Farm Rental Tips: Protecting Your Farm with Crop Insurance
As the weather cools, we know many are starting to think about rent negotiations for next year. Now is the perfect time to discuss strategies that can protect your farm's revenue and ensure long-term profitability, including the vital role crop insurance plays in managing risk.
Understanding Your Costs: Projection Models
Before diving into rent negotiations, it’s critical to have a clear understanding of your production costs. Profit and loss projections and farm budgeting are essential for effective farm management. There are plenty of resources available to help with this, including University of Minnesota's FINBIN and Illinois farmdoc, as well as Compeer Financial's Margin Manager tool.
Production costs will a challenge when considering 2025 projections and cash flows. We are currently experiencing margin compression due to rapidly decreasing commodity prices, while crop input prices have not yet adjusted. This will make understanding production costs even more critical for the 2025 crop year and likely into 2026.
Leasing decisions involve both short- and long-term considerations. Choosing to add or subtract acres from an operation has long-term impacts on overhead costs and equipment sizing. Over time, cash rental rates tend to be fairly consistent, with an increase over time. However, the return on operating rental land tends to be more volatile, creating a challenge for operators who must manage short-term profitability while keeping an eye on the long-term picture.
But financial management isn't just about understanding expenses. It's also about protecting your revenue – especially for leased land. That's where tailored crop insurance coverage and a strong grain marketing plan become valuable tools. Whether you're considering multi peril crop insurance (MPCI) to cover multiple risks or looking into private crop insurance options, having the right coverage in place can make or break your operation, especially during challenging seasons. Understanding how crop insurance works for leased farmland can ensure you're not left exposed to risks that could harm your bottom line.
For example, if you're adding new acres, it’s essential to know how those acres will be insured and how their production history will affect your coverage. Working with your local Compeer insurance officer will help ensure you're taking full advantage of the protection available.
Set Yourself Up for Success
Managing risk on leased farmland is crucial, especially in today’s unpredictable market. In addition to crop insurance, having a robust grain marketing plan can protect your margins and ensure stable cash flow. At Compeer Financial, we’re here to help farmers navigate these complex decisions. By spending time analyzing your operation’s costs and risk management strategies, you can set yourself up for success – and reduce stress – during uncertain times.
Crop Insurance
Crop insurance provides farmers with risk management tools to protect against crop loss or the loss of revenue due to declines in crop prices.