Aside from being a tough profession, there’s no denying that farming is a high-cost enterprise. There are a lot of resources to manage, machinery to maintain and use, not to mention labour costs to handle. What’s more, farms of different types can be run very differently from one another, so specific advice can sometimes be difficult to lend. Most importantly, you don’t want to cut costs in ways that also cut your yields and eat into your profits. As such, here we’re going to look at ways you can manage the costs in your farming business without putting the whole enterprise at risk.
Tighten your financial planning and controls
No business owner can completely predict how their finances are going to be at the end of the year. This is especially true of farming, which is one of the industries most regularly and heavily hit by changes in legislation, not to mention the supply chain and the demand from other partners in the supply chain. However, with the help of farming accounting software, you can make sure that you’re thoroughly tracking your cash flow, planning any investments with care, getting accurate estimates of profits you should be making from the number of crops you will grow, as well as factoring in the predictable costs such as land and equipment leases, as well as seed, feed, and agrochemical purchases.
Do the math on your investments
The accounting software can help you better track your numbers so that you have a better idea of what your financial situation is going to be like down the line. However, for any investments or inputs that you buy for your farm, you need to make sure that you have a good idea of how much return on investment that you’re likely to get. As such, you need to compare the cost of the product or service, then take the time to calculate, by what measurable metrics you can, the value of the service or product. You might be able to invest in cheaper products and services by making cuts, but you want to make sure that you’re not reducing the value you can expect from them by too much at the same time.
Consider shifting your efforts to no-till farming
One of the most labour intensive jobs on any farm is that of tillage. Having to disturb the soil to prepare the land for crops is vital to many efforts, but it also requires a lot of manpower. Switching to no-till farming reduces the number of steps involved in planting crops, which means you’re spending less on both the men and machines that do the work. However, it also leads to less soil erosion over time, better retention of soil moisture, and thus can give you more resilient and fertile soil to grow from. Making the switch to no-till farming is an investment, but modern zero tillage technology has made it possible and cost-effective once you get it set up so it may be worth looking into more closely.
Rethink how your farm uses chemicals
Despite the fact that general public perception of pesticides and herbicides continues to trend towards the negative, the truth remains that farmers continue to need them to deal with pests and weeds that would otherwise destroy harvests. However, that’s not to say that you couldn’t be using less of it. It may be worth taking the time to re-evaluate how much you spend on chemicals, considering alternative methods of battling farm weeds. If you are going to continue to use pesticides and herbicides, then look at where you get your supply from and make sure that any deals you are getting actually offer better value even if the competitors have a higher advertised price tag.
Consolidate your purchases as best as possible
When it comes to buying the materials you need for your product, whether it’s feed or seed for planting, then buying in bulk is already how most farms work. However, you might be able to save money on delivery and other associated costs with larger purchases if you are able to consolidate all of your purchases from one supplier. If you are currently buying different types of seed from different sellers, for instance, then you should put together a list of all the seeds you buy in total and send that list to each of your suppliers to see who could meet your entire supply for cheaper.
Consider where you get your machinery from
Some of the highest-cost assets in your business are going to be the farming machinery that you use to do the work that would be so much more expensive to do by hand. If you have been working with the same supplier for years, you might be missing the opportunity to buy or rent machinery at a much more cost-effective rate, whether it’s tractors, harvesters, cultivators, irrigators, or otherwise. Take a look at some of the different suppliers out there and see if they offer any better deals. It might not come in terms of the price of the machinery itself, but in the value-added through maintenance and replacements, for instance.
Consider where you may not need to buy
There are some pieces of farm equipment that you’re going to need on a regular basis, so you should make sure that you have them on hand at all times. However, there may be other machines that you use on a much more reasonable basis, such as a cultivator or a land imprinter. If you’re not using the machines often, then they could be sitting in your storage space, taking up room and energy to keep them safe and maintain them. You could be spending a fraction of the cost to simply lease them out for the few days or weeks that you need them before returning them. At some point, owning is going to become more cost-effective than leasing, so consider how often you would need to use a machine to justify spending enough to buy it outright.
Maintenance is vital for cost-effectiveness
Of course, the purchases of obtaining your machinery aren’t the only costs that you have to contend with. You also need to consider the costs of keeping them operative. The more you have to spend on repairs and replacements throughout the years, the less cost-effective those machines become. Their overall effectiveness and productivity will decrease in the long run as well. As such, taking the time to slow that process as best as possible is usually going to be the cost-effective option. Take the time to complete a full preventative maintenance schedule for any of the equipment on your farm, especially those that you use on a regular basis.
Know how much storage and transport you need
Not knowing how much produce you’re going to be storing or shipping out is always going to cost you. Either you’re going to have more produce than you anticipated, which means you need to either throw away extra produce or quickly buy or lease storage and fulfilment options to get it all on the road, or you’re going to overestimate it and spend more on transport and storage space than you should. Making sure that you have predictive management of your farm produce will ensure that you’re able to plan your outgoing supply chain much more accurately and avoid overspending by too much.
Are you maintaining too much land?
Consider the fields that you’re currently working on and how much you are getting out of them. At some point, the cost-effectiveness per acre is going to start to dip and it’s at that point you might want to consider cutting some of the lands to free up some cash? This is especially true for those who are renting fields that are starting to produce less profit than would justify keeping them. You might be able to use the money gained by letting go of land leases to instead invest in production and increase your yield from existing fields, or you could look at land lease options to try and find more profitable land lease options.
Not taking care of debt efficiently
Most farms run with some level of debt. However, how you manage that debt can play a huge role in the overall money management of your farm. You might think that you want to keep debt payments low enough so that they don’t affect your cash flow too much and it is true that you need to consider this to some degree. However, paying too little means keeping those debts for longer, which in turn means that you’re going to be losing more to the debt over the course of the year. Working with a bookkeeper could help you strategize the most effective way to pay off your debt without putting your operations at risk.
The specific solutions that can help you cut costs might not look exactly the same as the tips featured above. However, hopefully, you get some ideas that help you implement the solutions that will work in your case.