Weather the Canadian Farming Seasons by Locking in Rates Now on New Equipment

Some Canadian farmers tell me they feel like they are dealing with a perfect storm—one that is lacking rain in some areas. Equipment shortages, higher input costs, the war in Ukraine and rising interest rates are on many people’s minds. As we head into harvesting, here are some strategies that can help you weather any storm in any year.

·??????Keep cash-in-hand: This year, especially, farmers can benefit from maintaining some liquidity. Many seeded this year into a drier than average environment. This year might be a good time to consider financing equipment—even smaller equipment—instead of paying cash. That ensures you keep cash-in-hand for immediate crop needs as they arise.?

·??????Supply chain issues: Newer sprayers, seeders, and combines can do the same work faster and more efficiently but new equipment is harder to come by than ever before due to supply chain disruption. Good used equipment may be the smartest option since delivery of some new equipment can require many months of waiting. Some financial institutions offer attractive terms and rates on nearly new, or even older, refurbished equipment. It’s something that we’re seeing a lot of. Due to rising equipment costs, more and more requests are coming in for loan and lease terms up to 10 years—even on some used equipment.

·??????Lock in rates: Inflation is driving up costs and shows no sign of abating. Interest rates are also on the rise. By locking in rates as soon as possible, farmers can confidently plan for the future by securing the equipment at current prices and fixing their payments. If inflation increases crop prices, as well, then payments should become more affordable over time. If you are buying new, ask your lender to fix your rate for the future delivery. It’s something that we do often but is not always available from other financial institutions.

Having reliable equipment, a cash cushion and fixed interest rates can help farmers weather the seasons ahead.?

Blog by?Troy Stack, Business Development Manager at Meridian OneCap.