Plan for a Profitable New Year

The start of the New Year is the perfect time to begin the planning processes needed to set your operation up for success in 2025. To help you launch new plans, we reached out to three experts for their tips on managing finances, marketing, and crop insurance costs.

Finances

“January is a good time to review the past year and get all of your income and expenses accounted for and tallied up,” said farmer-rancher Pete Burgard, senior vice president of Merchants Bank at Rugby, North Dakota. The family-owned independent bank in the state’s north-central area primarily serves farmers and ranchers.

“Once you’ve got your finances in order, you can visit with your lender and start planning ahead,” he said.

Updating your balance sheet should be part of the planning process. “We like to see an increase in net worth year to year and a decrease in total liability,” Burgard said.

Based on your cropping and calving plans for the coming year, your lender can create net income projections based on future price and yield estimates.

The financial information may help you craft an operating plan reflecting the degree of risk you might assume in crop choices, input costs, equipment updates, land purchases, and debt reduction.

“The financial planning lets you see whether you can be adventuresome in your operating plan for the year or whether you should be cautious,” Burgard said.

Marketing

You can realize profitability gains as a result of astute crop marketing, but it requires attention to complex market forces and how they shape the current year’s marketing opportunities.

“Come January, keep an eye on basis improvements as they relate to selling later in the year,” said Scott Masters, director of market analytics for Total Farm Marketing, headquartered in West Bend, Wisconsin. “Market forces could improve basis to entice farmers to sell corn. As basis improves, consider locking in some grain sales.”

Marketing opportunities could come later in the coming growing season as a result of improvements in cash market prices. “But don’t wait until late summer, thinking you’ll get the best price improvements,” Masters said. “That might be too late, and there could be a rush to clean out bins. Prices tend to pop in the spring through early July.”

When working with a market adviser, Masters suggests asking a lot of questions about what’s going on in the market. “Marketing is a complex process,” he reminded, “and the more you understand, the easier it is for your adviser to help you.”

Crop Insurance

“Looking at marketing forecasts for crops, we see indications that there may be a couple of years of tight profit margins coming,” said Jennifer Ifft, Flinchbaugh agricultural policy chair at Kansas State University.

Knowing your break-even crop price is critical to managing input costs affecting profit margins. “Some producers may want to save money on crop insurance payments by lowering coverage levels,” Ifft said.

Including low-risk crops in the mix may help reduce crop insurance costs without incurring excessive risk. “You might plant some crops with lower input costs or less yield variability,” she said. “You could see lower premiums as a result.”

In the end, knowing your break-even price helps guide your decisions relating to coverage levels. “It may be painful to pay for a higher level of coverage, but maybe that’s revenue you really need to protect,” she said.