- Figure cost of production to a per-head basis. “It comes down to the thinking of ‘You can’t manage what you can’t measure,’ ” ag banker Troy Soukup says. “This is so cliché and doesn’t make for sexy magazine fodder, but it is important.”
- Separate your operation into individual enterprises. Background and finish cattle from your own cow herd? Soukup advises each of those be treated as separate businesses. “You have to break them down individually and study where you are making money and where you are not.” This will keep one enterprise from subsidizing another, allowing producers to seek more profitable marketing channels if need be.
- Intensify your management practices. Strip-graze cover crops, put in a rotational grazing scheme, hone in on genetics or look for management programs to collect premiums on calves. “Every dollar counts when things are tight. We started to put in cover crops so we can graze cattle for more of the year and rely less on expensive machines,” Soukup says. “A 5% increase in production and price, along with 5% reduction in costs, has a large percentage impact on net profit.”
- Match rate length to your needs. “The obvious place people want to go when faced with rising interest rates is to fixed rates, but it really depends on their needs,” Soukup says. “The yield curve has gotten much steeper since the presidential election, placing a greater cost premium on longer term rates. Don’t overpay for protection you may not need.”
4 tips for smart banking
Concerned about your banking relationships as the farm economy turns south? Here are four tips from banking experts.