When Margins Are Tight, Try to Preserve Cash, Stretch Out Debt
Published: Friday, December 26, 2025
As Indiana farmers continue to manage through tightening margins, I remember the advice a lender gave me when I started at Purdue Extension: "It takes two good years to overcome one bad year." The message is that it takes time to rebuild working capital after a year of losses.
According to Purdue University's Crop Enterprise budgets, some Indiana farmers are facing three straight years of losses, leaving many seeking strategies to shore up liquidity. At the recent 2025 Indiana Ag Gathering, a breakout session tackled this issue—"Questions I Should Ask My Agricultural Lender," led by Matt Eldridge, vice president of agricultural lending at First Farmers Bank and Trust in Terre Haute. With decades in the business, Matt shared practical advice tailored to today's challenging economy.
At its core, managing your farm through these lean times boils down to solid decision-making. Start with your farm's real numbers—accurate costs for everything from seed and inputs to machinery and labor. Use that data to set price targets that cover variable costs, overhead, family living expenses, and even a cushion for future expansion.
Forget chasing "home runs" in your marketing plan to fix cash flow woes magically. Instead, strive for a steady, balanced approach to marketing and cost control that minimizes the risk of another loss while still providing opportunities for profitability. Most importantly, safeguard your working capital—it is the real safety net for your operation.
Preserving cash is job one in protecting that working capital. Look for input savings that will not limit yield potential. Consider stretching out term debt on new equipment to ease annual payments. Negotiate flexible leases that reduce base rent while sharing upside revenue with landowners when prices rebound. These adjustments can reduce annual payments without cutting corners on production.
Making changes to your farm business might mean difficult conversations with family members, business partners, or your lender. Hoping for better markets is not a plan; it is a gamble. Eldridge urged farmers to get proactive with a 12-month cash flow budget that pinpoints savings opportunities and boosts liquidity heading into 2026.
Sometimes, those solutions sting parting with sentimental but unproductive assets passed down through generations, or walking away from leases on marginal ground that's bleeding cash in this market. The fear of not finding a rental that fits your budget is real. Is it worth holding on to a cash drain that threatens your farm's viability?
Eldridge wrapped up with a key reminder: "You bank to farm, not farm to bank." You are the captain making the calls, with your lender as a trusted teammate. As losses accumulate, they erode working capital fast, forcing tough choices like ramping up operating loans, selling down grain stocks, or tapping land equity for a lifeline. Tune out the social media "experts" who offer opinions without considering your farm's best interests. Lean on proven advisors: your ag lender, marketing pros, and agronomists who know your ground and goals.
It is worth borrowing a page from business school—treat your farm as a "going concern," built to thrive across generations. With smart management and the right questions for your lender, Indiana farmers can weather this storm and position themselves for brighter days.
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