Where to From Here? Navigating the Financial Implications of Season 2024

2024 is shaping up to be one of the most challenging seasons on record for much of the country. For those of us in southern Australia, the absence of a defined opening break, a substantial lack of rainfall throughout the growing season (in some instances, the lowest on record!), and most recently, devastating frosts, have all compounded to create a complex set of circumstances.

As the remainder of this growing season draws to a close and we enter the next phase of the farming cycle, many growers are beginning to work through and implement their ‘Plan B, Plan C, or even X, Y, and Z.’ While the thought of navigating a failed season is incredibly confronting, we encourage you to stay composed and maintain a strategic focus. We also encourage you to talk to the people closest to you, and if you are aware of someone in your circle working through frost losses or a challenging year in general, please give them a call and check in.

While the climatic impacts of the season are largely beyond our control, there are things we can do and strategies we can implement to help make the best of a bad situation.

Firstly, it is likely that any lump sum interest or principal loan repayments will not fall due until after harvest/sale of spring lambs/weaner cattle. This means you have time on your side and there is no need for drastic measures in the short term, however use this time wisely to put a plan in place and be on the front foot.

Below are some tips to consider when navigating the financial implications of a dry season or frost damage, based on Cross Country Management’s experience in helping clients prepare business strategies and finance requests.

1. Call Your Bank Manager
   Let your bank manager know that the season isn’t progressing as you had anticipated. Depending on your primary industry, this could be due to frost damage, a lack of stock feed, or less-than-ideal finishing conditions for livestock. If you don’t have a dedicated bank manager, call the number on your most recent statement. If that doesn't work, every bank has a financial hardship phone number. If you use a broker, give them a call.

   The purpose of this call is to update your manager on the situation and let them know you will be seeking their support. You might even ask them to visit your farm. Before ending the conversation, make sure you leave with a plan, which will likely include the need to prepare a revised cash flow budget reflective of the seasonal conditions. Ensure that you agree on a follow-up date for further discussions.

2. Prepare a Cash Flow Budget
   The next key step is preparing a cash flow budget that reflects potential changes to your annual income. Be sure to revisit your expenses as well. Consider all the variables. If you're altering one side of the equation, there will likely be an adjustment needed on the flip side. For example, less grain or hay income could mean a reduced chemical bill or lower harvest costs. Will you have increased feed costs for stock you're holding onto? This could result in decreased selling costs and freight. Or, will there be increased selling costs if you decide to move stock? Don’t forget to add in any additional income.

   If you don’t have a cash flow template, many are available online, and an Excel spreadsheet works perfectly well! Try this one: Cash Flow Template.

   Also, do you have Farm Management Deposits (FMDs) that could be redeemed? This is a good conversation to have with your accountant.

   While working through your cash flow budget, prepare a list of key service providers you engage with. Who are your allies and supporters? Don’t hesitate to give them a call. It could be your stock agent, agronomist, solicitor, accountant, chemical reseller, neighbour, or best friend.

3. Call Your Suppliers and Service Providers
   The purpose of these calls is twofold. First, be upfront about any potential delays in payment (if you have payment terms). Second, use this opportunity to help prepare your cash flow budget for 2025. What are the expected prices for fertilizer, chemicals, and other key inputs?

4. Meet with Your Finance Provider
   Once you have a clearer picture of your income and expenditure for the next 6–12 months, schedule a formal meeting with your finance provider. Don’t hesitate to bring along another key member of your business or a trusted advisor.

   The goal of this meeting is to seek support from your financial institution. This could involve:

   • Deferring loan payments

   • Switching from principal and interest repayments to interest-only

   • Extending your working capital or overdraft limit

   You may also want to consider moving a portion of your overdraft (any amount you don’t expect to repay in the short term) into a term loan, redeeming FMDs (see above), or tapping into any off-farm investment streams that could assist in the short term.

Remember, Australian agriculture is cyclical, and the good seasons will return. For now, it’s about keeping a steady head and working through each process one step at a time.

If you find yourself needing a ‘Plan B’, Cross Country Management is here to help. We offer our 'Wow Your Banker' package for instances where you need support in preparing a thorough and comprehensive submission. While asking for assistance in times of need may not feel like a 'wow' moment, your banker will be impressed by your proactive approach and ability to articulate your situation.

Please don’t hesitate to book an introductory call with Paige to see if we can assist during these unprecedented times.