Kick off the New Year with good business habits
With a fresh year only a few months away, now is a great time to declare your new farming resolutions. Our Top Producer experts weighed in to provide insights and strategies that can help bulletproof your operation for whatever lies ahead.
Chronicle Your Year
Keep a record of what you experience, think and decide this year. A private blog is a good way. The most valuable resource I have today is my collection of early writings. Since our memory rebuilds each time we replay episodes, only the written word truly conveys how I handled good times and bad. Revisiting those thoughts is variously comforting, alarming and instructive.
I’m reminded that I’ve been afraid of failure, experienced failure and moved beyond it. The past, as Mark Twain observed, does not repeat but occasionally rhymes. Without the error-correction of immutable text, our memories of the year and our actions could be little more than bad poetry. –John Phipps, Perspective Columnist
Mind the Details
The vacation is over. We as grain producers have had a number of years where we haven’t had to pay much attention to details. Yet when margins are tight, you have to squeeze every penny out of every asset. To do so, go through every line-item expense. Think about what the costs are and determine the number of bushels it takes to cover those expenses.
Once you know where you are spending money, you can do some scenario-planning to see where you can reduce costs. Maybe you can go with cheaper seed or reduce crop-insurance protection. This way, you can look at real costs as well as your bushel opportunity costs for changing production plans. –Chris Barron, Business Matters Columnist
Reduce Borrowing to Retain Cash
A common mistake I see is excessive borrowing on equipment just to get a tax deduction. For example, farmers buy a piece of equipment for $400,000 with no money down, and yearly payments are $100,000. If they take the full Section 179 deduction on the equipment, they reduce their taxes about $150,000, plus or minus.
Now with lower income, farmers have to generate $150,000 of taxable income to pay off the note for the year. Farmers should hunker down on any related tax purchases. Minimize outflows and retain cash, even if you end up needing to pay a little more in taxes to cover costs. –Paul Neiffer, The Farm CPA Columnist
Preserve Your Equipment’s Value
Plan to retain your used farm equipment’s value. Shed your equipment; a good shed is the best investment you’ll make. Also keep meticulous records of all machinery-related activities, including maintenance documentation.
Another good idea is to have a family member or friend shoot a bit of video of you planting or harvesting with the machine. These clips will be valuable down the road as video becomes the platform of choice online. Seeing and hearing a tractor, combine, truck or grain cart in action on your beautiful farm is valuable history for down the road and might help the equipment’s resale value. –Greg Peterson, aka Machinery Pete, Used Equipment Values Expert
Be Prepared for the Unexpected
My mother gave me some good advice as a teenager. “Expect the best,” she said, “but be prepared for the worst.” I make it a practice to look over my shoulder for something that might derail my outlook. Yes, the outlook looks bleak. Yet we can still do a lot with $3.50 corn, $9 soybeans and $5 wheat.
Fewer U.S. and global corn acres are likely in 2015. Production from new competitors doubled in the past 10 years to 135 million metric tons; a 10% acreage reduction is reasonable. A drop in U.S. corn acres of 4 million acres is feasible for a total potential reduction of 500 million bushels with average growing conditions. U.S. growing conditions will be key, as a return to trend-line yields isn’t in popular outlooks. –Jerry Gulke, Market Strategy Columnist