The only sustainable thing for your business long-term is profitability. This doesn’t mean we shouldn’t make efforts toward soil preservation or time efficiency, but does improving organic matter by 0.5% over 15 years matter if you go out of business doing it? Is the carbon program making the payment for your recently purchased land?
The roller coaster of markets will continue into eternity as it always has. Your focus should be what is most profitable for your business. Most of the rest is noise — though it’s still important to pull the signals out.
The current bleak outlook for farm profitability should stress the importance of this message. Many operations in 2024 are going to be OK only because of the higher yields. 2025 is an unknown, as any new year is.
The Best Product, The Best Price
The first question clients ask us is, “Where can we cut first so this doesn’t hurt as badly?”
Usually, we start with the importance of yield and price. You can’t save your way to prosperity — you need product (bushels), and you need to capture the best price by paying attention to the markets and knowing when to market because you know your bottom line (cost of production) to the penny. Cost of production doesn’t have room for error.
The Wrong Cuts in the Wrong Places
Next, we look at expenses. You need yield, so choose your fertility cuts with caution. The uncomfortable one that most people choose last is the cost of living. Lifestyle creep is when we make more money, we spend more money and become accustomed to that standard of living — see 2021 to 2023. It seems too hard to cut. Packages, frivolous expenditures or premature equipment upgrades add up fast. One or two generations back kept the cost of living in line much better than we do today — this is not conjecture, this is a fact.
The next place people look is other things they are writing a check for: seed, custom application and insurance. This is a slippery slope, especially in the outlook of environmental sustainability or income security.
While this might be unpopular in the modern outlook of sustainability, not seeding a cover crop could be a huge net positive. No seed costs, no application costs and maybe increased tillage. Tillage can and does improve yields in a large area of the country, and that is why it is still prevalent and important — this should be undisputed.
I wouldn’t reduce insurance coverage. Saving a few bushels worth of cost and leaving 20% to 80% of your income unprotected is something a lot of farms can’t afford. I don’t care if you like the current system or agree with the programs — they offer a huge safety net for revenue.
Five Takeaways
Do you want your farm to be sustainable for years to come? Make more money. Pull out the tillage equipment, grow good crops, get your spending in check and take advantage of insurance and marketing opportunities. It’s simple when written, but it’s not easy. Sustainability is profitability — there’s no two ways around it.
No one knows better than you that the future of your farm depends on balancing practices and profits that sustain your land, resources and family. The stakes are evolving based on weather patterns, technology, market demand and more. What actions are you taking to remain resilient?
