Protecting your operation in these uncertain times

With COVID-19 causing disruptions throughout the US economy, farmers and ranchers are experiencing a wide range of side effects.  While parts of Rural America have some insulation, certain sectors and areas have seen greater impacts.  Low oil prices and reduced demand for fuel, as travel has slowed, is wreaking havoc on the ethanol industry, which has a trickle-down effect on corn prices in areas supported by ethanol production.  Operating on tight margins, many farmers rely on off-farm income to supplement family living costs.  Unemployment claims have sky-rocketed over the past two weeks, creating additional uncertainty in off-farm income levels.  Supply chain disruptions are occurring as a result of state mandated shelter-in-place requirements.  And, the tariff ying and yang continues to create waves of uncertainty.  With all this market turmoil and unpredictability what can producers do to insulate their farming operations as the pandemic lingers?  There are a number of options available to help mitigate operational risk and aid packages for operations impacted by COVID-19

  • The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress with the intention of assisting business owners impacted by the pandemic.  The programs will be administered by the Small Business Administration (SBA at www.sba.gov) and can be accessed through your local SBA lender.
    • Paycheck Protection Program (PPP) Loans – provides federally guaranteed loans of up to 8 weeks of payroll.  Loans are forgivable if employers maintain their payroll.
    • Small Business Debt Relief Program – provides relief to businesses with non-disaster SBA loans; 7(a), 504, and microloans.
    • Economic Injury Disaster Loans & Emergency Economic Injury Grants – an emergency advance of up to $10,000 to small businesses.  Advances do not need to be repaid.
  • The USDA has expanded traditional crop insurance programs over recent years, with government subsidized whole farm policies, Dairy Revenue Protection, Margin Protection, just to name a few. https://www.rma.usda.gov/policies/#overview
  •  Some commercial lenders are providing need-based deferments on loan payments for borrowers that are experiencing acute liquidity issues as a result of the pandemic.  We recommend maintaining open communication with your lender.
  • Provisions are evolving for deferment of payments for residential mortgage loans and often farmers have these loans separate from their businesses.
  • As is always the case in times of extreme market volatility and times of tariffs (and tariff relief), there will be crop pricing opportunities that arise throughout the marketing year.  Farmers should routinely examine their marketing plans and maintain frequent communication with their marketing advisors.  For those who do not hire marketing expertise they may find in looking back on 2020 that it may have been one of the wiser expenditures they could have made.

More than ever it is time to focus on opportunities. Focus on near-term financial relief.  Focus on crop marketing as you plant for this crop year, with all the optimism planting brings.

Life isn’t about waiting for the storm to pass; it’s about learning how to dance in the rain.” – Vivian Greene

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