By Brian Hefty

At Ag PhD, we have 3 goals in mind all the time: helping you yield more, earn more, and improve the environment.  For years, we’ve been touting the benefits of prepay to help cut your costs, improve your tax situation, and lock in the best product for your farm.  I’ve had some farmers questioning me recently, wondering whether or not prepay is still worth it; or is my evaluation of prepay a little “Trumped-Up”?  Here are 5 things you need to know before you prepay.

  1. You’ve undoubtedly caught the word “Trump” in my title.  With our President-elect soon to take office, we don’t know the net effect on agriculture, but we can be certain some things will change.  One of those things could be lower taxes.  Talk to your tax advisor about this, but IF tax rates are lower in the future, it makes a lot of sense to push some income forward.  Prepaying before the end of your fiscal year allows you to do that.
  2. Yes, there are always a few deals in-season from desperate retailers, but pricing does actually go up on average between now and June.  There are 2 reasons why.  First, seed companies and crop protection manufacturers offer cash discounts to retailers, who then pass those on to you.  Second, many companies offer early stocking or fill programs.  Retailers almost always pass these savings on, too, but once the early product is spoken for, they have to raise prices.  You don’t typically have to pay by December 31 to get the best deal, so if you don’t need the tax break, the first week of January is often the cut-off for most retailers for the very best pricing.
  3. How safe is your money?  No retailer I know offers collateral when you write your prepay check.  This leaves you with two choices.  Either you had better pick a retailer you have absolute confidence in or you had better pick the product up right now.
  4. What happens with returns, leftover money, product switches, rebates, product performance issues, etc.?  Can you return anything you want?  If you have leftover money, can you get it back right away with interest?  If you need to exchange something, can it still be done at prepay pricing?  Will you actually receive ALL the rebate money you should, and how many dollars will it amount to?  If there is a product performance issue, what’s the service policy?  Make sure you ask these questions BEFORE you write the check.
  5. I could have included this next question in point 4, but it’s important enough to warrant a paragraph of its own – price protection.  For the most part, retailers are able to price protect you on seed and crop protection products, because seed companies and crop protection manufacturers typically price protect the retailers.  Here are some things you typically don’t get price protection on: fertilizer and generic pesticides.  I’m not saying don’t prepay for fertilizer or generics.  I’m simply suggesting you talk to your retailer about this before buying.

Pretty much this entire list is about saving money, but earning more net income isn’t always about saving more up front.  Make sure you get the best overall deal.  In some cases that means investing more.  We encourage you to prepay for quality products with a retailer you can trust.  You have a lot of dollars at stake on every acre, so take your time, do your homework, and make the right buying decision this winter.