Managing Costs and Liquidity During Low Commodity Prices

Two case farms simulate profitability and cash flow for low-cost/low-debt and high-cost/high-debt Western Kentucky grain farms to demonstrate interactions of cost structure, profitability and liquidity, and the erosion of accumulated working capital from low prices. The case farms are end-points for...

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Bibliographic Details
Published in:Journal of the American Society of Farm Managers and Rural Appraisers 2017-01, p.77-96
Main Authors: Davis, Todd D., Shepherd, Jonathan, Mark, Tyler B.
Format: Article
Language:English
Subjects:
Liquidity
Pricing
Online Access:Get full text
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Summary:Two case farms simulate profitability and cash flow for low-cost/low-debt and high-cost/high-debt Western Kentucky grain farms to demonstrate interactions of cost structure, profitability and liquidity, and the erosion of accumulated working capital from low prices. The case farms are end-points for a continuum of possible cost and debt structures, and represent best-case and worst-case scenarios. Even farms with a low cost and low debt may face liquidity problems and have little working capital to withstand yield, price, or cost risk. Management alternatives are presented to help farms survive during periods of low commodity prices.
ISSN:0003-116X