Farm Horizons • Feb . 6 , 2017 • Page 15
have yet to see a farm go broke because they had to pay income tax .
We tend to focus on selling the crop as a way to be profitable , and it is important . However , it is not the only concern for profitability .
One of the big issues for crop production the past two years is that the revenue has been going down , while input costs have remained steady . Fuel is the one expense that went down , and now fertilizer costs are moving down . Land rents have been very slow to move down , primarily because there is enough demand for land . We , as farmers and landlords , need to realize that not all acres are equal . We need to be able to identify this and set land rents accordingly .
The internet has given us many more avenues to research items and to buy inputs cheaper . You may find your favorite chemical $ 1 or $ 2 cheaper online or out of state , but if you factor in transportation costs and increased liability for chemical storage , did you save anything ? If you buy the majority of your inputs based strictly on a per-gallon price , do you expect the local retailers to provide the same service to you as the farms that purchased from the retailer ?
I am all for saving a buck or two , but I also recognize that the service intangibles that I receive have a value . Businesses need to recognize this and tell people that if they didn ’ t buy it there , they don ’ t have advice for that product . I know this is sometimes a fine line between business responsibility and good stewardship , but we need to identify it . If you find a good deal for an input or a supply that you need , then go ahead .
Understand that your lenders are watching what you do . If you submit a cash flow that is acceptable to the lender and the next time your lender sees you , you are driving a new truck or pulling a new boat that was not in the projection , you need to understand that this raises big red flags and he / she will start to question what else you are doing that has not been communicated .
You need to have regular conversations with your lender , and once a year to renew the operating loan is not a regular conversation .
Make it a point in 2017 to stop and have a chat with your lender , and give him a quick update on what is going on at your farm . Have you finished planting ? How is the crop looking ? What is the milk tank average and SCC for the month ? What is going well , and what has been a challenge ? What are you thinking about implementing ?
Your farm does not operate in a vacuum ; you have competition . In a commodity market , the winner is the one who can produce it the cheapest and market it for the most . How do you compare with your competition ?