Surviving a Farm Family Financial Crisis
Low prices for several major commodities, drought conditions in much of the state, low yields for many crops, pre-mature sales or liquidation in cow herds, and uncertainty in tobacco policy have created serious financial stresses for many Kentucky farms. Repayment of operating loans and term-debt repayment is in jeopardy. Many families have struggled to meet family living expenses. A serious farm family financial crisis is a reality for many Kentucky farm families.
Short of a major turnaround in commodity prices and bumper yields next year, there's no single solution for the farm financial situation. The current strategy for many farm families is to figure out how to survive this crisis. Among the survival options are things like cost-cutting, stress management, asset liquidation, refinancing, farm and off-farm alternatives, government programs and leaving farming. This forum obviously doesn't give us time to explore each of these options in detail but briefly let's explore a few of them.
First, cost-cutting. Many operations have already cut costs to the bone but now is the time to look closely at every expense. Is it necessary? Will it return more than it costs? Can I put it off for awhile? These are questions we should be asking. Be careful however that cutting expense doesn't cost more in benefits than it saves in expenses.
Secondly, stress management. Financial, personal, and family stresses associated with the financial crisis can be severe. Family communications often suffer during times of financial stress. This is a time for open communication. All family members are likely to be affected, including children. Family communication is an absolute necessity. Stress counselors are available in most areas. Public, private, and church supported resources are available. Many Extension offices maintain lists of local contacts.
A third option is refinancing your debt. Interest rates are creeping back up but are still at relatively low levels. If refinancing hasn't been considered, now may be the time to refinance operating or term debt. Refinancing should reduce current cash flow obligations to meet debt payments and leave more cash to meet other business or family obligations. Be aware that this option, while lowering current payments will result in more interest expense in the long run.
These are only a few of the options for farm families facing financial difficulties. Talk to your family; talk to your Extension agents; talk to your lenders. Explore all the options.