The farmers in the United States are currently facing the issue of expected higher revenue due to increases in retail sales along with the increased input costs due to feed and fertiliser requirements. Most people aren’t sure of how the world will be after the pandemic and how the policies of the new administration will impact farm costs and consumer purchasing patterns. The year 2021 could be a year of decline in profits which means that farmers will need to get more creative when it comes to lowering costs.
So, in order to do the best in this shifting economic environment, it is important to go through your 2021 budget and find all the ways that you can get rid of or lower expenses. When you look through each line item of your budget, you should ask three main questions about each item that you need to spend money on and they are as follows.
Is This Necessary to Achieve Long Term Goals?
Consider the importance of each investment or expense and how important they are to cash flow both in the long and short term. Also, don’t simply look at present day but look at the future and the business that you want to have within the next 15 to 20 years.
So, for example, when it comes to immediate cash flow, you’ll have to look at feed and stock expenses. However, you should also consider investments that are longer term that have longer lasting benefits such as upgrades to the farm’s infrastructure etc. This is especially important if you intend your farm to be taken over by your next generation. Always keep your eye on the future.
How Controllable Is the Expense?
The expenses of some farms are quite high and they often get out of control. There are inputs such as fuel, fertilisers, power, water etc that can appear to be uncontrollable. Even though you won’t be able to change the prices attached to these necessities, you can change how much you consume.
What Is the Timeline Related to the Expense?
It is essential that you understand your timeline of returns, particularly for big expenses. You can reduce some costs to provide quick fixes such as reducing your fertiliser usage, lowering seeding rates etc. However, there are some expenses that will take a longer time to get a return on.
We’ll now address a couple of ways to lower the expenses on your farm in 2021.
Re-consider Sourcing and Seed Traits
Whenever you plant crops and in particular, row crops, think about if you should use the most costly hybrids. Even though these hybrids can provide extra protection, they won’t impact how much you actually yield. So, it is fine to choose crops that only have 1 or 2 traits until you get a profitable yield. So, when it comes to getting simpler varieties, you shave to shop around for your seeds. It is possible to save some money by using a different supplier.
Always try to negotiate any high cash rents. So, if you have certain fields that keep increasing in rent, figure out if you really need those fields and if they are worth it. If you can find cheaper fields or can do well without the field, then closely consider your options. Even though this may be a big change, it can help you to save money immediately and help you in the long term so that you can find better options.
Work on Conservation Management
Next, you should work on how you manage pests, crop residue, livestock water, irrigation etc. By doing so you will be able to find ways to save on costs such as fuel, labour and equipment without much impact on your farm. Looking at new ways to upgrade or invest your money into new technology will lead you to better solutions and Fullwood Packo can help you on that journey.
Lastly, consider using solar energy since this technology has truly improved drastically in recent years. You can use solar energy to help save on utilities and even increase revenue if you generate enough electricity to sell. This is a great way to use your outbuildings as well as barns and create a new revenue stream or at least lower your bills.