What's Your Plan for 2014?

Finance First

Look at input prices in light of the bigger picture of your operation

Published on: October 22, 2013

We're hearing more questions from our clients – even as they're still harvesting – about plans for the 2014 crop year. And right now, it's not too early to be planning for 2014 even if you're still in your fields.

Farmers have been talking with our ag finance specialists about 2014 crop year plans as they run 'what-if' scenarios for them on land purchases or cash rent leases. These budget discussions are critical to success next year.

It's important to have a crop year plan every year, but 2014 looks to be especially important. With record farm incomes the past few years and lower commodity prices more recently, margins could be tighter. Planning will be a must for every farm.

Look at input prices in light of the bigger picture of your operation
Look at input prices in light of the bigger picture of your operation

One area to pay attention to is input price levels – and how moves in input prices are going to affect your ability to cash flow any new land you've bought or cash rent leases you've signed. You'll want to use projections to see what 2014 could look like for your operation.

Get that in place early. Then you can make changes and adjust as you discover more about what your year is going to really look like from a financial perspective.

Remember that swings in input prices generally follow market prices. But there's usually a lag between a move downward in the grain and livestock markets and a corresponding move down for input prices.

The input costs we saw in 2013 were based on the higher ag commodity prices of the past few years. Now that commodities have moved to lower levels, inputs will follow – just not immediately in step with commodities.

That makes watching and managing your input costs extremely important for 2014. Ask yourself: What could affect the success of my operation in 2014? Look ahead to anticipate potential challenges. Then once you've identified those, you can start thinking about how you're going to take action to address them.

As you finish in your fields, you'll want to be scheduling meetings with your banker, financial advisors and other specialists to do this planning. Do forward projections for your operation. Use the overall financial picture of your farm as you consider when to lock in inputs or whether you should sign a particular cash rent lease. The numbers need to back up what you're choosing to do.

Though we're wrapping up – or, in some cases – in the heart of the 2013 harvest, now is the time to start thinking about plans for 2014. Use the overall view of your operation as you plan for a successful 2014 crop year. Make decisions that will lead to a big picture of success for your farm – as we come into a year that might throw more challenges at us.