Dn-LaacMtar Faraiag Satarday, JMMry 31,1M7
Farmers Need A Financial Plan
Farming is undergoing many
changes. Farm operators who wish
to survive these changes must be
good financial managers. And this
requires a sound financial plan for
the business.
The purpose of financial analysis
is to give the manager warning
signals, identify trouble spots and
measure the effects of corrective
action.
According to University of
Delaware extension economist
Gerald F. Vaughn, producers who
develop a good plan are likely to
make more profitable
management decisions because
they know the strengths and
weaknesses of their business.
They’re also in a better position to
take needed corrective action
because they understand their
management options.
Farmers with a good financial
plan are more likely to receive
favorable credit terms when they
need to borrow money.
“Put yourself in the lender’s
shoes,” Vaughn says. “Would you
lend money to a farmer who has to
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ask you where he stands finan
cially? Or would you have more
confidence in one who walks in
well-prepared to explain his
financial and marketing plan to
you?”
Farm operators who’ve taken
the time to develop a financial plan
are likely to feel less personal
stress than those who haven’t
evaluated their business ob
jectively, the economist says. “If
you know where you stand
financially, how much corrective
action is needed and what your
alternatives are, you’re less likely
to feel helpleess. Discussing your
financial plans and management
strategies with other family
members or financial advisors can
also build self-confidence and
reduce emotional stress because
you know you’re not alone with
your problems.
“You can voluntarily develop a
financial plan now or be legally
forced to develop one later under
bankruptcy reorganization,” the
York, PA 17406
specialist points out. “Given the
less than optimistic agricultural
economic outlook for the next few
years, an eroding financial
position requires action now. As
time goes on, fewer management
options will remain as the
business’ resources and equity are
depleted. So the sooner corrective
management strategies are
adopted, the more likely they are
to be effective.”
Where liquidation must be
considered, partial voluntary
liquidation can often result in a
smaller, leaner and more finan
cially sound farm operation,
Vaughn says. “But this action
requires that some equity be left in
the farm. So it’s crucial to get on
top of your financial position while
you still have some equity.”
It’s not enough merely to keep
good financial records, the
economist concludes—you must
analyze them and then put them to
use to make sound management
decisions.
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Buyout Program
(Continued from Page 011)
latter half of 1986.
The M-W decreased slightly, but
steadily, through the first 3 months
of 1986 and started increasing in
June, slowly at first, then in large
increases during the next 4
months. In August, the M-W moved
above the support price and by
November was 60-cents above
support. If the M-W does not go
above $l2 in December it will
probably be very close.
Although the support price
25-cents January, it
should only decrease the M-W a
very small amount, if at all. It
could very well be that since sales
to the CCC are quite low and,
conversely, sales to the com
mercial market are strong, no
decrease in the M-W may occur in
January and February.
If trends in production and
consumption remain constant,
further increases, although, not as
large as during the latter part of
1986, may occur in early 1987.
Again, the spring flush will play a
major role in the determination of
the M-W in 1987.
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If production of milk doesn’t
increase significantly in 1987, the
M-W average price in 1987 should
be well above that for 1986. In
addition, dairy fanners will regain
the 40-cent assessment in 1987,15-
cents in January and the
remaining 25-cents in October.
This coupled with an expected
increase in Class I utilization
should result in an increase in
blend prices to Pennsylvania dairy
farmers of 25 to 40 cents in 1987. it
certainly looks that at least for 1987
the economic situation is brighter
for dairy farmers.
What occurs in 1988 and 1989 will
depend on if and how strong milk
production increases after the
impact of the buyout program on
production ends.
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Lancaster Farming Carries
DHIA Reports lech Month!