News

Farm financial planning and risk management in 2023  

Harvest is coming to a close and a leader with Farm Credit Mid-America says it’s not too early to plan for 2023.

Steve Witges, senior vice president of ag lending, is encouraging farmers to consistently complete year-end financial statements.  

“One of the most critical aspects of understanding one’s financial position and the financial capacity of a farm is being very consistent completing financial statements. If you’re an LLC or single entity operation and you file a tax return and December 31 is your year end, it’s so critical to do a corresponding financial statement,” he says. “If a farmer gets in the habit of doing those, you can learn so much from the change in financial position from year to year. You’ll understand your profitability and the demands of your profitability. One of the things I tell farmers is it’s one thing to make money, it’s another to make enough. Profitability has demands including payments, equipment replacement, etc. For those that are already consistently doing year-end balance sheets I would encourage them to continue doing it. For the farmers that haven’t done that consistently year in and year out, I think that is the first starting point.”

He tells Brownfield a break-even analysis is also critical.

“Your trends can become quite reliable for the future. Once you get done with harvest look at year-to-date expenses, what’s left for the year, total cost to produce that crop, and the breakeven. And then, setting some targets on when they’re going to sell crops,” he says. “(farmers should) know costs and take a look at profit margins to determine if they’re adequate. We need to be very careful. Hitting homeruns is nice on occasion, but when we swing for the fences all the time we get a lot of strikeouts. Let’s aim for the singles and doubles, make some decisions, and lock in some profits.”  

Witges says this will help farmers put together a strong risk management plan.