Farm cash flow management can be difficult in the best of times. Seasonal costs and revenue fluctuations have always been a part of farming economics. These days, there’s also unpredictable weather, trade issues, and world conflicts creating all kinds of uncertainty around agricultural costs and income.
In May, the U.S. Department of Agriculture (USDA) projected that net farm income will be $153.4 billion for the 2026 calendar year, a drop of 0.7% from 2025 (not adjusted for inflation). In inflation-adjusted terms, net farm income is expected to fall by $4.1 billion, or 2.6% from 2025.
By planning your deposits around your harvest income, preparing for seasonal and recurring operating expenses, and using the right banking products, you can improve your financial stability throughout the year. This can help your profitability and how efficiently you manage your operations, as unexpected costs or opportunities could happen at any time.
A key piece of equipment could break down or need replacing. Livestock can get sick and need more veterinary care than you expected. On the other hand, someone might suddenly offer you a deal on feeder cattle or a slightly used tractor. Knowing exactly where you stand in terms of your cash flow and forecasting can help you decide whether to cover an unexpected expense with cash, a loan, and the terms you would need.
Why Seasonal Cash Flow Is Different in Agriculture
Farmers deal with high operational costs early in the season for things like seed, feed, and labor. Most or all of their income arrives months later during harvest or livestock sales. In between, they face operational costs such as fertilizer, equipment repairs and replacement, utility bills, insurance, taxes, loan payments, and other expenses.
Managing that gap with accurate budget forecasting between cash outflows and inflows is essential. Just as a weather forecast helps you determine when to plant, harvest, and how to manage your herds, cash flow forecasting can help you better prepare for what may come.
For example, a livestock rancher could look at their seasonal data and cash flow to get a better idea of when to market their herds. If they sell early, they would get less money per animal but would also reduce their feed costs. If they hold on for a while and sell later in the season, they would get more per animal but would have to include the cost of feeding and caring for the animals.
Understanding Your Farm's Annual Cash Flow Cycle
Every farmer knows they’ll have certain expenses every year, even if they’re not exactly sure what the cost will be. Getting a grip on these costs and their impact on cash flow can help you better prepare so you can adjust and manage your budget as needed. The USDA has a downloadable Excel file that agricultural producers can use to track their monthly cash flow, their long-term history, ag loan amortization, and other details.
Peak Income Periods
Most agricultural income is seasonal, including crop sales and livestock auctions. Some farmers might also benefit from Conservation Reserve Program (CRP) payments, rental income, custom work and services, and off-farm income.
Predictable Seasonal Expenses
While the actual cost of many agricultural inputs can be subject to trade frictions and turmoil overseas, the need for these expenses is unlikely to change. Things like seed, fuels, fertilizer, feed, hired labor, equipment rental and repairs are part of any farming operation.
There are also fixed costs that are more predictable, such as rent, equipment leases, insurance premiums, taxes, living expenses, loan payments, and long-term capital investments such as equipment purchases, livestock housing, grain storage, buying land, and irrigation systems.
Strategies to Better Manage Deposits Throughout the Year
Every year, farmers and ranchers have to decide how much they’ll plant or how much livestock they’ll raise. Of course, they have to do this while not knowing what their corn, cattle, or hogs will fetch in the marketplace, or what the cost of diesel fuel will be. They might lock in some of their inputs and outputs ahead of time with purchase and sale contracts; or hedge their bets in the futures market. Whatever strategy you use to get you through the season, we recommend managing your cash and income with the same level of planning and scrutiny.
Separate Operating & Reserve Funds
Operating funds are what you’ll spend within the current year or growing season. You draw on them to start the season and replenish them at harvest time. The source of your operating funds could be your own bank account, an agricultural loan, or a line of credit.
Reserve funds are like a safety net that can help reduce your need to take on debt in order to improve your operations or get through the lean years. They should be insulated from your everyday operating costs and used for things like down payments on buying land or machinery, or major improvements to your operations such as replacing a well, installing an irrigation system, or investing in new buildings. Reserve funds can also serve as a financial cushion to help you get through severe droughts, a drop in commodity prices, or the loss of overseas markets.
Build Cash Reserves during High Income Months
One of the reasons for analyzing and monitoring your cash flow, is to help you make the most of it during your higher income months. We know our customers in farming and agriculture already understand the importance of saving, and cash flow management can help you save more and make the most efficient use of your funds.
Planning for Major Farm Expenses
Farm Progress reports that knowing your input costs is crucial these days because farmers deal with ever-tightening margins from lower commodity prices and volatile crop input costs. It notes that knowing or estimating your production costs can help farmers determine their marketing and purchasing strategies.
The USDA’s Commodity Cost and Returns report can be a valuable resource. It offers information on agricultural costs and returns, as well as historical data and cost of production forecasts. It predicts that higher production costs in 2027 will be driven by higher prices for seed, chemicals, repairs, and labor. Fertilizer costs are expected to remain high as well.
Seed, Fertilizer, Feed, & Equipment Costs
Seed costs obviously depend on the type of crop you’re sowing as well as the variety, which has a tremendous impact on yields. A survey by the American Farm Bureau Federation revealed that 70% of farmers couldn’t afford all the fertilizer they needed for the 2026 season because of conflict in the Middle East. The report also noted that farm diesel prices increased by 46% since the end of February and that nearly six in 10 farmers reported worsening finances.
In June, Farm Progress reported that the cost of farm equipment increased dramatically during the season, despite a drop in demand, as tariffs increased the price of steel and agricultural equipment, while inventories of used equipment fell by 28%.
Preparing for Unexpected Expenses
It seems there’s never a shortage of unexpected costs that can happen on a farm. A harvester or a truck could need repairs in the middle of harvest. A pest outbreak could require additional chemicals or veterinary care. Of course, government policies and international issues could add additional costs without warning. Extreme weather could hurt your yields and ruin a harvest. While cash flow management can be difficult in uncertain times, having a grip on what you do know can leave you better prepared for the unexpected.
How Ag Operating Lines of Credit Help Bridge Seasonal Gaps
An agricultural operating line of credit is an important part of farm expense planning because it gives you the financial flexibility to make key investments at the start of every season and help you deal with unexpected losses or expenses. It can be an important part of your cash flow management strategy.
When to Use a Line of Credit
Many of our agricultural customers draw on a line of credit at the start of a season to buy the seed, fertilizer, and feeder livestock they need. Some of our customers also use an agricultural line of credit to cover any unexpected costs, while preserving their cash reserves as a financial cushion.
The Benefit of Flexible Repayments Tied to Agricultural Cash Flow
One of the key benefits of ag operating lines of credit with Peoples Bank is that we offer flexible repayment terms that fit your cash flow and cyclical needs. For example, you might draw on a line of credit at the start of the season and make interest-only payments until harvest time. You could set up a line of credit just in case you need funding and would only pay interest on what you borrow from the moment you withdraw your funds.
Partner with Peoples Bank for Agricultural Banking Solutions
If you need help with farm expense planning and would like to learn more about agricultural loans and agricultural lines of credit, schedule a consultation with one of our agricultural business banking professionals to discuss cash flow strategies or apply for an ag operating line of credit. Please contact us or reach out to one of our locations in Iowa, Minnesota, and South Dakota.