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Ag banker suggests using money markets to stretch cash reserves

An agricultural banker says many farmers were able to pay down debt with last year’s stronger earnings, but farmers should consider an additional strategy now.

Sam Miller with BMO Harris Bank tells Brownfield the overall financial condition of farmers this year is great, but the higher expected costs of production and shrinking margins mean farmers need to make their cash go farther, and putting cash into short-term money market accounts gives a good rate of return right now. “In fact, if you look at the short-term interest rates, they are higher than longer-term interest rates, so keeping some funds liquid in a money market account that pays at a higher rate and then spending that down as you have some margin compression, that’s a pretty good strategy.”

Miller says many of his farmer customers are holding off on major purchases or facility expansions because of interest rates and purchase prices. “Yeah, I think that they are, and again, it has to do with the cost.”

Miller says farmers should use risk management tools and also work with consultants to buy inputs at the right time and price to help keep expenses low.

Miller spoke to Brownfield during the Wisconsin Bankers Association Ag Banking Conference in Wisconsin Dells, Wisconsin Thursday.