Fall-time farm management decisions and how Michigan State University Extension can help
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EmailFall is a great time to review your farm production year’s status and outlook. Free education and resources are available to help make difficult decisions or adjustments for successful farm management.
Fall is a great time of year to review your farm production and plan for next year. Especially in stressful or uncertain times, it’s important to make good decisions. Michigan State University Extension has many resources available to help you make the most informed decisions or point you in the right direction on factors influencing those decisions. In this article, we will briefly discuss some of the questions farmers should be considering before the end of the production year.
Recordkeeping
How is the production year looking? Expecting a profit or loss? Have you been able to keep your records up to date? Do you know if your cash flow projection is good or are loans needed? Spending only a few minutes a day to ensure documents and receipts are organized can make a huge difference in being able to track and project farm finances.
There are many options for recordkeeping such as farm management software programs that range from simple expense records to labor management and enterprise tracking. Michigan State University’s (MSU’s) TelFarm program supports QuickBooks and PCMars, but there are several options that work well for farmers depending on needs and technical abilities. A simple solution is keeping paper records and a free Farm Records Book.
Tax planning
Even though the year isn’t over yet, now is the time to evaluate this year and plan for next. What is working well and what adjustments need to be made? Are you prepared to pay a large payment for taxes due? If income projection is low, can you postpone some expenses? MSU TelFarm offers tax planning services by the Farm Business Management team. Be sure to read “Year-end tax planning is valuable for good years, bad years and everything in between” by MSU Extension’s Corey Clark for insight.
Farm financial analysis
If you are not doing an annual financial analysis, now is the time to consider it. This can give you and your lender information on your ability to grow or change your business and compare benchmarks for opportunities for improvement. A solid balance sheet including accurate inventories and asset details along with cash flow statements will give lenders a picture of your ability to finance debt. Learn more about MSU’s TelFarm program, which can include an annual business analysis.
Cost of production
Are your production records reliable? Review prior cost of production and accuracy of production records. If not already known, calculate the cost of production and review your records. Run estimates for year-end results and know break even prices needed to cover input costs. A small difference in what you thought was produced versus what was sold and used or kept in storage should give more accurate results to compare. Find some helpful tools here: Budgets and Cost of Production - Farm Management.
Commodity marketing
Will higher yields at lower market prices be enough to produce a profit? Sometimes the market may not offer a price equal to or above your cost of production. Creating a marketing plan that uses a few different marketing tools for selling your grain is recommended. This can help you better manage your risk and improve your chances of locking in profitable prices. See “Price checking your grain market strategies” for more information on this topic.
To learn more about grain marketing and pricing tools, review MSU Bulletin E-3416: Introduction to Grain Marketing. MSU Extension also offers an Introduction to Grain Marketing: Video Series based on Bulletin E-3416. Beef producers be sure to read Frank Wardynski’s article “Protect high cattle prices with risk protection” regarding the Livestock Risk Protection program.
Entity reporting is required
Is your business organized as an entity, such as an LLC, S Corp or corporation?? If so, you will need to report your business information for the Corporate Transparency Act (CTA), which is a simple registration that will save you a significant penalty if done before the Jan. 1 deadline for current businesses. This is a new requirement; the CTA is an anti-money laundering law passed by Congress in 2021, so add it to this year’s to-do list. Find more information here: Reporting is underway for the Corporate Transparency Act: Farm and Ag Businesses must report before Jan. 1, 2025.
Succession planning
Are you at a point where you are thinking about the next generation taking over? It’s never too soon to learn about how to prepare for transition and include younger generations in learning about farm management and your operations. See “Designing your farm succession plan for maximum success” for some helpful information, no matter what stage you are at.
Farm stress
Are you concerned about yourself, a family member, a friend or a neighbor? Farming, especially during tougher economic times, can be stressful dealing with the many unknowns and variables. Check in with your family and friends and reach out when help is needed. In-person discussions and healthy relationships are vital to mental health. MSU Extension has many resources and educators that can help identify and manage stress.
Other things to consider
- Talk to your local Farm Service Agency and conservation districts office for government programs that may offset risk or grant funds for conservation programs such as planting cover crops.
- Vegetable growers may be able to adjust selling prices if needed. Do you know your input and production costs and prices of market competitors?
- Can you negotiate leases? If possible, convert to a rent based on yield or revenue with a smaller base payment. Flexible farm lease examples and much more leasing information is available on the MSU Extension Farm Management’s Land Energy and Leasing Contracts page. Learn more about financial planning and other topics at your own pace and make sure to revisit topics for important updates. One example of a great course would be “Finding Financial Success in Uncertain Times,” a free, self-paced, online course that covers topics such as record keeping, cost of production and integrating insurance programs into marketing strategies.
- Talk to an agronomist about seed, chemicals and fertilizers needs. There may be ways to cut expenses and reduce unnecessary inputs if your business forecast isn’t looking great.
- Learn more about financial planning and other topics at your own pace and make sure to revisit topics for important updates. One example of a great course would be “Finding Financial Success in Uncertain Times.” a free, self-paced, online course that covers topics such as record keeping, cost of production and integrating insurance programs into marketing strategies.
Many resources are available in addition to MSU Extension programs and websites, like lending institutions, agricultural vendors and United States Department of Agriculture resources to help with farm business decision making. Whether you prefer to read articles or attend webinars or classes, there are several options available to suit your needs. If you can’t find what you are looking for, be sure to contact your local MSU Extension farm business management educator for help or to discuss new topics that would be beneficial.
