Farmers are diligent about watching what they can see. Crops are scouted. Livestock health is monitored. Markets are checked daily. But many operations go years without a clear checkup on the financial health of the business itself.
In today’s environment of tighter margins, higher interest rates, and rising input costs, that lack of visibility can quietly increase risk.
In agriculture, it’s easy to blame the market. Soybean prices soften. Input costs fluctuate. Interest rates shift. Weather rarely cooperates. When margins tighten, many producers assume the numbers simply reflect the environment.
Sometimes they do. But sometimes the numbers are pointing to something more specific inside the operation—and that’s where a structured financial and production assessment becomes valuable.
Today’s financial assessment takes aim at surviving volatility
A comprehensive assessment provides a clear look at the health of the business at a specific point in time.
Carolina Vargas, an economist and farm business management consultant with Pinion, compares the process to an annual physical.
“It’s like going to the doctor for a checkup,” she said. “You measure the key indicators, identify strengths and weaknesses, and determine what needs attention.”
It evaluates core financial measures such as liquidity, solvency, profitability, repayment capacity, and efficiency. When paired with production metrics, including per-acre input costs, yields, and break-even prices, the picture becomes far more complete.
Just as important, a thorough review ensures the data itself is accurate. Misplaced expenses or incomplete information can distort conclusions. When numbers are organized and categorized correctly, they begin to tell a reliable story.
But the assessment itself is not the goal. It’s the starting point because this data is only good to have if you know what to do with it.
Looking beyond a single year
A well-structured assessment doesn’t just measure this year’s profitability—it helps identify trends and evaluate long-term sustainability.
When producers complete assessments year after year, they can compare their operation against itself. Are input costs creeping up? Is machinery investment growing faster than revenue? Is working capital improving or tightening?
Those patterns are difficult—if not impossible—to spot in a single season.
That historical view also provides context when markets turn. If returns decline during a widespread commodity downturn, benchmarking can help determine whether the pressure is external—or whether cost structure and efficiency deserve a closer look.
“If profitability is down, we have to ask why,” Vargas said. “Is it purely the commodity cycle? Or is there also a cost structure issue?”
That distinction matters.
Separating market forces from management decisions
Benchmarking against similar operations adds another layer of clarity.
Credible comparisons are built from aggregated data representing real farms operating in real-world conditions—not theoretical models. When producers can see how their liquidity, cost per acre, or return on assets compares to peers, blind spots often come into focus.
A detailed review may uncover situations like:
· Input costs that are out of line with regional averages
· Machinery investment ratios that strain cash flow
· Labor expenses that don’t align with production output
· Break-even prices that exceed realistic market expectations
Evaluating performance by crop or production segment can further isolate where margins are being made or lost.
Without interpretation; however, financial ratios are just numbers on a page.
Turning insight into strategy
Ultimately, the goal is to identify profit drivers and focus attention where it matters most.
Once the assessment is complete, an advisor helps interpret the findings and prioritize action.
Sometimes that means operational adjustments—renegotiating input costs, restructuring debt, reevaluating capital purchases, or improving labor efficiency. Other times, it involves connecting producers with additional resources or programs they may not be utilizing.
Long-term outlook and strategy can evaluate:
· Is your current capital structure sustainable in a lower-margin cycle?
· Should expansion plans be paused or accelerated?
· What changes would strengthen resilience over the next three to five years?
These conversations are more productive when they’re grounded in accurate, benchmarked data rather than assumptions or gut feel.
“Producers are incredibly resilient,” Vargas said. “But resilience doesn’t mean guessing. When you understand both your financial and production performance, and how you compare, you can make sound decisions instead of reactive ones.”
Creating a clear path forward
At a time when volatility has become the norm, proactive financial assessments offer perspective and control. They provide a clearer view of both financial and production trends, highlight strengths and weaknesses, and help frame decisions around risk and opportunity.
“For producers looking for a structured way to begin that process, Pinion’s benchmarking tool, SnapShot, combines multi-year financial and production data with an adviser review,” Vargas said. “It was intentionally designed to measure the financial health of the business, identify key profit drivers, and place results in context alongside similar operations.”
But as Vargas emphasizes, the true value is not just in the report itself.
“The numbers start the conversation,” she said. “What you do with them is what moves the business forward.”
Good advice doesn’t start with answers—it starts by helping producers understand what their numbers are really saying and how to act on them with confidence.
Editor’s note: Keaton Dugan, a certified public accountant, advises farmers and agribusiness owners on strategic tax planning, succession strategies, and long-term financial sustainability. Whether the goal is to expand operations, transition ownership, or optimize tax structures, Dugan draws on his experience as a trusted advisor and his background working on his family’s multi-generational farm to deliver practical, tailored solutions. Contact him at [email protected].
