Planning helps when times are tough

Dec 2, 2008      Victoria Advocate

Allison Miles

Dec. 2, 2008 (McClatchy-Tribune Regional News delivered by Newstex) -- The last year has been tough on Mike McBee.

His company, Grimes Turfgrass Farm, expanded into Victoria just before the economy took a southern turn, McBee said, and at the end of the fiscal year he was about 10 percent off on his gross sales.

"But the staggering factor was our cost input for fuel and fertilizer," he said. "Fertilizer and chemicals are up there pretty good."

When it comes to surviving an ailing economy, the same tips that apply to families and businesses apply to producers, said Mark Waller, professor and associate department head for extension at Texas A&M University's Department of Agricultural Economics.

Reduce your existing debt, he advised, and cut back on spending where you can.

"If you've been looking at getting new machinery you might want to re-think that," he said. "But if you need it, you need it."

Those who plan to speak with lenders should go in with complete books, Waller said. Lenders will be looking more carefully, he said, before handing out loans.

And, don't wait until the last minute. Some banks might find themselves strapped for cash before the end of the lending season.

Liquidity can help during trying times, AgriLife Extension Economist Danny Klinefelter said in an extension news release.

He suggested agriculturists evaluate their practices to make sure the expenses generate sufficient income.

Look over your debt and make sure it's structured correctly, he said. Even if it comes with a higher rate, agriculturists might look at converting short-term debt into fixed-rate loans.

"The objective is to improve your working capital position and to become more flexible," he said in the release. "You don't want to get caught with a lot of carryover operating debt for the next year."

When in doubt, ask the experts, said Veronica Obregon, chief communications officer with the Texas Department of Agriculture.

Agriculture consultants can evaluate a farm's workings and test soil and moisture to make sure producers aren't using too much fertilizer -- which translates to spending too much money, she said.

Waller reminded people that the automotive companies asked for bailout money and Congress told them to come back with a plan.

"That's the same thing everybody needs to be doing," he said. "It's better to do some planning ahead of time than to say, 'Ooh golly I don't have enough cash to get through the spring.'"

McBee said he remains cautiously optimistic.

Fertilizer and diesel costs appear to be swinging back to reasonable levels, he said, and the company has cut costs where it can, such as in advertising.

"Everything needs checks and balances and I guess this is a check for us," he said. "Or a balance."

And the Lone Star State has fared better than other areas, McBee said. Turfgrass sales for companies in some states were down 40 percent.

"But we're still clicking along," he said. "Thank God for Texas.

Tips for staying afloat

Get more liquid.

Make sure the income gained justifies expenses. Make sure debts are structured in the right way and consider shoring up loans.

Evaluate your crop insurance program.

Some products offer revenue guarantees in case of lost production or decreasing prices.

Evaluate alternative business models.

Joining with other producers can help grant you access to expertise and economies of sale.

Have a complete and accurate set of financial statements ready before approaching a lender.

This can keep access to credit open and lessen turnaround time once you make your request.

Source: Texas AgriLife Extension news release

Newstex ID: KRTB-0211-30072017

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