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:

Farm Bureau economist Dr. Faith Parum says EPA’s final biofuel volumes keep corn demand steady and strengthen the outlook for soybean-based diesel feedstocks.
Global soybean competition is moving deeper into crush capacity, logistics, and value-added product control.
CME Group’s Fred Seamon joins us to break down the drop in farmer sentiment, discuss the role of input costs and global factors, and share his outlook for the ag economy ahead.
Cotton margins improved slightly, even as fertilizer and fuel costs rose due to the Strait of Hormuz disruption linked to the Iran war.
Flour milling demand stayed generally steady, but total wheat grind remained slightly softer year over year.
U.S. export inspections turned in another strong corn week.