Media Contact: Catherine Dehdashti, U of M Extension, (612) 625-0237, ced@umn.edu
Source: Bob Craven, University of Minnesota Center for Farm Financial Management and University of Minnesota Extension

New study emphasizes the need for farmers to sharpen financial skills

ST. PAUL, Minn. (2/19/2009) — A new study analyzing agricultural financial conditions highlights the need for farmers to keep a tight eye on finances says Bob Craven, director of the University of Minnesota Center for Farm Financial Management. The study showed that price volatility and the declining margins are impacting farm finances.

“The study results won’t be news to farmers who have seen their input costs go up while market prices decline, but it is a reminder that this is the time to sharpen your money management skills,” said Craven, an Extension farm management economist. Craven recommended using tools like University of Minnesota developed FINPACK to analyze finances and improve their marketing skills through programs like Extension’s Winning the Game program.

As part of the study, the Center for Farm Financial Management and Extension Risk Management Education Regional Centers surveyed 2,300 agricultural professional nationwide about their analysis of agricultural financial conditions. Key findings include:

• Most agricultural producers are in relatively sound financial shape. More than 60 percent of survey respondents said that 10 percent or less of producers they deal with are experiencing financial stress now. Another 15 percent indicated that less than 2 percent of producers they deal with are currently experiencing financial stress.

• The survey respondents predicted an increase in financial stress among producers during the next three years. Slightly more than 28 percent of respondents expect at least 30 percent of their agricultural clients to experience financial stress during the next three years.

• Declining land values and rising interest rates, two factors that played a key role in the 1980s farm crisis, ranked at the bottom of 13 factors contributing to farm financial stress. Top rated factors were price/input cost margins, price volatility and negative cash flows. 

• More than 80 percent of producers are equipped in terms of financial skills to manage their businesses through a period of financial stress according to survey respondents.

• Responses given by lenders when asked about future financial conditions tended to be less pessimistic than those from individuals who supply goods and services to agriculture. Twenty-six percent of lenders think the probability is very high that producers will experience financial stress in the next three years compared to 39 percent of all respondents who rated the probability at very high.

Craven said that Minnesota conditions are probably slightly more optimistic than the national conditions reflected in the survey. “Our dairy producers are facing a tough profit situation now, but many Minnesota producers raising crops entered 2009 in a relatively strong financial position.” he said.  

The 2,300 agriculture professionals responding to the survey included lenders, educators, crop insurance agents, consultants, farm input suppliers and brokers. A summary of the survey is available on the University of Minnesota Center for Farm financial management website www.cffm.umn.edu 

In addition to the education programs from Craven and other Extension farm management educators, University of Minnesota Extension’s Farmer-Lender Mediation program helps farmers and lenders work out solutions for managing agriculture debt. More information about lender mediation services at extension.umn.edu or by calling (218) 935-5785.

URL: http:// www.extension.umn.edu/extensionnews/2009/farmers-finacial-skills.html  This page was updated Sept. 22, 2009 .
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