2026 Farm Loan Renewal Preparation

Many farm operations are coming off the second relatively poor profit year in 2025, especially crop producers in several areas. Some farmers had very small profit levels last year, while other producers had very poor results in 2025. In all cases, most farm operators continue to face very tight profit margins for crop production as we head into 2026. During these challenging farm financial times, it is good to plan ahead before meeting with an ag lender for renewal of a farm operating line of credit or for an annual review of the farm financial portfolio.
 
Following are some tips for farm operators to be more proactive, as they are preparing for an annual meeting with their ag lender:
 
Prepare an up-to-date 2025 year-end farm balance sheet (as of 12-31-25 or 1-01-26).
Preparation of an accurate and up-to-date year-end balance sheet is critical to the loan renewal process for any farm operation. Updating the previous year’s balance sheet with current year-end numbers can help expedite the process. If the farm operation is a sole proprietorship, most ag lenders will also want personal asset and liability data included. If it is a partnership or family corporation, most ag lenders will also require personal balance sheets from all partners.
 
A good year-end balance sheet will include:
• List of accounts receivable as of 12-31-25, which includes whom the money is due from, the dollar amount, and the date it will be received. This includes deferred payments for grain sold in 2025, as well as potential Farmer Bridge Assistance payments, SDRP payments, etc.
• List of accounts payable as of 12-31-25, listing who the money is owed to, the dollar amount, and when payment will be due. Be sure to include any items listed as current assets where payment is still due, as well as final 2025 land rental payments that were still due as 12-31-25.
• List of 2026 prepaid expenses for both crops and livestock as of 12-31-25, which details the input, amount of the input, and the amount that was prepaid. This is for items where payment has occurred.
• Grain and livestock inventory list as of 12-31-25. The grain inventory should include total bushels of each crop, bushels that are forward priced (date and price for each sale), and any sales plans for the remaining bushels. Livestock inventory should include the number, weight, and any sales information on market or feeder livestock. An updated list and estimated value of breeding livestock should be included as an intermediate asset rather than a current asset. 
• Marketing Assistance Loans (MAL’s) on 2025 grain that were taken prior to 1-01-26, listing the bushel amount, MAL loan rate, MAL interest rate, MAL loan maturity date, and sales plans for MAL grain.
• Review the list of farm machinery and equipment, buildings and facilities, and other capital assets, removing any assets that have been sold or removed, and adding any assets that were purchased or acquired during 2025. Farm machinery values should be adjusted to represent current market values.
• Add any land or other long-term assets that were added in 2025 and adjust asset values as necessary (may want to review this with an ag lender).
• List of all other loans and creditors as of 12-31-25, listing the principal balance, interest rate, payment amount, and payment dates. Be sure to include short-term creditors for crop and livestock inputs, loans with family members, and MAL loans through FSA offices.
 
Prepare a 2025 year-end income and expense statement as of 12-31-25.
The year-end income statement from the previous year should be based on actual sales of grain and livestock during 2025, which will likely include some 2024 inventory that existed at the beginning of the year, as well as any 2025 grain or livestock that was sold during the year. The 2025 expenses would include any accounts payable from the beginning of the year balance sheet that were paid in 2025 and any 2026 prepaid expenses that were paid in 2025, in addition to the other crop and livestock expenses that were paid throughout the year. A preliminary 2025 federal tax return is a good resource to prepare an income statement. 
 
Prepare a budget-to-actual summary for the previous year (as of 12-31-25).
Once the 2025 income and expense statement has been finalized, and accrual adjustments are made based on the year-end balance sheet, it always good to review the actual year-end financial analysis compared to the budgeted cash flow analysis that was prepared at the beginning of the year. Pay attention to the big differences that exist in crop and livestock income and the various expense items, as well as determine explanations for those differences. Analyze for any potential adjustments that are needed for 2026.
 
Prepare a preliminary 2026 budget and cash flow analysis.
Preparing an accurate and complete budget and cash flow analysis for 2026 is a very important part of the loan renewal process and can assist with grain marketing decisions for the 2026 crop year. A high-quality cash flow analysis will likely include:
• Planned crop and livestock production for the year, including acres of various crops, anticipated production levels, and any current or planned sales of the 2026 production.
• A grain and livestock marketing plan that includes a list of the amount sold, the contracted price, and the date to be delivered, as well as plans for remaining unpriced grain and livestock inventories.
• A list of planned crop and livestock inputs for 2026, including the contracted or planned price of the inputs and when the expense will be incurred.
• A detailed list of rented farm land for 2026, which includes the name of the farm owner, acres rented, amount of rent (including flexible lease details), and dates when rent payments are due.
• Include income received for accounts receivable on the year-end balance sheet, and account for the payment of expenses for the listed accounts payable at the beginning of the year.
• Include any other farm income (custom work, etc.) and non-farm expenses (family living, personal loans, etc.) that must be accounted for in the cash flow analysis for the farm.
• Provide details of planned 2026 crop insurance coverage, such as updated APH yields, percentage coverage, enterprise versus optional units, and the addition of hail or wind insurance. (Your ag lender may be a good resource for these decisions.)
• Provide a copy of FSA farm program information listing the crop base acres and FSA program yield for each farm unit. Discuss the 2026 farm program choice with your ag lender.
• Include any planned changes or adjustments in the farming operation for 2026 in the cash flow analysis, including farm machinery purchases or sales, adding or selling land or other assets, and any other changes to the farm business, as well as any changes in personal assets or liabilities.
• Include likely Farmer Bridge Assistance payments expected for late February, as well as potential “top-up” 2023 and 2024 SDRP payments likely to occur later this year. Potential 2025 PLC or ARC-CO payment estimates for corn, soybeans, or wheat could also be included; however, be sure to use realistic market year average (MYA) price estimates, and make sure that you are using the correct payment calculation formula for accurate projections.  
 
It is best to include all partners and family members that are part of the farm operation with the preparation of relevant financial information and in the renewal process with an ag lender. It is important for all key players to be “on the same page” with financial decisions affecting the farm business. It is very important to be trustworthy and honest in preparing and sharing financial information with an ag lender to help assure confidence in the accuracy of the financial data. View an ag lender as an informal partner in developing farm business strategies, as a good ag lender can be a valuable resource in making management decisions. Farm operators should expect their ag lenders to be well prepared, trustworthy and honest in financial dealings. Most ag lenders are part of the local community and want to see farmers have financial success, which is in the best interest of both the farm business and the ag lending institution.
Note - For additional information contact Kent Thiesse, Farm Management Analyst, Green Solutions
Phone - (507) 381-7960; E-mail - [email protected]