Business management

Farmers should put bad crop year 2021 into perspective, farm business management instructor says


However, before producers start to blame themselves for being responsible for the collapse of their cash plans, they should be reminded of other years when plans went awry, said Betsy Jensen, management instructor. farm business at Northland Community and Technical College in East Grand Forks, Minnesota.

Jensen spoke to farmers virtually about “How to Catch a Fall: Adapt when nothing goes as planned,” at a Minnesota Association of Wheat Growers online marketing seminar in September, Wednesday, September 15.

Although the drought this year reduced farmers ‘yields, in other years, quality issues such as falling numbers and test weight resulted in crop damage that reduced farmers’ cash flow, Jensen noted. .

“There are a lot of things that can derail our plans,” she said.

In addition to quality losses in other years, unexpected financial challenges that farmers have faced in the past include the unbudgeted hiring of custom combiners, insects, disease and other farm input expenses, and unforeseen family expenses. , she said.

Before farmers panic about their financial situation, they should determine if their cash flow is as bad as they think it is, Jensen said.

For example, wheat yields of 45 bushels per acre, sold for $ 8 per bushel, would produce a total of $ 360 per acre, which is not considerably lower than the yields of 70 bushels per acre, sold priced at $ 5.50 per bushel; the latter would have produced a total of $ 385 per acre, just $ 25 per acre more than the former, Jensen said.

Producers who have determined they have had a bad fiscal year can work to avoid repeating it by keeping cash on hand, she said.

“If you have the cash on hand, this is the best way to avoid a fall to start with,” Jensen said. “We want to make as much cushion as possible,” she said, noting that while loan prepayments are tempting, farmers shouldn’t.

Farmers should also resist making decisions for the future based on how they remember this year. While futures may not have worked in 2021, that doesn’t mean farmers should never contract futures again, Jensen said.

“I think there are a lot of risks in not communicating with the front,” she said. “It’s not something that I’m backing off. “

However, farmers should not consider “sliding contracts,” Jensen advised. “I think it’s one of the worst ideas I’ve seen in my entire life.

“Sell 2021 (crop) in crop year 2021 and start selling 2022 for delivery next fall,” she said.

This will help farmers have peace of mind if they are discussing their financial plans with their lenders, and they should also determine the level of crop insurance coverage they need.

“If more crop insurance helps you sleep at night, it might be worth it,” she said.

During this time, talking to someone like a lender, accountant, or farm partner about losses is important.

“Finding solutions usually requires outside insight and ideas,” Jensen said. The changes don’t have to be drastic if the farm is successful in the long run, she said.