The next 16 weeks is a chaotic period in the lives of many farming families. The world stops and panic sets in. You all know the story – it’s harvest time.
It’s a stressful time because your entire financial welfare is tied to a short timeline. Influenced by factors outside your control, namely weather, machinery issues and delays at the silo (to name a few!) we understand the mindset this can create.
With final crop estimates due and preparations underway, we should talk about one thing you can manage before life gets too crazy: a plan on how you are going to sell your grain.
Selling grain has changed
As you all know, the way grain is sold has changed a lot over the past 10 to 15 years. Not only do you have many possible buyers of your grain, but most buyers offer multiple options on how you can sell it.
The list goes on, but here are a few:
- cash advances
- forward contracts
- deferred schemes
All of these different options have different codes which must be declared at the time of delivery – how confusing!
Unfortunately, you can’t predict the future and the scariest part is that those different codes can have a massive impact on your financial outcome. Choose the wrong code and you can pay too much tax. Choose the wrong code and you can run out of cash. Choose the wrong code and you can be on the end of price movements beyond your control.
Have a strategy to get the most from your harvest
The good news? All of these things are manageable by having a crop sales strategy.
We’re not talking about picking grain prices or markets (we’re not grain marketers and don’t claim to be), we’re talking about setting a strategy in advance using the right ‘scheme’ to sell your grain. A strategy will help you get the best tax and cash-flow result for your business and family.
Generally, the best results come from a mix of products and buyers that deliver different results. Having this plan in advance avoids costly mistakes and confusion at the silo (after pulling a week of all-nighters!).
How we can help you
Our approach with our most proactive farmers is to:
- Sit down after the October estimates are done and before the header gets dragged out of the shed and estimate the likely harvest income for the year.
- Plan a strategy on how the grain will be sold (and who will buy it), taking into account cash flow needs for the next 12 months and the likely tax impacts of this strategy.
Farming is not like other businesses. You don’t get 365 opportunities a year to change your strategy to achieve a different outcome. Once a year, you get a small window to get it right. Get it wrong and you could pay the price. Get it right and harvest time will become far more exciting and lucrative!
Contact us for advice
For more information – or if you have any questions about your personal situation – contact our friendly team today!