With the razor-thin margins that come with agriculture, farmers are constantly searching for new tools and methods that shave off costs, while doing what they can to add to the revenues. There’s plenty that can be done in the field, in the barn and in the machine shed to help you save time and resources, and get more out of what you have. That hard work will pay off.
But successful farming means finding time to dig into the books and spend time with key numbers, so you can nudge your way into the profit zone. The following will look at some resources that can help save time on making big decisions, key account strategies you should prioritize this year, along with resources to help you sharpen your marketing game.
Download one of these ag apps
Farmers are not people to shy away from technology, because becoming faster and more efficient was always the way forward. While there are plenty of apps out there that can help you manage your operations, here’s a trio that can compile the data to help you make more financially sound decisions.
- AutoHedge: This app bills itself as “Autosteer for Grain Marketing,” because much like the technology that helps you drive your tractor, this app automates bushel pricing and selling. In addition to pricing bushels for you, it sells an equal portion of bushels on trading day from February to July — during the period when prices are historically higher than harvest.
- Growmark: When all your money is out there in the field, it's good to have backing from this powerful app that runs through complex yield calculations to guide your planning.
- FarmLogs: This app lets you document work, track your production costs, use field data to manage daily operations and track marketing data to make more profitable sales.
Deploy smarter accounting strategies
The numbers in the spreadsheets paint a revealing picture of your operation and its strengths and weaknesses, which is why every farmer benefits from putting on their accounting cap and sharpening those skills.
Know your ratios
When margins are tighter than ever, your ratio of asset-to-debt is one measurement that tells lenders something about your likely ability to repay the loan. As you put in more years on the farm, you’ll see that ratio get lower over time. To avoid surprises when it’s time to go in for your operating loan, you’ll want to do a quarterly check-in, at minimum, with your ratios throughout the year. If it falls to a level that’s less than one, that’s a warning sign. For more tips on keeping your accounting shipshape for the operating loan, read Operating loans: What are they and how do you get ready.
Prepay your inputs
As you undoubtedly know by now, the sales reps you know and love have incentives to sell early. Not only should you get a discount, you can also leverage these early purchases into tax savings. To free up the cash you need to make the deal, speak with your lender about extending your operating loan. They’re well-versed in tax savings and can walk you through a few scenarios to help you decide if it’s worthwhile for your operation. Finding savings through these simple tactics can save you thousands every year.
It’s a simple thing that bears repeating. Benchmarking with similar-sized operations offers a revealing look at what you’re doing well, and where you need to focus on to improve. This year, download your report, and be sure to share it with the professionals in your life — broker, lender and accountant — to help you formulate your plan for success.
Become a skilled and savvy ag marketer
In recent years, with trade wars, sluggish commodity prices and wet weather, it was more challenging than ever to finish the year on a profitable note. For those who did lodge a profit, they’ll chalk up their success to the marketing decisions they made. If you’re looking to come out a winner in this increasingly tight market, one thing you’ll want to spend extra time on is working toward being a savvier marketer. It takes time and discipline to develop this skill. Fortunately, there are plenty of online resources to help you get up to speed and come up with a sharper marketing plan.
- The Center for Farm Financial Management has grain marketing plans for mythical operations, along with templates so you can build your own. Here, you can also order a copy of Edward Usset’s seminal resource, “Grain Marketing is Simple (It’s Just Not Easy).” (Due to COVID-19, however, shipments may be delayed, so plan ahead!) You can also join an ag marketing group in your region through the University of Minnesota Extension Service.
- Crop marketing 101: The University of Iowa Extension Office offers a helpful video series to help you get up to speed on the different components of commodity marketing, from futures to basis to seasonal price trends, concluding with a video that walks you through the basics of writing your own marketing plan. You can find additional marketing sources here, including tools to help calculate your storage costs.
Every operation is different, and no two production plans are alike. But when it comes to winning the financial game of farming, it boils down to diligence and discipline. The more time you spend digging into the numbers, and understanding what they’re telling you about your operation, the better your decisions will be for your operation.
At Minnwest Bank, our ag lenders are members of your community, and we're committed to helping your farm thrive.