What is one primary reason for using short-term loans in agriculture?

Using short-term loans in agriculture primarily addresses the need to boost cash flow during critical periods, such as harvest time. This period typically involves significant expenses, such as labor costs, equipment rentals, and input purchases like fertilizers and seeds, which can spike just as revenue from the sale of crops has not yet been realized. Short-term loans provide immediate access to funds that farmers need to maintain their operations until they receive payment for their harvest.

This financial tool is particularly valuable in agriculture due to the cyclical nature of farming, where income is often received in lump sums after harvests, while expenses occur throughout the planting and growing seasons. Accessing short-term loans enables farmers to manage their cash flow effectively, ensuring they can meet immediate financial obligations without delay.

The other options pertain to longer-term financial strategies, such as acquiring permanent assets or investing in long-term projects, which would typically require more extensive financing and therefore are not suitable for short-term loans. Additionally, covering insurance costs is generally not directly associated with the use of short-term loans, as insurance is often considered a consistent and predictable expense rather than one that fluctuates dramatically with the agricultural cycle.