December 13, 2021
As we quickly approach 2022, farmers are having several different thoughts about creating business and financial plans for the upcoming crop year.
One thought is that there’s entirely too much uncertainty surrounding 2022 – in almost every way possible. There’s major uncertainty around input costs and those markets. There’s uncertainty (as always) involved in the grain markets. There’s uncertainty around interest rates and global financial markets – as well as local land markets and cash rents.
These high levels of uncertainty around so many factors for 2022 can lead many farmers to question the point of creating plans and projections for the upcoming year. Their line of thinking goes something like this: “With so much that’s likely going to change, and keep changing, what’s the point of planning at all?”
Here’s the thing about going through the process of making financial plans and projections for the next year: Even if factors that are out of your hands do shift, you’re still ahead of the game. You’re ahead because when you’ve already worked through different scenarios, you can shift your plans more quickly to make any needed changes.
The point of creating financial plans and projections goes far beyond the plan itself. It’s about knowing your own farm’s numbers and financial situation inside and out so you can make the best possible choices for your operation when any of those outside factors shift and change.
It’s also about being prepared for your lender – to show them exactly how you plan for business success in the upcoming year and how your plans will be responsive to changes in markets, input costs, and so on. It’s about being able to answer their questions easily and use “their language” of financial terminology.
Roll with the changes
Engaging in this type of planning is never a waste of the farm leader’s time – especially when elements in the plan need to shift because of changes in outside factors. Times of greater uncertainty actually require more forward-looking planning, because there are more variables changing at quicker rates.
Often, when our farmer clients start working on plans with their advisors, they find that their feelings of uncertainty or anxiety about the upcoming year begin to lessen – because they’re focusing on what they can control (running their operation and making decisions), rather than what they cannot control (markets, global economic picture, etc).
Use any uncertainty that you’re feeling at this time of year about the upcoming crop year to propel you forward – not hold you back – from thinking about and creating business plans for 2022.
What about 2022 grain markets?
Another topic on farmers’ minds moving into winter and 2022 is marketing plans – and where the grain markets may be heading into the new year. A tailored marketing plan that’s flexible with market moves is key.
Our market advisors partner with and bring education around different marketing tools. They also help farmer clients with planning and execution around marketing decisions.
Get a free two-week trial of our marketing information service (MarketView Basic). Your free trial includes regular audio and video updates, technical analysis, recommendations and more. Or learn more about our market advisor programs and offerings at www.waterstreetconsulting.com.
The opinions of the author are not necessarily those of Farm Futures or Farm Progress.
About the Author(s)
CEO, Water Street Solutions
Darren Frye grew up on an innovative, integrated Illinois farm. He began trading commodities in 1982 and started his first business in 1987, specializing in fertilizer distribution and crop consulting. In 1994 he started a consulting business, Water Street Solutions to help Midwest farmers become more successful through financial analysis, crop insurance, marketing consulting and legacy planning. The mission of Finance First is to get you to look at spreadsheets and see opportunity, to see your business for what it can be, and to help you build your agricultural legacy.
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