Is 2024 déjà vu all over again?

Looking at this year’s farming challenges, Bob Craven gets a sense that we’ve been here before, drawing similarities to 2012-14.

“We came out of 2022 with excellent profits in Minnesota. But as we headed into 2023, cash felt good — but we were in a situation where we had an 80% drop in net farm income from a median of $187,000 down to about $45,000 in 2023.”

Craven, University of Minnesota Extension professor in the Department of Applied Economics, says those numbers originate from the FINBIN database contributed from the Minnesota State Farm Business Management Program and the Southwest Farm Business Management Association.

“I would expect to have similar circumstances in 2024 as we look at this year,” he says. “Certainly, we saw expenses come down in 2023. I don’t think we’re going to continue to see a big drop in expenses. I expect fertilizer prices to be relatively flat as we look at 2025 pricing, seed up a few percent and fuel relatively flat.”

One of the challenges this year is an expense base against a big drop in market prices as a result of “great crops” around the United States, “unfortunately in Minnesota — and I farm in southwestern Minnesota — it doesn’t feel that way on my farm,” Craven says; and on his farm, there are 200 acres of prevent-plant. “We’ve been through this kind of downturn before, just a decade ago … so it’s familiar territory for many of us.”

Familiar territory or not, the ’24 growing season has presented growers with the dilemma of possibly giving up on this crop. “It’s just so frustrating with rain every day, we can’t get it in the fields, the crops look terrible; at what point do you say, ‘I’ve spent enough on it, I’m just going to leave it alone and let it be what it is,’” says Todd Stencel, Farm Business Management instructor through South Central College based in North Mankato, Minn. The top questions he hears are: Have I spent enough? Do I want to spend any more? “And most of the answers are ‘We’re done; just let it go to harvest, and it is what it is,’” he says.

Plan for opportunities

Unless hidden bushels miraculously appear come harvest, how should producers approach this fall and into 2025?

“As we look to getting through the next couple possible tough years, you really need to have a marketing plan,” Craven says. “You need to take advantage of opportunities should they arise.”

Craven points to Ed Usset’s 11th Commandment of grain marketing: Don’t hold unpriced grain after July 1. Usset is a grain marketing specialist at the University of Minnesota Center for Farm Financial Management. His 11th Commandment was proven correct this year. “Looking at statistics, three out of four years, we’re going to see prices go down between July 1 and harvest,” Craven says. “There’s always that exception, but that didn’t happen this year. Think about a marketing plan that involves preharvest marketing, when the price is right that you can make a profit. Think[ing] about postharvest marketing opportunities is an important part of managing through the times we’re in.”

Holding true from the similar situation of a decade ago, Craven says it’s important to preserve one’s working capital. “Crop farms came out of ’23 with about 53% working capital as a percent of gross income, so they had over half of their gross revenue in the bank, in cash or in grain in the bin. … So, they went into this situation in a really good position.”

Preserving that working capital, and “part of that is, don’t do capital expenditures just to avoid taxes,” Craven says. “Think about that: Do you really need that new piece of equipment, unless it’s a really good deal?”

He suggests that if you do purchase equipment, do not put it on your operating line of credit; rather, get term financing for those capital equipment purchases.

In addition to farm expenditures, Craven stresses that now may not be the time for family living enhancements, such as buying a lake cabin.

Cut where you can

Stressing that farmers try to control what they can, Stencel adds that it may be a good time to have conversations with landlords on the land rental rates. “When you look at production costs, the largest input is land costs; some say it’s impossible to control those,” he says, but he says looking at FINBIN figures from a decade ago, the average rental rate did fall from an average of $235 in 2015 to $216 in 2018. “You’ll say that’s not much, but they did fall, so it’s worth having those conversations now with your landlords — especially if it’s an unproductive farm.”

In addition to having those rental rate discussions, Stencel, who also farms, says it’s important to scrutinize every cost, and cut where possible, with suggestions such as using soil test data and working with your agronomist to see if you need to fertilize at a build rate, or if you can get by with a maintenance rate to reduce nitrogen, phosphorus and potassium. Equally to be scrutinized are herbicides, fungicides and seed traits “that you can live without.”

Referring again to the FINBIN number 2015-18, Stencel says farmers were able to cut seed costs, “so if they did it then, I think they can do it now.”

Craven adds that it’s to the producer’s benefit to shop early for fertilizer, seed and chemicals “if you’ve got the financials to do it. … It never hurts to shop around. That doesn’t mean you won’t up with your regular supplier, but it’s always nice to have another bid to say, ‘I could get this somewhere else, so can you come in a little lower?’”

As insurance rates continue to increase, Craven says adjusting deductibles on home and farm policies can show dividends.Maybe most importantly, Craven says it is important to have a good relationship and open communication with your farm lender. “Lenders don’t want to be surprised; they are under a lot of pressure from regulators to make sure the loans are sound and secure,” he says. “The sooner that you start talking to them the better off you’re going to be. … Do not expect your lender to solve your problems.”