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Post-Harvest Checklist for Better Farm Management

Date: 
Author: 
Josh Swanson
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Articles
Interests: 
Grain, Young, Beginning Farmers, Women in Ag
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As Ag producers across the Midwest put the 2018 Harvest behind them, they’ll shift their mindset towards getting bookwork up to date and preparing for tax planning.  As a Ag financing lender, I’m continually thinking of ways to help my clients succeed and be better prepared.  I want to share some thoughts for Ag producers to pay attention to with year-end just around the corner, to help them improve their farm management practices

It’s no secret that 2018 brought a lot of challenges.  The weather wasn’t very cooperative, at least not in southern Minnesota where I’m located.  In addition, the markets were volatile with projected record crops and the potential impacts on demand due to trade issues.  It is easy as Ag producers to blame the things we have no control over. However, I’d challenge you to reflect on what else went wrong in your own farm operation this year that was within your control.  Those items are the ones we should be focusing on for next year.

Along the same lines, what went “right” in 2018?  Were there changes or executed plans that led to positive results in your operation?  It can be easy to focus on the negatives, especially the ones that we can’t control.  I encourage you to recognize your successes and use them as motivation for next year. 

If you don’t already know your yields, you will shortly.  It’s the final piece in determining your breakeven price per bushel.  I’ve spoken to many producers throughout this harvest season who have already analyzed their profitability per field to assist in next years’ rent negotiations and decisions.  Analyzing profitability and break evens on a per field basis gives you the perspective to know where to invest time and resources. These numbers will also play a large part in budget planning for the year ahead.  Analyzing yield and profitability data helps to determine where longer term investments in tile, soil testing, and fertility will provide the greatest return.  Performing this analysis also helps producers quantify and measure where past investments are paying off. 

Perhaps your yields are better than expected causing your breakeven price per bushel to be lower.  In contrast, your yields may be less than expected, requiring increased pricing targets in your marketing plan.  Having your breakeven figures up to date at the end of harvest is critical for making adjustments to your marketing plan.  I recommend producers to put their marketing plan in writing with target prices and dates; it will help you make decisions.  The document can and should be modified with changes in circumstances.  Be aware of the larger market picture and focus less on the day to day price movements.  Also, remember the fundamentals of seasonal price and basis trends, and take advantage of on farm storage by making forward sales.  If you haven’t already, it’s time to start a 2019 sales and marketing plan along with a 2019 cash flow projection.

There will be crop insurance claims in some areas, due to lower yields and prices.  While it’s still fresh in your mind, review your crop insurance plan and make some notes for next year of any changes you would like to discuss with your crop insurance provider.  I’ve heard it said that the perfect crop insurance plan could be written in the fall after the growing season.  We learn each year and should try to incorporate those lessons into making a better plan for next year.  

As you think about yearend cash flow needs and tax planning, you should also be calculating your working capital position and whether it’s adequate for 2019.  I recommend at least $200 per acre or 25% of your gross revenues. If you are short of your working capital target, there are things you can do to improve it.  Working capital not only prepares your operation for adversity, but also puts you in a position to take advantage of opportunities. I encourage you to be proactive in discussing your financial position with your lender. 

In the last year or two, many have put off machinery trades or purchases for a variety of reasons.  If you’re considering a replacement, make analyzing your cash flow and working capital position a priority to tax considerations.  Take inventory of your machinery line and determine if there are any underutilized or unused pieces and sell them.  I find that the fewer things we have around can help make the decision making process more efficient.  There are many different machinery ownership strategies and agronomic practices to produce a crop.  Challenge yourself to step back once in awhile and consider different ways of looking at machinery investment.

Although I’ve heard it many times before, it bears repeating; at the end of each growing season, take the time to count your blessings and be grateful for the important things in your life.  It’s because of those reasons that we get up every day and work in this industry.
 
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