WEST LAFAYETTE, IN – A farm can look solid on paper and still run short of cash when crop prices fall, or fertilizer and fuel costs rise. Purdue University’s Dr. Michael Langemeier says producers should update contingency plans as 2026 margins remain uncertain.
Langemeier says a sources-and-uses-of-funds statement can help farms test whether operating cash will cover family living, taxes, debt payments, and possible equipment purchases. The tool is especially useful when prices vary widely.
In a southwest Indiana case farm, low-price corn and soybean assumptions pushed net farm income and debt-repayment capacity into negative territory. Base and high-price scenarios remained positive, but only the high-price case supported machinery replacement.
That matters because tight cash flow can force producers to delay machinery purchases, draw down working capital, sell assets, or increase borrowing. Even farms with strong liquidity can weaken their position if they move too late.
Langemeier recommends updating cash flow projections through the summer as prices change. A written Plan B can help producers protect repayment capacity before cash shortages become urgent.
Farm-Level Takeaway: Producers should test cash flow under multiple price scenarios before committing to equipment purchases or additional borrowing.