In 2021, farmers in America are expecting a higher revenue because of the retail increases, but there is also higher input costs (feeds and fertilizer). No one knows what is going to happen after the pandemic and the policies set by the new administration and how it is going to affect farm labour costs and consumer purchasing. It could be heading towards a year of fall in profits, and this demands creative ways of cutting down on costs.

If you want to make the most out of this uncertain economic environment, then you have to look at your 2021 budget then looks for ways of reducing your expenses. There are three questions you need to ask yourself as you review your budget line-items:

Are the investment/expenses important to my long-term goals?

Think about the investments or expenses as things important to the short-term cash flow and also viability in the long term. Don’t just think about today. What type of business would you like to have fifteen or even twenty years from today?
Stock and feed can fall into the category for immediate cash-flow purposes, but investing in infrastructure or equipment that provide benefits in the long term. This is even important for those who want to sell or hand over the running of the business to the new generation. Make sure you see things from a long-term point of view. If you would like to learn more about milking parlour equipment then see here.

Are the expenses controllable?

There are those expenses that are beyond your control. Inputs like fertilizer, utilities, fuel, and power are variable costs but uncontrollable. You can’t do anything to change the price of fuel. Even though you can’t do a lot about the cost, you can easily control your consumption.

What is the timeline of that expense’s effect?

It is important to understand the return timeline, especially when dealing with major expenses. There are some measures that are going to produce immediate effects, e.g. reducing fertilizer use or seeding rates. There are some measures that are going to have a slow return and the savings can be seen over time.

Below are ways of saving on your farm’s expenses:

Re-evaluating seed traits and sourcing

If your farm plants row crops, then it is time to consider whether you need to have the latest high-tech hybrids. While there is yield protection when investing in additional traits, they don’t help with the yield. Sticking to one or two traits is enough to have a profitable yield and not pay for the latest releases. If you choose a simpler variety, then shop your seed sourcing. Looking for an alternative supplier can end up saving you a lot of money.

Doing the homework

Negotiating or reconsidering high cash rents. If you are dealing with increasing rent costs on given fields, then it might be time to start re-evaluating and determining whether the fields are worth the cost. Are there less expensive alternatives you can go for or do without the field so you can maintain your margins? This seems like a dramatic change, but it might offer both long-term and short-term benefits as you start looking for other land lease options.

Improving your conservation management practices

You could reveal hidden savings on opportunities on fuel, labour, and equipment without radical impacts on your farm system if you improve your management practices of integrated pest management, crop residue, livestock water or irrigation.

You can convert to solar power to have control of your energy costs. Solar systems have improved in terms of their longevity and the power they can generate. With solar power, you are getting savings on your energy costs and also a source of revenue because you can sell it back to the power grid. Add new revenue streams and control variable utility costs at the same time.