For many grain producers, this year was the Grinch that Stole Christmas. Bogged down by low commodity prices and a frustrating production season, some farmers are more than ready to close the books on 2017 and move on to the New Year. If this describes where you’re at, I hope the following ideas and recommendations can help as you look ahead.
- Put a plan in place. Volatile grain prices are likely to continue in 2018. If your marketing plan needs work, don’t put it off.
“Prioritize action items for next year,” advises Chris Barron, a financial consultant for Ag View Solutions and director of operations and president of Carson and Barron Farms, Rowley, Iowa. “Mapping your plan will help you be more disciplined with difficult decisions. It will also help you share your business vision with family, employees, lenders and other partners.”
- Examine your financial situation. Farmers who know all their costs (including fixed and variable costs and family living expenses) will be in the best position to take advantage of good deals as they present themselves—whether it’s capitalizing on a specific market price or buying ground the neighbor decides to sell.
“Look at your numbers at least monthly to know how to adjust throughout the year,” advises Keith Lane, executive vice president for specialty lending at Farm Credit Mid-America. “That’s just as important as scouting your fields for pests.”
- Evaluate opportunities. Knowing your financial position will help you make sound decisions on when to buy, sell or take a pass. Most farmers need to sell more aggressively than they have in the past, Barron says. Instead of waiting for the “ultimate price target,” consider some early pricing to match purchases, he adds.
“If you purchase $100,000 of fertilizer or seed, sell $100,000 worth of grain to cover the expense,” Barron advises. “Matching your input purchasing with sales can help you be deliberate in taking advantage of a margin opportunity instead of looking for a price target. This strategy also works for managing cash-flow needs.”
- Stay in touch with your lender. Talk with them about big purchases. “They can update your balance sheet and counsel you on its impact to your cash flow,” says Betty Berning, University of Minnesota Extension educator. “By doing that, they can let you know if they foresee any problems in the future and avoid surprises.”