By: Mike Estadt and Chris Zoller, OSU Extension Educators
Forecast
The United States Department of Agriculture Economic Research Service (USDA ERS) divides the country into regions for analysis and reporting purposes. These regions are delineated by the types of agricultural production in each area. Recently, USDA ERS announced its projection that average net cash income for all regions will be 18% lower when compared to 2022.
Net cash income is calculated by subtracting cash expenses from gross cash income. Increases in production expenses, reduced receipts, and less Government payments are cited as contributing factors in the projected 18% decline in net cash income. Reductions in net cash income are expected to range from -9% to as much as -30%. The Heartland (which includes Ohio) is forecast to experience a 13% decline in net cash income.
What to Do?
Assuming this forecast is true, now is the time to formulate a plan. We offer the following suggestions:
- Regardless of what you produce, know your cost of production.
- Review and adjust your budget: Take a close look at your financial situation and revise your budget to align with the projected reduced income. Identify areas where you can cut costs without compromising the quality of your operations. This may involve reducing expenses such as equipment purchases, inputs, or labor.
- Diversify your income streams: Explore opportunities to diversify your income by expanding into complementary agricultural activities or exploring non-farm ventures. For example, you could consider value-added processing, agritourism, or direct marketing to consumers through farmers’ markets or online platforms.
- Improve operational efficiency: Look for ways to enhance productivity and reduce waste on your farm. Implement efficient farming practices, optimize resource allocation, and consider adopting technologies that can streamline operations and reduce costs.
- Evaluate crop and livestock selection: Assess the profitability and market demand for different crops or livestock products. If certain commodities are projected to have lower returns, consider diversifying your production mix by focusing on crops or livestock that may offer better profitability prospects.
- Manage risk effectively: Given the uncertain agricultural market conditions, it’s crucial to have risk management strategies in place. Explore options such as crop insurance, futures and options contracts, or other risk management tools that can provide some protection against price volatility or unexpected events.
- Seek additional education and resources: Stay informed about market trends, agricultural policies, and technological advancements. Attend workshops, webinars, or conferences to learn about best practices and access resources that can help you navigate challenging times.
- Collaborate with other farmers and stakeholders: Engage with local agricultural organizations, cooperative extensions, or farmer networks to share knowledge, resources, and experiences. Collaborative efforts can help reduce costs through group purchasing, shared equipment, or joint marketing initiatives.
- Explore government assistance programs: Stay updated on government programs and initiatives that provide financial assistance or support to farmers during challenging times. These programs may include subsidies, grants, or loans specifically designed for the agricultural sector.
- Monitor and adapt: Regularly monitor your financial performance, market conditions, and emerging trends. Be prepared to adapt your strategies as needed to navigate changing circumstances and take advantage of new opportunities.
Utilize these resources as you evaluate your business and develop a plan.
- OSU Extension Farm Business Analysis and Benchmarking Program (https://farmprofitability.osu.edu/)
- OSU Extension Enterprise Budgets (https://farmoffice.osu.edu/farm-management/enterprise-budgets)
- University of Minnesota, FINBIN Financial Analysis data (https://finbin.umn.edu/),
Summary
Remember that these are general suggestions, and the specific actions you should take will depend on your unique circumstances, the type of farming you engage in, and the specific factors affecting your local agricultural market. It’s advisable to consult with agricultural experts, financial advisors, or relevant professionals who can provide personalized guidance based on your specific situation.
References
USDA Economic Research Service Chart of Notes, https://www.ers.usda.gov/data-products/charts-of-note/?cpid=email