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I’m all out of cash

March 29, 2019 GMT

Music is interesting. For me, I like the songs I can sing along with and also the songs with lyrics that have a story. For me, music probably started with church hymns and now that also means country music. With that said, I grew up in the 1980s and I really like that music too. There were some good songs back then.

It’s funny how different songs come back to my mind from more than 30 years ago and now I relate them to other parts of life.

Not long ago, I had a day that included three conversations, starting with an Iowa hog producer who is going through tough financial times and he was running out of money. Within two hours, a Wisconsin dairy farmer called and due to a number of circumstances, primarily low milk prices, he was out of money. About two hours after that, a Minnesota grain farmer called to tell me he was out of money and needed money before spring.

For whatever reason, my mind flashed back to the old Air Supply lyrics “I’m all out of love, I’m so lost without you” and I thought the farm version of those lyrics would be ”’I’m all out money and it’s so hard to operate without you.”

It left me wondering where all the working capital had gone. Was it bad decision-making? Was it bad market conditions? Was it too much money going to family living? Was it a bad purchase? In other words, was it something controllable? Or was it something uncontrollable? It’s hard to hear stories of people running out of money and being forced to make really tough decisions.

So what is next for these operations?

Obviously, time will tell, but the one similarity for all the situations was that they were middle-aged families. Clearly the older generation of farmers can get in financial trouble as well, but as these three farmers described their situations, I concluded there was a limited number of things that I could do related to finding a source of cash. More than likely, their next directives will be coming from their banks and lending institutions. It is never a fun conversation to hear a hard-working family in financial pain.

There are a couple of things I thought of that may help other people avoid those same situations:

• During good times, are you strengthening “your fort” before you expand?

• Are your purchases improving your cash flow or are they just made to minimize your income taxes?

• Is your plan based on hope or reality?

• What other events could derail your operation? What is the probability those events occur and do you have a plan for it?

• Is losing part of your operation better than losing all of it?

• Will you listen to someone giving advice you don’t want to hear?

It is not easy to listen to a suggestion or recommendation from someone else. Some recommendations may sound cold but they may also be the truth that you do not want to hear.

Here is what I know for sure in these three situations. At this point, those boats are taking on water fast and the smallest wave will cause them to capsize. A big wave, like a death of a parent, will end the game. The thought of coming up with additional capital to buy out siblings or equalize things from their parents’ generation is not even close to a reality at this point. Maybe they are playing a game that ends with a ship wreck anyway.

Realistically, your family farm plans need to start with a strong fort around the ground and assets that you already have. Use careful consideration for cash flow that is required to make everything work for current and future generations to keep what you have. Then and only then should you proceed with purchases that fit your operation and work into your cash flow.

Most farmers are eternal optimists and can rationalize nearly every good thing happening, but when your farm is all out of cash, it will be lost without you.