2024 is certainly presenting some challenges, no defined open break, a substantial lack of growing season rainfall, and in some areas, the lowest in history and now significant frost.
As the extent of the frost damage becomes more known in the coming days and growers start to work through ‘what next’, we encourage you to approach this next period of time with a cool head, and a strategic focus. We also encourage you to talk to the people closest to you, and if you are watching someone now have to work through frost or a challenging year, give them a call just for a check in.
Paige Cross, a project manager with Mallee Sustainable Farming, has a background in agribusiness finance. Paige has put together some tips to consider when navigating the financial implications of a dry season or frost damage based on her experience of working with clients to prepare business strategies and finance requests.
Firstly, remember that it’s most likely any big loan repayments are not due until after harvest, this means you have time to work through your situation and there is no need for drastic action.
We have prepared a suggested approach that could be taken when it comes to navigating an approach with your financial institution:
- Call your bank manager to let them know that the season isn’t progressing as you had anticipated, and that it’s very likely you have frost damage. If you don’t have a dedicated bank manager, ring the number on your most recent statement and failing that, each and every bank has a financial hardship phone number. For those who use a broker, give them a call.
The purpose of this call is purely to let your manager know what is going on and that you will be looking for their support. You could even ask them to come and visit you on farm.
Before hanging up, make sure you leave with a plan which will most likely include the need to prepare a revised cashflow budget. Also, make sure you have a date when you will chat again.
- The next key step will be to prepare a cashflow budget considering the potential changes to your grain or hay income. Revisit the expenses as well, will you now have a reduced chemical bill?
If you don’t have a cashflow template, there are lots available online, and remember, an excel spreadsheet is a perfectly acceptable format! Try this one:
https://business.gov.au/finance/cash-flow/set-up-a-cash-flow-statement
Do you have FMD’s that could be redeemed? This is a good conversation to have with your accountant.
While you are working through your cashflow budget, prepare a list of key service providers you engage with, who are your allies and key supporters? Don’t be afraid to give these people a call. It could be your stock agent, agronomist, solicitor, accountant, chemical reseller, the neighbour or your best friend.
- Call your suppliers and key service providers. The purpose of this phone call can be 2-fold, to let them know any potential delays to payment (if you have any payment terms) but also to help you prepare your cashflow budget for 2025. What is the expected fertiliser price, chemical price and other key inputs.
- Once you know the above and have a clearer cashflow picture for the next 6-12 months, instigate a formal meeting with your finance provider. Don’t be afraid to take another key member of your business with, or a trusted advisor.
The purpose of this meeting is to seek support from your financial institution which could be by way of:
- Loan payment deferral
- Change from principal and interest repayments to interest only
- Working capital/overdraft extension
Other things to consider could be moving a portion of your overdraft (which has just sat there for a period of time) into a term loan; redeeming FMDs (refer above); any off-farm investment streams that could assist in the short term.
Remember, Australian agriculture is cyclical and the good seasons will return. Now is about a steady head and working one step at a time through each process.
The team at Mallee Sustainable Farming are here to help and support you. There are many resources available online including through the ‘Better Frost Decision’s’ Facebook group, on our website and through funding bodies such as the GRDC.
There are some great sources of help available including:
Rural Financial Counselling Service https://rfcsnetwork.com.au/
PIRSA Farm and Business Advisors (FABs),
Murraylands and Riverland
- Robyn Cain: 0411 633 085
- John Chase: 0419 848 672
- Brent Fletcher: 0439 409 430
https://www.pir.sa.gov.au/emergencies_and_recovery/funding_and_support/fabm
