Whether one wants to accept it or not, we are kicking off the second quarter of the 21st century. Let’s examine some of the disruptors and influencers that will impact farm and ranch profitability in 2025 and beyond.

The weather

Ask any producer and they will often indicate that checking the weather is one of their first activities after awakening. Extreme weather, such as prolonged periods of dry weather followed by intense heavy rainfall, is becoming the norm in many production belts around the world. In the first few months of 2025, growing conditions in the Global South will dictate outcomes in the global grain market. Moving toward spring, moisture levels in the production belts in North America, Europe, and Asia will need to be closely monitored as a part of marketing, risk management, and operational plans that generate cash flow and profits.

Cash flows and profits

An operational plan to generate cash flow and profits that allows the numbers to do the talking in an objective manner will be a high priority. Was the positive bottom line the result of normal operations or were assets sold, also known as decapitalization? Was other income, such as green energy initiatives, keeping the business afloat? The question becomes, how sustainable will cash flow be in the long term and how does it influence long-term transition and legacy plans?

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Difficult choices

Mapping out the cash flow and budgets for 2025 will require some economic and financial soul-searching. How long will one continue to subsidize landlords with rents and leases that are not economical for fear of losing the ground? What inputs will be limited and how does this impact long-term productivity of the soil resources? What will be the government programs and specific contracts that could influence negotiations? Scenario planning with various prices, costs, and interest rates with different enterprise combinations will require planning and execution of the plan and constant monitoring.

Livestock and dimensional revenue

Producers that appear to be weathering the economic cycle are often diversified with various sources of revenue. Of course, the livestock sector is doing well. The economic health of the general economy and supply and demand metrics will dictate profitability. More young and beginning producers are launching and growing businesses with outside income. In addition to a supplemental source of income, another advantage to this situation is getting outside the operation will expose them to a network of people, some who are customers and others who can provide new ideas and perspectives.

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General economy

The Federal Reserve's battle between the balance of inflation, unemployment, and growth of the economy in the quest of lowering interest rates will be a challenge. Long-term interest rates will be influenced by the ability of the government to manage debts and the overwhelming deficits. The current rate of government debt growth and government spending exceeding revenue is not sustainable. The overall global debt to gross domestic product (GDP) is a limiting constraint to economic growth.

The 10 P's that are going to be critical for success

Kicking off the second quarter of the century is going to require a focus on the 10 P's.

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