Tips for 2019 Farm Management
With 2018 behind us, now is the time to evaluate your current situation and provide financial security for your farm or ranch in the coming year. The tight conditions faced in 2018, will likely continue to feel familiar while planning in 2019. However, if you spend time preparing, you will help position your operation to survive into the future.
Here’s a few tips to help you thrive in 2019:
Establish profitability and cash flow goals.
The first step for preparing and planning for 2019 is creating a realistic budget and cash flow goals. In addition to careful budgeting and close evaluation of costs, run multiple budgets under different scenarios. Consider what a worst-case scenario and a best-case scenario could look like.
Create a disciplined marketing plan
Becoming a disciplined marketer does not happen overnight. It requires input from multiple sources to determine costs of production, estimated yield potential and income goals. Invest the time to create a strong plan and stick to it. If prices reach a point where you can market grain in a profitable fashion, then that’s a great place to be.
Evaluate grain storage options
When considering a storage plan for grain, make sure to carefully review each option and consider all costs, including: transportation, additional bins, storage fees, interest, time invested, etc.
Manage working capital
Monitoring working capital is always important but especially during times of tight margins. If your operation experiences negative losses, working capital is used up to keep the operation going. With too little working capital, you will likely find yourself in financial stress. To calculate, use your worst-case budget scenario and see how many years of losses your working capital could cover.
While many hope it doesn’t need to be utilized, it is important to be prepared for life’s unexpected circumstances. This includes purchasing the right crop, property and casual, liability and even life insurance to properly protect you, your family and your operation. Having the proper risk management in place could make or break the survival of a farm and ranch operation in the event of an unforeseen circumstance.
Be conservative with living expenses
In the current ag economy, it is a good idea to take a detailed look at your personal expenditures and trim where possible. Create a personal budget that fulfills the necessary expenses and eliminate those that are unnecessary. Some items that you may need to take a careful look at could include new vehicles, lake cabins, vacations, etc.
It is important to discuss your current situation and future plans with others involved including family and financial professionals. Bad surprises will likely be stressful for everyone involved, given the general agricultural economy. Maintain an open and proactive relationship with these individuals and be prepared to bring solutions or suggestions for solutions to current challenges.
Take advantage of new technology
Technology is constantly changing and a product targeted toward your farm and ranch is always on the horizon. Review new opportunities carefully. Understand the return on investment and take advantage only of those that provide value to the needs of your farm or ranch.
It is often hard to start the conversation for farm and ranch families to plan succession, but a properly structured succession plan provides opportunities for continued business with current generation of owners and managers and also establishes working relationships for the next generation. When planning be sure to include a power of attorney and consider implementing living wills and health care directives.