Cash Flow Planning Helps Farms Manage Price Risk

A written Plan B can help producers protect repayment capacity before cash shortages become urgent.

A farmer with a computer stands in a field of grain.

ibragimova - stock.adobe.com

WEST LAFAYETTE, Ind.(RFD News) — A farm can look solid on paper and still run short of cash when crop prices fall, or fertilizer and fuel costs rise. Purdue University’s Dr. Michael Langemeier says producers should update contingency plans as 2026 margins remain uncertain.

Langemeier says a sources-and-uses-of-funds statement can help farms test whether operating cash will cover family living, taxes, debt payments, and possible equipment purchases. The tool is especially useful when prices vary widely.

In a southwest Indiana case farm, low-price corn and soybean assumptions pushed net farm income and debt-repayment capacity into negative territory. Base and high-price scenarios remained positive, but only the high-price case supported machinery replacement.

That matters because tight cash flow can force producers to delay machinery purchases, draw down working capital, sell assets, or increase borrowing. Even farms with strong liquidity can weaken their position if they move too late.

Langemeier recommends updating cash flow projections through the summer as prices change. A written Plan B can help producers protect repayment capacity before cash shortages become urgent.

Farm-Level Takeaway: Producers should test cash flow under multiple price scenarios before committing to equipment purchases or additional borrowing.
Tony St. James, RFD News Markets Specialist

Tony St. James joined the RFD-TV talent team in August 2024, bringing a wealth of experience and a fresh perspective to RFD-TV and Rural Radio Channel 147 Sirius XM. In addition to his role as Market Specialist (collaborating with Scott “The Cow Guy” Shellady to provide radio and TV audiences with the latest updates on ag commodity markets), he hosts “Rural America Live” and serves as talent for trade shows.

LATEST STORIES BY THIS AUTHOR:

Cattle analysts say the U.S. beef cattle herd rebuild still faces major hurdles despite some minor positive signals noted in certain regions.
USDA’s first 2026/27 outlook shows tighter supplies across several markets, led by wheat, corn, cotton, rice, beef, and sugar.
Strong export demand is supportive, but higher freight costs may pressure basis and grain movement margins.
Advocacy groups say farmers, ranchers and business owners may need to file claims before a July deadline.
Cattle producers may get some credit relief, but land and facility borrowing costs likely remain high.
Ethanol plants kept production steady, but softer gasoline demand and lower exports may limit near-term momentum.