The fifth and final week of the Agribusiness Management Program (AMP) Summer Webinar Series featured Bob Rhea, CEO of Illinois FBFM. Rhea presented on the elements of G.R.I.T. that farmers have demonstrated and will need to continue to focus on to ensure success of their operations.
G – GRIND to succeed
Each of the previous few years has brought a set of unique challenges that force farmers to grind through tough situations to make ends meet. 2020 has taught us that we all need to be prepared and flexible enough to work differently than we may be used to.
From a financial perspective, the basic premise of grinding through a tough year is to spend less than you earn. While the concept is simple, the actual execution can be tough to implement. The good news is that a large percentage of Illinois farms are profitable and have a low enough debt-to-asset ratio that they are in a good position to expand. For those that still have work to do, Rhea suggests reviewing expenses and trying to cut 2% from each area at a time. This reduction in expenses will add up across the board and increase farm profitability.
R – RELATIONSHIPS that boost performance
In farming, relationships are extremely important, whether its within your own family or with outside vendors and organizations. Those relationships can impact the profitability of your farm and should be considered as you look towards a positive return on your end of year balance sheets. Do you have a good relationship with your landlord? Perhaps there are creative lease agreements or bonus rent terms that could increase profitability for both parties.
Especially important in 2020/2021 is your relationship with a tax adviser. Understanding tax obligations is an important part of looking at your overall financial health. With 2021 crop budgets currently trending towards a negative return for soybean farmers, anything you can do now to ensure a positive return in the coming year(s) is an important priority.
I – INNOVATION to create solutions
Innovation and farming go hand in hand, but we often think immediately of technology or new production practices when we think of innovation. Another important area of innovation is within a farm’s finances and understanding options as they relate to tax deferrals, interest rates, credit opportunities, working capital and land values. Being proactive in identifying where you can take an innovative approach with your finances can be a benefit to your business.
T – TALENT to perform in business and production
Illinois farms have some of the most talented people working on them and it is essential to keep that level of talent high. Farms must remain competitive in terms of labor and management income to bring talent back to the farm and remain competitive with other industries. Rhea reviewed a list of some of the habits of financially resilient farms, which include the following:
- Attention to detail
- Operation cost management
- Maximize yield
- Disciplined spending
- Machinery cost management
- Land control and rent strategies
- Financial planning
- Overhead cost management
- Implementing new technologies