I’m not sure whether great times await United States farmers and ranchers in 2025. In fact, the year ahead could be tough.
Despite some improvement in crop and livestock prices, producers face the rising cost of labor, the potential impact of tariffs on our exports and uncertainty about farm policy. High machinery-repair costs and challenges in paying off debt are ongoing problems. While many producers will make it through the months ahead, others will struggle.
Those who find themselves in financial trouble may be making these common mistakes:
1. They keep doing the same old thing. If it worked before, they stay with it, even during tough times. For example, they keep growing the same crops because it’s what they’ve always done, not because it’s profitable.
2. They don’t evaluate regularly. It’s not unusual for people in financial trouble to avoid record-keeping tasks, but it’s impossible to track what your farm is doing if you’re not consistently monitoring income and expenditures.
3. They look for expense deductions instead of revenue growth. The lowest expense possible isn’t always the best way. Higher returns can result from re-thinking your marketing strategy.
Solutions to consider
Here are a few ways to avoid or fix those common mistakes:
Know your cost of production.
Every farm and ranch has its own situation and costs. Understand your numbers. Account for every dollar. It’s how you’ll quantify whether you’re headed for profit, loss or breakeven.
Follow the money.
Every month, track receipts, records and other financial information to remain organized and accurate. Also keep an eye on your processes and systems so you know what’s working and what’s not.
Look for ways to increase your farm or ranch income.
Is there custom work or other services that would generate added revenue? Could you convert part of your operation to organic production? Maybe there’s potential for higher premiums in raising non-vaccinated cattle or grass-fed beef. You might want to explore off-farm employment for one or more household members.
Use a computerized accounting system.
Financial technology is just as essential as any other equipment in your ag operation. Today’s financial tools run the gamut from software packages that help you keep track of expenses or payroll to more sophisticated systems that collect data from every facet of your operation and store it on a central platform so you can access it.
Get professional help.
Find an experienced adviser who can help you develop your farm’s financial statements, including information on understanding and building your balance sheet and farm income statements. First, sit down with your farm bookkeeper and review your finances and do some preliminary troubleshooting. Armed with that knowledge, you can then discuss solutions and strategies with your accountant or tax or other financial adviser. There may be other respected people who could give a fresh perspective on the operation. Sit down with them, talk things through and see what ideas might arise.
Communicate with your lender or creditor.
It’s common for people in financial stress to avoid those to whom they owe money, but you can improve your situation by reaching out. Schedule a time to meet in person with them. Share the data you’ve gathered as well as an outline of proposals to address the problem. If communication has become strained, you may want to bring along one of the advisers who helped you brainstorm or analyze your situation. A third party may be able to ease some of the stress of the conversation. As part of the communication process, openly share ideas for generating cash or reducing expenses. Talk about ideas for debt restructure – perhaps debts that could be consolidated or stretched out to reduce payments.
Be willing to ask for a lower rate.
Whether it’s reducing your interest rate from your bank or lowering the fees from a vendor, it’s often possible to negotiate a better rate. Lenders would rather make slightly less off your loan than lose you entirely, but you need to ask for it.
Don’t ignore these suggestions just because you’ve never tried them. People often resist change out of fear of the unknown or disruption of habits. They keep doing what they’ve been doing, even when
it isn’t working. If your farm or ranch is worth saving, get help. With a plan to manage your farm finances, you can survive and even thrive.
Editor’s note: Maxson Irsik, a certified public accountant, advises owners of professionally managed agribusinesses and family-owned ranches on ways to achieve their goals. Whether an owner’s goal is to expand and grow the business, discover and leverage core competencies or protect the current owners’ legacy through careful structuring and estate planning, Irsik applies his experience working on and running his own family’s farm to find innovative ways to make it a reality. Contact him at max.irsik@pinionglobal.com.
