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Tips for Beginning Farmers During a Downturn

Date: 
Author: 
Brooke Grant
Educational Opportunities: 
Videos
Interests: 
Grain, Dairy, Swine, Beef, Young, Beginning Farmers, Women in Ag
Home > Education & Events > June 2017 > Tips for Beginning Farmers During a Downturn
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Today I'm going to share with you some things that beginning farmers need to be focusing on in an industry downturn. Even though all farmers face the same challenges and amount of risk, beginning farmers can be more susceptible to industry downturns. They haven't had the years to build their balance sheets, probably are going to have a smaller net worth position, and less working capital. In addition, they probably have a smaller land base and have more variable costs. All of these result in them not having as many options as a veteran farmer when cash flow shortages arise. 

The first thing you can do is keep good records. Keeping detailed, accurate financial and production records is crucial to understanding and managing your business. Do monthly cash flows and monetary operation on a budget to actual basis. If you know your cost of production, you'll be able to make better decisions using that information. 

The second thing you can do is have a risk management plan. Once you have your financial records in place and know you'll break even, you can now better manage risk on your operation. Put together a marketing plan, and remember to focus on the margin. Review your levels of insurance and MPP. If you're not strong in this area, find an expert who is who can help you. 

The third thing you can do is build working capital. Working capital is your best defense against a cash flow short fall. A good management target is $500 per cow. If you have other enterprises, such as beef or grain, you're going to need more. 

The fourth thing is monetary capital expenditures. With limited capital, it is important to prioritize and spend your dollars on needs versus wants. Analyze each purchase to determine if it will add enough to your bottom line to justify the cost. 

All of these things are going to help your business manage through the tougher times, and set you up for long term success. Remember to reach out to your peers and industry experts, discuss options with your lender, and keep them informed.

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