Prepare for Rising Farm Costs in 2024

Agricultural forecasts for 2024 predict increased expenses for everything from machinery and equipment to taxes and insurance. But if everyone is facing the same rising prices, why aren’t all farmers in the same economic position?

Make strong decisions for your agricultural business in 2024 by considering the following key areas:

• Land cost: Does your cash flow support the cost of the land needed for your operation? A high land cost can pressure expenses in other areas or decrease your profit margin.
   
• Machinery cost: Are your machinery and vehicle costs appropriate for the number of acres you operate? Investing in an equipment line sized for your business can propel it to great achievements, but too much debt can tip a business over.
   
• Working capital: Having adequate working capital in relation to the size of your business allows you to make the right management decisions. Apply for capital now to prepare for expenses later.

Manage your costs and cash flow

Staying on top of cash flow drivers is a crucial way top producers manage their operations. 

• Commodity prices: Develop, update and execute your written marketing plans, review comprehensive risk management practices and ensure you have the proper level of crop insurance.
   
• Yields: Strong production is key to driving down the breakeven price.
  
  
• Living draws: Many producers dramatically underestimate this number. Make sure you know your actual living cost by going through the detailed calculations.
  
  
• Other operating costs: Look for opportunities to reduce costs without harming the bottom line.
  
  
• New income sources: Consider changes that allow new income sources either from business operations or off-farm employment.
   
• Income taxes: Analyze and develop the most appropriate approach in managing your income tax liability.
   
• Capital spending: Assess if there are non-essential or non-earning assets that should be liquidated to free up cash. Evaluate the return on investment for new capital purchases.
   
• Know your cost of production: Develop a “manage by the numbers” approach to steering your business decisions and investments.
   
• Finance structure: Debt servicing requirements are driven by finance structure and terms. This is typically the last component of developing a plan to ensure that your cash flow breakeven price is competitive. 

Remember, even minor adjustments can have a significant impact that makes the difference between a year of success or a struggle to break even.

Unlock capital to reach your goals 

Life happens—especially around the farm. You can talk with a trusted financial officer about term loans to cover the smaller purchases and equipment you need to keep moving, or can apply online for up to $1 million for an operating loan and $2.5 for a farmland loan.

Whatever your situation now, and your forecast for 2024, Compeer Financial is here to help you define your future.

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