This year could be a real test of your management skills.
“Farmers have extreme risk in 2022,” says Steve Johnson, retired Iowa State University Extension farm management field specialist. “They have risks in crop yields, costs and prices, and they will need to manage all three simultaneously.”
Consider these three strategies to manage risk for 2022:
1. Analyze each lease agreement.
See if you can convert a fixed cash rent arrangement to a flexible cash lease, Johnson says. Or pay a 2021 crop bonus to keep your rate down for 2022.
Understand your profitability on each rented farm, adds Ryan Bristle, farm business consultant with AgSurion Risk Consulting.
“If you go into a rental negotiation without knowing your costs the only thing you can compare against is what you’ve done in the past,” he says. “Remember, your best farm isn’t always your most profitable.”
2. Develop your 2022 preharvest marketing plan.
Flexibility in grain marketing will be key in 2022, says Matt Bennett, owner of Bennett Consulting and partner with AgMarket.net.
For 2022, Bennett recommends having 20% of your average production in corn and 50% of soybeans sold. His advice to farmers is to tune out the market noise and focus on your farm’s profit potential.
“This winter, basis has been really strong, and we have no market carry; those are facts,” he says. “You can say it’s indicative grain buyers will want corn later, and they’ll pay more, but those are presumptions. Focus on the facts. Reward the market with some bushels by incrementally selling at profitable levels.”
3. Leverage your crop insurance options.
Most crop insurance decisions need to be made by March 15. Johnson encourages farmers to look now at coupling Supplemental Coverage Option (SCO) or Enhanced Coverage Option (ECO) with Revenue Protection.
“Find tools or people who can help you understand your risk and which options best fit your farm,” Johnson says. TP
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