It's in the Details...

As I write this our bank is deep in the heart of renewing operating notes for the 2025 growing season. This has been one of the more trying renewal seasons we have had in several years. With crop prices down and inputs remaining high, this scenario has not been kind on our producer’s balance sheets, adding downward pressure on working capital and equity. Which leaves many of them asking the question of “What do I do?” The honest answer…” Buckle down.”  Here are a few things that need to be monitored in 2025 that will help you buckle down. 

Cost of Production

I probably sound like a broken record as I seem to preach about breakeven in every article I write, but we too often see a “ballpark” breakeven being tossed around as opposed to “actual” breakeven numbers. Cash flows are very important, but they are only as good as the information used in them. If ballpark numbers, pulled out of the sky, are used in the creation of the cash flow, most likely the breakeven will not be close to the actual number. This is where historical data comes into play. Using past averages of actual costs to produce a given crop is a great place to start. Calling and getting actual pricing on things like fertilizer, chemical, and seed for expected acres also makes the cash flow more accurate. Use APHs on yield and conservative grain prices. Shock test your cash flow by decreasing projected yield 5%,10%, and 15% along with grain price. Do the same but with an increase in bushels and price. Doing all of this gives you information to help you make better decisions when deciding to sell your grain. The more detailed and accurate data you use, the better result you will have. But don’t just set it and forget it as the cash flow is ever changing. Update it monthly as new expenses or revenue arise that affect breakeven price.

Track Family Living Expenses

Family living expenses should also be added to the cost of production and included in the cash flow. This answers the question: Can the farm not only sustain itself but also support the family living on it? Adding family living expenses to production costs requires accurate tracking. The first step is to figure out what the family needs to live on a monthly and annual basis. Family living expenses include groceries, mortgage, utilities, education, childcare, vehicle, healthcare, and entertainment. Too often family living expenses grow out of control with no monitoring and can end up putting a strain on the profitability of the farm. 

Unnecessary costs

Both farm and family living will likely have non-essential expenses that could be cut from the budget. For the farm, this might mean delaying equipment upgrades or purchases. It could also mean cutting back on discretionary input costs. On the family living side this could include reducing dining out, vehicle purchases or trades, and entertainment budgets. Budgets should be monitored monthly and adjusted accordingly. 

With the current economic conditions in the commodity realm being unfavorable, now is the time to sharpen your pencil and buckle down. Having a detailed cash flow that can be updated throughout the year and giving real time feedback on cost of production, will help you make wise decisions in the 2025 crop cycle. That along with cutting unnecessary expenses and tracking the family budget could be several factors that lead to profitability in 2025.

-Luke Thorell, President- Holdrege-