Check your farm debts

Time for a quick look at borrowings to see that they don't get away from you. Quarantine borrowings by shutting the "overdraft gate". That means reducing spending on the overdraft.  also check on your creditors as they can cause problems if not handled well. This is a tricky time for farmers because of the fuel and fertiliser shortages.

Recession warning

Then the danger is magnified by the prospect of a recession coinciding with a rise in interest rates.  Most mortgage loans allow for variable interest rates. That can be dangerous if they rise fast. Some of today's farmers will remember rates going over 20% pa. That is a lot of debt on which to pay interest or have it added to the loan.

Farm Impact

There are  number of issues to be dealt with at once. Many will benefit from some expert advice. Having run my own sheep and cattle, I know how sceptical farmers are about "experts". However experts are often just those who have done it for decades, like the guys who showed me how to run cattle on the tablelands as opposed to the merinos I had out west. They knew and I didn't! I took their advice.

Expertise

My loan expertise comes from qualifying as an accountant, then running a national Chartered Accountancy, CPA practice. We had some large farms and meat works as clients. Then I ran my own properties for over 30 years. Still a newcomer to farming but I do know farm loans because once banks were deregulated I fought them on behalf of a lot of farmers from one side of Australia to the other and from top to bottom. We always won when the borrowers did exactly what I suggested.

Cull and manage

This is a time to extend the repayment period for long-term mortgage loans on farms to give you time if recession does hit. It is also a time to cull out particularly dangerous loans with higher rates or where very valuable property is mortgaged, if that is possible. However, at the same time it is important to build whatever cash reserves you can because if profits and property values fall at the same time, cash can be king. Stock prices can also take a tumble due to  the recession but might just as easily rise due to shortages. Chat with  consultant This is a time for those who use farm loan consultants to chat with them regularly and listen to their advice. The farmer always needs to make the final decisions because they know all the factors involved. However, it pays to incorporate that expert farm loan advice into the farmer's decision-making. Farmers are skilled at toughing it out. The main  thing is to move early. Look for the financial risks and put in place the very best solutions possible. Take it seriously. If nothing eventuates you will be fine, but if it does you will "Be Prepared".