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A good time to refinance

An ag lender says now might be a good time for farmers to refinance because of low interest rates.

Jason Johnson with Farm Credit Services of America tells Brownfield the first thing clients need to do is get a firm handle on what their cost of production is.

“Once you understand your cost of production, what can you do from a land perspective?  Are there some re-amortization things we can do to spread out some terms and take payments that (from) when they bought land at 10 year terms when corn was at $6 dollars, today that doesn’t work.  So how do we take those payments and make those be at levels that work with current cash flows?”

Johnson has been proactively reaching out to customers to encourage them to take advantage of historically low interest rates.

“As part of that discussion, we (also) talk about if the term is right.  Is a 10 year term right (or) should we go longer?  Should we be refinancing things and injecting some liquidity into their operation?  So it’s not just one discussion about interest rates.  We try to tie all that together and try to set up a plan so their cash flow works long-term.”

He reiterates that any financial decision needs to be made AFTER the farmer figures out their cost of production.

Brownfield spoke to Johnson at the Farm Progress Show.