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Managing debt key to long-term viability

A grain market analyst says how farmers manage debt is often indicative of the long-term viability of their operation.

Al Kluis is president of Kluis Commodities in Wayzata, Minnesota.

“There’s an old saying that most people take on debt in the good times and try to pay it off in the bad times.  And I think if you can plan ahead to try and not be in that position, your farm is going to do better over the next 20 to 30 years.”

He tells Brownfield many farmers are trying to pay off debt while profit margins remain down.

“Some of that debt they accumulated in good times.  Other farms who were more disciplined put some money in the bank and are now able to buy some of these lower-priced assets.  So, think and plan long-term (and) take on debt in the bad times.  Be willing to stick your neck out.  But when you have good times, get liquid.”

Kluis recommends farmers also plan for inflation, pointing out that short-term borrowing costs have risen a half percent since November and long-term rates are up nearly one percent.

 

 

 

 

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