Producer Page: Check the Gauges

Details: Created: Thursday, 27 May 2021 12:00

Do you remember when you were just starting out driving tractor and doing field work? I’m sure your Dad was like mine and said, “don’t just watch the implement and the field, make sure that you are checking the tractor gauges too.” His point being that even when you think things are sailing along, you need to be aware of potential problems and catch them before they become big.

Well, right now you may be thinking (and you would be right) that things have been going along really well in agriculture over the past few months. Prices have rallied and we were blessed with a bountiful harvest in 2020. But even in the good times, don’t forget to check your ‘financial gauges.’ The cost of production is creeping up (especially fertilizer), and by this next year it could be rent and other inputs as well. If you are not tracking closely, your cost of production on corn could rise to nearly $5/bu. It isn’t too soon to plan ahead for tax liabilities on the 2021 return, and begin to think about how you can negotiate a fair land rental agreement. How’s your marketing plan for 2021 and 2022? You will need to know cost of production to determine when and how to sell your crop. Do you have a good soil test program started on your farm? With the cost of nutrients, it is vital to only apply what you need, where you need it.

This is a good time to pay down on some shorter-term debts to solidify your working capital, and resist the temptation to 'buy' your way out of a tax liability. Invest in equipment when you need it and when it enhances your business, not when you think all the neighbors are upgrading. Use the good times to brace for the bad times. That way when good opportunities and bargains present themselves, you are ready to take advantage of the situation. A longer-term perspective in management can be very stabilizing in business operations.

Take Care,

Mark