Farm Progress

Boost your farm’s financial health

Knowing your breakeven is key to getting the best results.

Darren Frye, CEO

February 22, 2017

4 Min Read
IngramPublishing/ThinkstockPhotos

Looking toward the upcoming spring season, several financial concepts will be very important to understand and commit to for a successful crop year. As the farm’s leader, you’re responsible for many different areas but there’s one that can absolutely make or break the farm: Your numbers – particularly, your breakeven.

Think about it this way. Perhaps you highly value your personal health so you can continue to do the things you enjoy. So, with that in mind, you decide to keep a closer watch on your overall condition and well-being.

You’d probably want to first get a baseline of some key markers, for example, cholesterol levels, blood pressure, weight, insulin levels and so on. The results would help you and your doctor determine any lifestyle changes you’ll need to make – like increasing physical activity or decreasing the total calories you’re eating.

With those baseline levels, you can keep monitoring your numbers regularly. You can track your progress and see whether your efforts are moving your health stats in a better direction. You gradually gain more energy through your commitment to take responsibility for your own health.

In the dark
But what if someone just assumed they already knew their numbers, without having measurements taken and working with a doctor? It could be a disaster.

It might even be like someone never weighing themselves and estimating that they weighed 150 pounds. But they actually weighed over 200 pounds. In the meantime, they did nothing to try to move toward a healthier weight, and in fact, put on some more weight.

Wow, they might say later after learning their actual weight, that’s a huge difference. I would have made some different decisions if I had known I was that far off.

Sometimes we don’t want to get on the scale. We might not want to calculate our farm’s breakeven or other metrics. But even if you don’t want to see a certain number at the time, it’s more powerful to know it because you now hold the truth. That can lead you to commit to making better decisions for the future. Ultimately, it’s what allows you to reach your goals and have more fun in life.

Who will win?
Even in today’s tight ag economy, many farmers are still in the dark about their breakeven or may not know exactly what they can do to change it. It’s likely that more than half of all farmers don’t have an accurate calculation of their true breakeven point.

In the game of farming, it’s all about managing margins. The lowest cost per bushel producer will always win out. They will persevere and do an incredible job – especially in tough times – because they know their breakeven and carefully manage their operation and financials around it.

Some keys to farm financial success in 2017 will be:

  • Get clear on your farm’s key numbers, including your breakeven

  • Use your numbers in all decision-making

  • Prioritize decisions that advance the farm’s financial ‘health’ and well-being

The right stuff
Do you know your operation’s breakeven – with all costs factored in, including areas like labor and machinery? Keep a watchful eye on it this year, especially during the growing season when factors such as weather and yields are changing.

Wouldn’t it be amazing to have the numbers you need and help with ideas on what you can do to impact them? Seek another perspective while interpreting and analyzing your numbers, such as that of an ag finance advisor, before spring kicks into gear.

Read the new midwinter issue of the Smart Series publication, bringing business ideas for today’s farm leader. This issue includes perspectives on what to do when a landlord asks for higher rent, how to find the right new employee, a farm business checklist for the spring season, and more. Get your free online issue here.

The opinions of the author are not necessarily those of Farm Futures or Penton Agriculture.

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 (www.waterstreet.org), to help Midwest farmers become more profitable through financial analysis, crop insurance, commodity marketing, and legacy planning. The mission of Finance First is to get you to look at spread sheets and see opportunity, to see your business for what it can be, and to help you build your agricultural legacy.

About the Author

Darren Frye

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.

Visit Water Street Solutions

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