or quality.
- Focus on working capital discipline. Consider renegotiating payment terms with suppliers or customers to smooth out timing mismatches between expenses and income.
Even small shifts in cash flow planning, like adjusting input purchasing schedules or leasing equipment during peak seasons, can compound into meaningful savings and preserve liquidity when it’s most needed.
To inform your cash flow planning, consider reviewing the USDA’s latest Farm Sector Income Forecast, which provides insights into projected farm incomes and expenses.
Diversify Income Streams:
Inflationary periods often highlight the risk of relying on a single commodity, crop, or revenue source. One way to build resilience is to expand or diversify your operation’s income streams. Done right, diversification doesn’t dilute your focus—it protects your core.
- Renewable energy: Leasing land for solar or wind infrastructure, or installing your own energy generation systems, can lower long-term costs and create new income lines.
- Custom services: If you have specialized equipment or skills (e.g., drone spraying, fencing, soil testing), consider offering these as paid services during off-peak windows.
The goal isn’t to chase every new idea, it’s to select one or two avenues that complement your core business and create a buffer against volatile input costs or market swings.
Invest in Efficiency:
During inflationary cycles, the operations that thrive are often the ones that do more with less. That doesn’t mean cutting corners, it means investing in smart efficiency gains that reduce cost exposure and improve predictability.
- Precision agriculture: GPS-guided planting, variable-rate input application, and real-time yield monitoring can drastically reduce waste and optimize production.
- Energy savings: Simple upgrades like LED lighting in barns, insulated cold storage, or irrigation timers can reduce long-term utility costs.
- Equipment upgrades: While capital intensive, newer machinery can bring cost-per-acre benefits over older, less efficient models, especially with tax incentives or leasing options.
- Labor automation: Automated feeders, climate control systems, and robotic milking parlors are becoming more accessible and can help address rising labor costs or shortages.
Efficiency investments should align with your long-term goals. They’re not always cheap up front, but they pay dividends by insulating you from input price volatility and operational bottlenecks.
Build Strong Lender Relationships:
Inflation changes the financial landscape, and having a transparent, communicative relationship with your lender becomes more important than ever. The days of one-size-fits-all financing are over. Your ability to adjust to changing conditions often depends on whether your lender truly understands your business.
- Ag lenders can offer customized loan terms, interest rate locks, or restructuring options if they have insight into your operation and goals.
- Strong relationships often lead to faster decisions during time-sensitive opportunities or disruptions.
- Regular check-ins with your lender allow you to course-correct early if cash flow or debt coverage starts to tighten.
Don’t wait until a financing need becomes urgent. Meet with your lending partner annually (or more often) to review your financial position, discuss inflation concerns, and plan ahead.
“In this rate environment, we don’t just want to be the lender you call when things go sideways, we want to be the first call when you’re planning ahead,” continued Erickson. At Conterra, we view lending as a relationship, not a transaction, and in volatile times, that relationship becomes a real strategic asset.
Inflation won’t last forever, but the decisions you make during it can have long-term effects, both good and bad. Managing agricultural debt through inflation isn’t about playing defense. It’s about staying proactive, aligning your financing with your goals, and leaning on partners who understand the unique pressures of farm finance.
Whether it’s restructuring a loan or exploring new revenue streams, every step you take now can help build a stronger foundation for the years ahead. The key is making informed, timely moves with your eyes on both the current landscape and the road beyond it.
If you’re thinking about refinancing, exploring new strategies, or just want a clearer view of your options in today’s rate environment, the right lending partner can make all the difference.
Find an experienced Conterra ag lender near you to start the conversation about what’s possible for your operation, right now, and years down the road.
At Conterra Ag Capital, we do more than lend, we partner with producers. We work across the country to provide financing that meets the real needs of real operations, whether that means restructuring existing debt, financing new ground, or helping you build long-term equity. Our team is built around relationships, not transactions, because we believe the best financial strategies are grounded in trust, expertise, and a deep respect for agriculture.
Disclaimer: Please note that the information provided in this article is for educational and informational purposes only, and should not be construed as financial or investment advice. While we have made every effort to ensure the accuracy and reliability of the information presented, Conterra Ag Capital and its affiliates make no representation or warranty as to the completeness, correctness, timeliness, suitability, or validity of any information contained in this article. You should always consult a qualified financial advisor, tax professional, or other qualified professional for advice on your specific financial situation.
