Success is based on more than returns, profits
Farming is a business, although it is also a way of life for many farmers. The meeting season is a time to reflect, recharge and look to the future.
Many farmers enjoy the production side of farming, driving the tractor and being in the fields, barn or workshop. The planning, financial and business side of the job is equally important, and a job that someone on the farm should do with equal zeal.
Measuring the success of an agricultural enterprise is not limited to knowing yields or prices. This involves managing cash flow, getting a line of credit, completing an income statement and balance sheet, and at this time of year, calculating taxes.
Higher costs, inflation, interest rates and the supply chain situation mean lots of analysis to project expected income and expenses. 2022 will be a year of careful analytics that will inform the farmer on how to optimize a decision to rent, buy, sell or lease, and make other important cash flow decisions.
Careful analysis begins with writing a strategic business plan for the farm and the “big three” financial statements: income statement, balance sheet and cash flow statement. Fortunately, lenders need these statements to assess the farm’s potential profitability.
The University of Minnesota has an AgPlan which can be a great free online tool for customizing a business plan. This plan has five business plan templates that can be created, saved, downloaded, printed, shared and edited by the farmer. Each template contains valuable tips and resources for each section of the business plan to help create the plan.
New Sidedress Nitrogen Insurance
New for 2022 is a crop insurance option for farmers considering getting rid of nitrogen. This new option is called the Post-Application Coverage Rider, which is an additional coverage option to the underlying crop insurance policy for corn nitrogen applications during growth stages V3 through V10. .
This option provides insurance if the sidedress request cannot be made. Payments will be based on approved yields, hedge share, hedge level and final loss factor. PACE is available to farmers in select states and counties. Visit your agricultural service agency office to see if you qualify.
Agriculture, hackers and ransomware were a hot topic at the recent Great Lakes Culture Summit. Some recommendations included:
Backups. Have data backup, including a 3-2-1 approach. This means performing three backups, two of which are on-site and the third completely off-site of the farm business.
Hard copies. Print documents, such as a contact record and inventory. Printed documents take longer, but cannot be hacked and can save the business if all electronic data is lost.
Coaching. Train all IT operators and include some cybersecurity.
Communicate. Communicate with employees, customers, or others about any hack and ransom demands. Designate a single person to do the communication, so that a precise and careful message is transmitted.
Assurance. Ask your insurance agent about a cyber insurance policy or endorsement.
Software. Everyone needs antivirus software. There are military and civilian personnel in other countries whose only job is to hack into company computers and make financial demands.
Birkey is an educator emeritus at Michigan State University Extension and owner of Spartan Ag.