America’s farmers in 2021 are faced with the dichotomy of estimated higher revenue (mainly from increases in retail) combined with higher input expenses (primarily from feeds and fertilizer). No one knows for sure how the new administration’s policies and post-pandemic year (wishful thinking?) will impact farm labour cost and consumer purchasing. It could shape up to be a year of lower profits where cost-saving strategies are needed.
To get the most out of this very uncertain economic environment, most likely you will be searching through your 2021 budget to search for ways to lower your expenses. When you are reviewing line-items in your budget, begin by asking yourself the following three questions about each of the expenses:
Is the Investment or Expense Important for Helping Me Achieve My Long-term Goals?
Important investments or expenses should be viewed as fundamental items for the short-term cash flow of your business and long-term viability as well. Don’t only cover today’s expenses. Look ahead at the type of business that you would like to have built 15 to 20 years from now.
For immediate cash-flow purposes, stock and feed might fall under this category, but longer-term investments in infrastructure and equipment updates do as well. They provide ongoing benefits, particularly if you are wanting to hand your operation over to a new generation or sell it. Always keep a long-term view in mind.
Is It a Controllable Expense?
There are some farm expenses that cannot be controlled. At least that is how it seems. Inputs such as power, utilities, fuel, and fertilisers represent variables that appear to be uncontrollable. There is not much that you can do to change fuel prices. However, although you may not be able to control the price, you frequently can control your consumption.
How Is the Expense Timeline Affected?
Understanding the timeline of a return, particularly on major expenses, is essential. Certain cost-cutting measures represent quick fixes that can have immediate effects such as reducing fertilizer use or seeding rates. However, others will have a return that takes longer and savings will accrue over time.
The following are some ways that you may be able to save on your 2021 farm expenses;
Re-evaluate Your Seed Sourcing and Traits
If you grow row crops, do you really need to have the latest high-technology hybrids (along with their high cost)? Although yield protection can be provided by additional traits, they don’t make any contributions to yield. Sticking with only one or two traits is often sufficient for maintaining a profitable yield without needing to pay for the most recent genetic releases. If you are choosing simpler varieties, shop around for your seed sources. A different supplier might save you a lot of money.
Do Your Homework
Reconsider or negotiate high cash rents. If your rent costs are steadily increasing on specific fields, re-evaluate to see if these fields are actually worth the cost. Maybe there is a less expensive alternative that is available or you can get rid of the field and still main your margins via production cost savings. It is a significant change to make. However, as you are searching for alternative land lease options, it can provide you with both long-term gains and short-term savings.
Make Improvements to Your Conservation Management Practices
When your management practices of livestock water, irrigation, integrated pest management, or crop residue are improved, hidden saving opportunities can be revealed on equipment, fuel, and labor, without your farm system being dramatically impacted.
Converting over to solar power can help you control your energy expenses. Take a look at Fullwood Packo and digest what they have done to better things as a whole. Solar power systems have really advanced in terms of their longevity and how much power they produce. Solar power provides benefits of both saving on your utilities and as a potential source of revenue by selling your energy back to the power grid. Your outbuildings and livestock barns can be put to work to control your variable utility expense and possibly add on a new revenue stream as well.