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Preparing for crop expenses and feed needs
March 23, 2022
Almost all dairy farms have significant crop expenses each year. As we approach planting season, many of you are developing your annual cropping and feed inventory plan. Below is a suggested process to help you plan and develop your cash flow  budget. Many farms also plant winter grains or forages, so these should also be included in your annual plan.
Spring and Fall
  1. How many acres to plant?
  2. What crops will be planted and on how many acres?
  3. How much will the seed cost per acre? 
  4. What are the expected yields for each crop?
  5. If yields are not realized, will enough feed inventory be available?
  6. How much will the fertilizer cost per acre?
  7. Will there be an expense for custom hire and what will be machinery and fuel cost per acre?
These questions will help you develop a cropping budget per acre and per ton of forage or bushel of grain produced. Next, you may want to evaluate how to structure financing and payment terms with your suppliers.
  1. Pay from current cashflow — This may be an option. However, margins may not always allow for this, and you may have better uses for current cash.
  2. Supplier terms — This is commonly available for agronomy inputs. When using supplier financing, it is important to consider the interest rate as suppliers often charge higher rates than typical lenders.  Consider how much interest in arrears you may be charged.
  3. Lender financing — Financing through your bank or another lender, such as DFA Financing, has some advantages that may fit your operation
Advantages to lender financing
  1. Expenses paid early may result in discounts from your vendor
  2. Maintain positive vendor relationship by paying current invoices
  3. Opportunity to spread  payments over 12 months
  4. Greater peace of mind, knowing you have a line of credit in place
Preparing for crop and feed needs can be time-consuming.  Taking a strategic approach and weighing your options can provide you with a good decision-making framework. If you have any further questions or would like to discuss crop expenses and feed needs for the year, please feel free to contact the DFA Financing loan officer for your Area.