Making a Farm Financially Resilient

At Understanding Ag, we often talk about how focusing on the Six Soil Health Principles leads to resiliency of the Four Ecosystem Processes on our farms. That is extremely important and doing so certainly significantly lowers input costs, helping to make our farms more profitable, but if we genuinely want our farm to be financially resilient, we must become Price Makers instead of being Price Takers.

Look at how most farmers market their production. They haul grain to a terminal when they need money, “taking” what they are offered. They haul calves to the auction barn, “taking” whatever dollars their calves sell for. Yes, farmers can hedge or forward contract, but they can only do so with the prices that are posted for the specific commodity.

The recent global events have shown just how fragile commodity markets are. How resilient is your financial model when it depends on your grain being shipped halfway across the country, loaded on a ship, and sent halfway around the world? How many transactions must take place, flawlessly, without it affecting you?

What if fuel prices rise? What if the workers at the port go on strike? What if shipping lanes are adversely affected? What if the company owning the ship goes bankrupt? What if a foreign government decides to buy grain elsewhere? What if our government decides to put an embargo on that country? I could go on but you get the picture. I hate to be blunt here but that is NO way to be financially resilient.

Now contrast that to a conversation I had recently with a UA client who has been laser focused on implementing regenerative practices for the past six years. This client grows eleven different cash crops and cover crops on over 5,000 acres, taking pride in marketing them to companies who want regeneratively grown grains.

He stated to me, “Gabe, no matter what crop I grow this year, as long as I get it in the bin, it will be profitable.” What a beautiful statement to hear! That is a resilient farm! How much freedom does that give him and his family?

So, what are he and his family doing that allow for such freedom? The answer is simple, they have become Price Makers, not Price Takers. Their focus on the Six Principles of Soil Health to drive the Four Ecosystem Processes have allowed them to drastically reduce fertilizer, pesticides, fungicides, and herbicides. Their soil infiltrates rainfall and then increased organic matter holds that moisture, giving them resilience to drought.

Their marketing begins years in advance. They spend the time promoting their farm, seeking out buyers who are looking for high-quality grains and are willing to pay for that quality and the story behind it. They look for opportunities to grow different crops that can both enhance their crop rotation and increase profitability.

They build relationships. This takes work, time, and commitment. However, the financial freedom they receive is well worth it.

If you are interested in becoming a Price Maker instead of a Price Taker, reach out to us at Understanding Ag.