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Southern Illinois | University of Illinois would prefer $300/acre working capital which I would love but it seems kind of like a pipe dream for a lot of borrowers. Given the current economics of farming, I’m just hoping a lot of my larger borrowers have positive working capital, period. Positive cash flow (meaning enough profit to service debt, provide cost of living and pay taxes) is fine given current commodity/dairy/livestock prices.
However, I’d have to agree with a lot of the other posters. Working in the banking industry, I’m obviously dealing with people who borrow money. In this part of the country, I’d venture to say 50% or more have enough working capital to put in half of the next year’s crop without having to borrow for it. This is considering quite a few operations that don’t have to borrow money at all. A lot of these operations have had land paid for for years or generations, this is also holding land values together and in some minute areas land prices are still increasing. To answer the original post, I can’t put a number to how much cash a farmer needs to have. To me, grain in the bin is about like money in the bank. Not exactly the same thing considering grain isn’t quite as liquid as cash in that it has to be kept in good condition and it has to be hauled in order to receive the money. Having said that, I don’t look at a balance sheet any differently though if a guy has $100k in cash or $100k worth of grain stored. Both as liquid as it gets in my mind. | |
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How much working capital per acre does your lender want?
