Are you building a financially viable farm?

The recent market rally has provided opportunity for major crop farmers to sell at prices that haven’t occurred in almost seven years.  At current futures prices, forward contracting aggressively for 2021 and 2022 crop year should be on your mind daily.  In the “front months” for corn and soybeans, stored grain can be sold at a significant margin over costs of production. Is farm financial management still necessary when markets are presenting opportunity?  When margins appreciate rapidly on paper, it is time to think about crop marketing in a different way. 

Historical data shows that a harvest rally occurs about 13% of the time, providing a unique window of time to make proverbial hay. When margins are really good, the tendency might be to become complacent with your marketing plan…but this is when strategy and discipline can literally pay dividends.  Recency bias is a psychological barrier that influences perspective; the recent trend will reverse, usually at a more rapid decent than incline. Before that happens, this is the opportunity to bulletproof your farming operation by growing the top part of your balance sheet.  You can take advantage of these high prices to put money in the bank as working capital, for planned expansion in the future, as an emergency fund, or by paying down debt.  Those decisions are clear if you have established short term and long term goals.

Pricing decisions can be an emotional challenge, and it is tough to take that aspect out of your decision making process when you’ve put so much hard work into producing a crop.  Financial management empowers you at all times, to make decisions based on fact, not speculation.  Don’t miss the opportunities to build a legacy operation because you think financial management is only for the challenging times.