Tips to help get you out of financial trouble and improve your mental health
Tuesday, October 25, 2022
by: By Art Lange, Grainews August 23, 2022

Section: Wills, Estates, Wealth Transfer

Mental health among farm families is much written and talked about in the media these days — and rightly so. Over the last couple of years, western Canadian farmers have been hit by record-setting droughts and other hardships while they cope with the lingering effects of the pandemic.
In Alberta, there was an excess of moisture in many areas in 2020, which lead to late or no seeding, and what finally grew produced poor yields. In 2021, there was drought in much of Western Canada, which, once again, led to greatly reduced yields. Fortunately, commodity prices increased significantly that year. However, the net result was a break-even situation for many. As one farmer told me, “Half of the crop at double the price is the same as a normal yield at the normal price.”

Now, in 2022, we have rampant inflation with seed and fertilizer prices and fuel and crop insurance premiums, the main inputs in a grain operation. All of this on top of COVID-19 — it really can affect one’s mental health. As a result of these and other factors, some farmers are finding themselves in financial difficulty.

Pressure like this often causes mental stress, which can permeate the whole family, and then everyone suffers. As a farm business consultant for 18 years, I have helped farmers deal with financial distress situations many times, and I have some ideas that may help.

The first thing I recommend is to analyze your overall financial situation. That starts with preparing a net worth statement as of the farm’s last fiscal
year-end. To do this, list all assets (at fair market values) and all liabilities. The difference is your net worth. If you have 75 per cent or higher net worth you should be in reasonable financial shape. On the other hand, if you are down around 50 per cent (or lower) you are probably in financial difficulty.

Next, look at your income and expenses over the last five years. This will show you what the income trend is for your farm. Combining these two factors will tell you if there is a financial issue and how serious it is. Next, discuss with your family/team what your personal and business goals are for the short term (one to five years) and long term (five to 10 years).

Take the above financial situation and your goals and see if there is any way to combine the two. If there is a financial problem, there are basically three ways to deal with it, alone or in combination:
• Sell assets to reduce debt load
• Off-farm employment
• Restructure debt


On many farms, there can be an excessive amount of machinery, some of which I call toys (specifically, items that are not absolutely necessary). My rule of thumb is if you haven’t used it in the past two years, why do you need it? Remember, machinery is a depreciating asset. The more you can reduce unnecessary equipment, the better off you will be. For smaller farms, I suggest sharing equipment or getting the work done by a custom operator, so you won’t need a seeder, sprayer or combine.

If selling excess machinery doesn’t solve your debt load problem, you may have to consider selling some land. This is not a popular suggestion but is the logical next step. I’ve had some cases where I’ve recommended clients sell one or more quarters and then rent them back, so the productive value of the land is retained. A couple of times, we were even able to include a buy-back clause in the sales agreement, whereby the seller had first option to buy the land back at an agreed price within five years.


Depending on the location of your farm, its size and your time availability this may or may not be possible. Some grain farmers have time over the winter when they can work off of the farm.


This is usually done in conjunction with selling assets to reduce debt load. This can be achieved by taking some or even all of your total debt (current, intermediate and long term) and amortize it over a longer period of time. This allows you to reduce your cash flow requirements to meet your income stream.

Some other suggestions for managing debt include the following:
 Try to keep current with all of your payables. If you fall behind with your loan payments, it adversely affects your credit score. It also makes for difficult relations with your lenders or can make it harder to find new ones.
 At the very least, always try to make the minimum monthly payments on your credit cards. Failing to do so will, again, cause your credit score to suffer.
 Be open with your creditors. If you have financial challenges, discuss the situation with them, sooner rather than later. Hopefully they will work with you to make some adjustments to your payment schedules.
 Sometimes the financial situation has deteriorated so much your existing lender will not work with you.

Then it’s time to find a new one. However, before you do that, prepare a business plan that outlines your situation and how you intend to work through it using some of the above tools. Also, it’s helpful to include a section on how you plan to avoid your present predicament in the future. Once you have a business plan, present it to all of the lenders you know of, you never know who will bite. If you can’t find a new, conventional lender and want to continue farming, an equity lender may be an option.

These types of lenders typically have higher interest rates and higher application fees but are usually willing to work with farmers if they have adequate equity.
 Bankers like business ratios, so it’s important to try to include those in your business plan (specifically, before and after scenarios). The debt servicing ratio is an important one. Alberta Agriculture, Forestry and Rural Economic Development has a program called Agricultural Business Analyzer to help farmers calculate business ratios, which can be found at

I hope by exploring these suggestions you can see that it is possible to work through financial challenges. It’s better to start sooner rather than later. If you must find a new lender, it can take from six weeks to six months to get it all arranged. The farmers I have worked with who have participated in this exercise say they have experienced an immense reduction in mental stress and family life has also
greatly improved. GN
Art Lange, PAg, CAFA, is a farm business consultant
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