Steffes Group


“Getting Lean” is Never a Bad Idea, Especially When Ag Markets are Choppy

“Getting Lean” is Never a Bad Idea, Especially When Ag Markets are Choppy

Farm profits for 2018 will decline about 10.5 percent when all the crops and numbers are in, according to the USDA’s recent forecast. And on an individual level, many operations are facing leaner times, with shorter cash flows and conservative outlooks for 2019 and beyond.

As we talk with farmers in the upper Midwest about their own situation, our advice keeps coming back to two words: Get lean.

“Whether times are good or bad – or somewhere in between – an efficient operation is always in a better position to respond to market opportunities or pressures. Farm sector profits overall have trended downward for several years, but a lean operation can level out those bumps,” said President Scott Steffes.

Here are a few suggestions for getting lean:

- Liquidate under-utilized assets or equipment. Let’s say you have a tractor that only gets 100 hours a year. Sell it and get out from under  the payment, or put the cash to use elsewhere.

-When it’s time to trade in a truck or piece of equipment, do it yourself rather than trading it in at the dealership. It’s a little more trouble, but you’ll get more money for it.

- Go with what you have. If you can get another year or so out of a tractor with some maintenance or new tires, that’ll put more money in your pocket.

- Buy used, rather than new vehicles and equipment.

- Sell peripheral assets. If you have a farm that’s less profitable than your core holdings – either because of distance or higher costs -- consider selling it.

Finally, if you’re having trouble making your loan payments, talk to your lenders before they sense trouble and come to you. They want to keep you as a customer, and it’s in their best interest to help you stay financially healthy.