Supply costs are on the rise for American farmers, but earnings are also expected to increase. Both point to inflationary influences amid a post-pandemic economic climate. How will the policies of the Biden administration affect farmers moving forward? While profits are expected to increase this year, supply costs are already making farmers and economists a little nervous.
During uncertain economic times, many farmers are reworking budgets to cut expenses and ensure a better bottom line. There are three main questions you need to ask yourself when reworking your own budget for this year.
How Does Each Expense Match Up With Your Goals?
Consider the most important expenses that are key components of your operations. Priority expenses tackle both short-term and long-term cash flow. You must look ahead if you are going to cover your bases. What changes can you make to help your business 5-10 years from now?
Farmers need feed and fertiliser to help generate immediate cash flow and they are also well known for their milk supplies and milk pasteuriser. Yet upgrades to your infrastructure and investments in new equipment might also be priorities for you at the moment. Always maintain that long-term perspective when making purchases to grow your operations.
Are You Able to Control a Particular Expense?
Many of the expenses you have as a farmer are methodical and not under your control. For example, you need a particular amount of fertiliser for your crops, and there is no skimping. The same goes for utilities; however, there are costs that can be controlled. Think about the supplies you purchase. How can you control the consumption of some of these supplies?
How Long Will It Take for the Benefits of an Expense to Be Made Manifest?
Farmers must have a timeline in place for generating returns. When you afford a major expense, you want to know how long it is going to take for it to pay off. Are you able to reduce the seeding rate for your farm? This would be an example of a quick return. There are other changes you can make to your expenses that take a little longer to generate returns.
Ways to Save
When planting crops, are you in need of those high-cost hybrid seeds? Yield protection is one thing, but these extremely popular hybrid seeds do enhance your yield. Instead, focus on a couple of traits. Do this to maintain the type of yield you are expecting out of your harvest. You do not have to pay up for those new releases. And remember, alternative suppliers often provide nice discounts to farmers.
Think about rents and whether or not they can be renegotiated. Rent costs on the rise can make you want to switch fields. In fact, you could do just that if you are able to find a cheaper alternative. Save on production costs as best you can, and you will start to see results. Some of those results will be made manifest in the short term, while the long-term gains will be on the horizon.
Focus on improving your strategy for conservation, including irrigation and pest control. You might just find some opportunities for hidden savings. Consider labor costs, fuel costs, and equipment costs, too. Make changes that you see having a positive impact on your farm.
Could you switch to solar power? This type of change saves you money on your utilities, and it gives you a chance to generate more revenue. That’s just something to chew on….