The Impact of Inflation on Your Financial Health
Inflation Rate
Source: BEA
Federal Funds Rate
Source: FRED
Fed’s Outlook on Inflation
Source: Federal Reserve
The Latest Dot Plot
Source: Federal Reserve
Source: ISU Extension and Outreach Estimated Costs of Crop Production, File A1-20
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Source: ISU Extension and Outreach Estimated Costs of Crop Production, File A1-20
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2022/23 Crop Price Projections
Based on futures prices
2023/24 Crop Price Projections
Based on futures prices
Iowa Milk Prices
Source: USDA-NASS
U.S. Dairy Export Values
Source: USDA-FAS
Source: USDA-FAS
Source: USDA-FAS
Source: USDA-ERS
Changes in Consumption
9 Strategies to Manage Margins
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1.
Protect your working capital
2.
Avoid cash shortages
3.
Diversify income
4.
Revise production costs
5.
Actively manage risks
6.
Revise family living expenses
7.
Secure repayment capacity
8.
Revise growth strategy
9.
Know your government support programs
Strategies:
1. Protect your working capital
•
Revise recent asset purchases
•
Revise share of rented land
•
Revise scale of operation and fixed costs over next 2-3 years
•
Manage taxes: visit with tax advisor
–
Deferred payment contracts
–
S179
–
Carry back operating losses to obtain tax refunds
Strategies:
2. Avoid cash shortages
•
Plan for tighter margins/operating losses (renters)
•
Secure operating loan/emergency loan terms
•
Be very careful with new capital expenditures
•
Maintain cash reserves and operating credit lines:
Strategies:
7. Secure repayment capacity
•
Short repayment schedules reduce cash flow vs. long
repayment schedules
•
Try to extend repayment schedules on equipment & real
estate loans (low interest rates)
•
Work a plan with your lender(s) for 2024-2025
Iowa Farmland Values
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https://www.extension.iastate.edu/agdm/wholefarm/pdf/c2-10.pdf
Thank you for your time!
Any questions?
Ag Decision Maker:
http://www.extension.iastate.edu/agdm/
Iowa State University is an equal opportunity
provider. For the full non-discrimination
statement or accommodation inquiries, go to
www.extension.iastate.edu/diversity/ext
.
Iowa State University
ofrece igualdad de
oportunidades. Para ver la declaración
completa de no discriminación o para consultas
de acomodación, siga a este vinculo:
www.extension.iastate.edu/diversity/ext
.
Explore the effects of inflation on your finances through insights on inflation rates, Federal Funds Rate, the Federal Reserve's outlook, crop production costs, interest rates, crop price projections, milk prices, dairy exports, and consumption changes. Learn strategies to manage margins effectively to safeguard your financial stability amidst economic fluctuations.
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Presentation Transcript
Inflation: How It Affects Your Bottom Line? Chad Hart Professor chart@iastate.edu 515-294-9911
Inflation Rate Source: BEA
Federal Funds Rate Source: FRED
Feds Outlook on Inflation Source: Federal Reserve
The Latest Dot Plot Source: Federal Reserve
Iowa Estimated Costs of Crop Production per acre by Expense Category, 2019-2023 Source: ISU Extension and Outreach Estimated Costs of Crop Production, File A1-20
Interest Rates and Charges on Preharvest Variable Costs, 2019-2023 Source: ISU Extension and Outreach Estimated Costs of Crop Production, File A1-20
2022/23 Crop Price Projections Based on futures prices
2023/24 Crop Price Projections Based on futures prices
Iowa Milk Prices Source: USDA-NASS
U.S. Dairy Export Values Source: USDA-FAS
Changes in Consumption Source: USDA-ERS
9 Strategies to Manage Margins Concern: cash flow / liquidity Solvency is less of an issue 1. Protect your working capital 2. Avoid cash shortages 3. Diversify income 4. Revise production costs 5. Actively manage risks 6. Revise family living expenses 7. Secure repayment capacity 8. Revise growth strategy 9. Know your government support programs
Strategies: 1. Protect your working capital Revise recent asset purchases Revise share of rented land Revise scale of operation and fixed costs over next 2-3 years Manage taxes: visit with tax advisor Deferred payment contracts S179 Carry back operating losses to obtain tax refunds
Strategies: 2. Avoid cash shortages Plan for tighter margins/operating losses (renters) Secure operating loan/emergency loan terms Be very careful with new capital expenditures Maintain cash reserves and operating credit lines:
Strategies: 7. Secure repayment capacity Short repayment schedules reduce cash flow vs. long repayment schedules Try to extend repayment schedules on equipment & real estate loans (low interest rates) Work a plan with your lender(s) for 2024-2025
Cash Rents Tend to Follow Land Values https://www.extension.iastate.edu/agdm/wholefarm/pdf/c2-10.pdf
Thank you for your time! Any questions? Ag Decision Maker: http://www.extension.iastate.edu/agdm/
Iowa State University is an equal opportunity provider. For the full non-discrimination statement or accommodation inquiries, go to www.extension.iastate.edu/diversity/ext. Iowa State University ofrece igualdad de oportunidades. Para ver la declaraci n completa de no discriminaci n o para consultas de acomodaci n, siga a este vinculo: www.extension.iastate.edu/diversity/ext.
