Protecting Farm Profits During a Pandemic Means Being Open Minded to Change
Granular recently hosted the first roundtable in its COVID-19 series that stressed the importance of starting where you can control, with your own balance sheet.
The discussion was moderated by Vance Crowe and featured two guest panelists: Nate Franzen, president of the ag banking division of First National Bank in South Dakota and David Widmar, ag economist with Agricultural Economic Insights. More than 700 farmers registered to hear the experts tackle ag profitability in a pandemic and provide actionable tips.
The experts agreed that once you have your farm financials updated and a baseline established, the next step is to monitor your budget. But that leads to the next question:
What are the key areas of my farm financials I should be looking at in order to protect my profit potential during this pandemic?
David cautioned the need to be smart about what you are reviewing. “I think the industry spends more than 80 percent of their time talking about how to reduce fertilizer, seed and crop protection expenses. Those are relatively easy expenses to go after. But also look at the rest of the pie chart and evaluate cash rent, family living and machine expenses. These are all areas where we should dig in and benchmark.”
Roundtable attendees confirmed that they’ll be looking beyond input costs this year. When asked which lever they would be pulling to find profitability this growing season, 45 percent said they’d be managing operating expenses. Other answers included:
- Manage production expenses (24 percent)
- Sell bushels aggressively with any market uptick (21 percent)
- Increase yield targets (10 percent)
As farmers continue to monitor numbers, Nate stressed the importance of being open minded. “Look at your balance sheet and do whatever you can to position yourself best. That includes working capital, your leverage level, the amount of debt you owe. You might have to sell some things you like, but sometimes that’s the best decision you can make to position yourself for success in a downcycle.”
Nate also suggested to look into how you might take advantage of the lower fuel prices and the possibility to lock into low interest rates.
You might not know for sure what the markets or your exact profits will look like in a few months, but updating your budget, taking a disciplined approach to monitoring all pieces of your financial pie and being open minded about change will help you lead your operation through these challenging times.
“Monitor, communicate and lean on your experts, your stakeholders, employees, partners,” said Nate. “We need leadership to step forward, stay focused and positive, and work through it.”
Granular is committed to providing the tools to help farmers track their farm operations during these challenging times. If you’re looking for a tool to track your production and financial metrics, and track your budget to actuals, visit granular.ag or reach out to us at 888-435-4726.
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