By Hollie Rudy

If you’ve come into farming over the last 10 to 15 years, 2024 may be one of the first times you’re seeing so much pressure on your bottom line. Every year presents challenges, but the outlook for 2024 is decidedly less optimistic because of the higher cost of doing business over a prolonged period.

Economists will tell you the ag business is moving back into a “normal cycle” this year, following several years of higher profits. That change — which includes projections from USDA that net farm income will decline 25% — feels jarring to many, especially young growers who don’t have the historic perspective or cash reserves of seasoned growers.

As farmers make this shift, it’s important to adjust your crop and financial plans to stay profitable, particularly if you are on the earlier side of your career.

Change with crop conditions

One way to do this is to revisit plans as crop conditions evolve. Farmers have a lot on their plates. It’s still vital for you to understand the dynamics at play around profitability and ensure that you’re managing those details before you’re deep into the growing season. Now is the time to ask yourself what’s changed since you put seed in the ground. Have things gone as planned, or are you up against some scenarios you weren’t expecting?

Asking these questions will help improve profitability as you evaluate your crop plan and gain a better understanding of how market or environmental conditions have changed since early spring. If you review your situation now, you still have time to respond to current crop growth conditions to adjust your strategies and position yourself for a better shot at a successful season.

One example of shifting your position is in how you manage interest expense. When commodity prices are high and interest rates are low, you may not give much thought to those expenses. But in the current market, it’s a line item that you can’t overlook.

Do your research on strategic supplier programs for crop protection and nutrition products to confirm that you’re using the best economic option available. You can also use financing strategically to preserve your cash and complement your operating line of credit. Finally, when revisiting your crop and financial plans, do it with trusted individuals who are invested in your success.

This collaboration can help uncover new ideas to reach your breakeven point and, even better, to realize a greater return than you might if you go it alone.

Success different for all

Another point to remember is that success looks different on every farm. Variability is a defining feature of the agricultural industry. The ever-changing conditions from day to day and year to year are what attract many growers to farming. However, this unpredictability also means there’s no one-size-fits-all solution to ensure you reach your breakeven point.

This is why completing a midseason review of your plans — after you’ve made investments in your crop — is so important to make sure the economics of your operation align with what’s happening in the field. 

One example of a blanket strategy that many growers may follow is the adage, “Cash is king.” Prepay options and cash-based transactions are popular, but they aren’t always the most beneficial payment methods.

Using cash payment options have opportunity costs, risks and benefits just the same as your crop selection might. Evaluating how and when you are using cash will reveal the potential advantage that comes with using a line of credit, which enables you to preserve, and earn a return, on your cash. 

Consider the following variables to customize your own strategies to reach your breakeven:

Despite a somewhat down market, farming operations can still achieve a return. The key to navigating these turbulent times lies in regularly reassessing and adjusting your breakeven point. By staying informed and leveraging available tools and resources, young growers can enhance their prospects for a profitable year.

Rudy is a territory manager with Nutrien Financial. She provides financing expertise to growers throughout Minnesota and the Dakotas to increase their buying power and maximize every opportunity for success. Learn more at NutrienFinancial.com.