The 2021 crop year has undoubtedly been disappointing for grain and field crop producers in the Northern Plains.
However, before producers start blaming themselves for being responsible for their cash flow plans collapsing, they should remember other years when plans went wrong, says management instructor Betsy Jensen. farm business at Northland Community and Technical College in East Grand Forks, Minnesota.
Jensen spoke virtually to farmers about “How to Fall: Adapting When Things Don’t Go To Plan,” during a Minnesota Wheat Growers Association September online marketing seminar on Wednesday, September 15. .
Although this year’s drought reduced farmers’ yields, in other years quality issues such as falling numbers and test weight resulted in crop damage that reduced farmers’ cash flow, noted jensen.
“There are a lot of things that can derail our plans,” she said.
In addition to quality losses in other years, unexpected financial challenges farmers have faced in the past include unbudgeted hiring of custom combiners, insect, 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 less than yields of 70 bushels per acre, sold at $5.50 a bushel; the latter reportedly produced a total of $385 per acre, just $25 per acre more than the former, Jensen said.
Producers who have determined they had a bad financial year can work to avoid repeating it by keeping cash on hand, she said.
“If you have cash, that’s the best way to avoid a fall,” Jensen said. “We want to create as much of a cushion as possible,” she said, noting that while prepaying loans is tempting, farmers shouldn’t.
Farmers should also resist making decisions for the future based on their memory of 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 contacting forward,” she said. “It’s not something I back down.”
However, farmers should not consider “rolling contracts”, advised Jensen. “I think it’s one of the worst ideas I’ve seen in my entire life.
“Sell 2021 (crop) during the 2021 crop year and start selling 2022 for delivery next fall,” she said.
This will help farmers have peace of mind if they talk to their lenders about their financial plans, 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.
In the meantime, talking to someone like a lender, accountant or farming partner about the losses is important.
“Finding solutions usually requires outside knowledge and ideas,” Jensen said. The changes don’t need to be drastic if the farm has been successful in the long run, she said.