Large farm management can be rewarding but exhausting and expensive at the same time. Bigger farms have a higher risk of crop failure, require more investments, increased needs for farm inputs, and more data to manage.
Large-scale farmers are currently facing many challenges linked to the increasing production cost. According to USDA data, farm production expenses in 2022 have increased by 6% from 2021. This is after a 12% increase in production expenses in 2021 from 2022.
The recent steady increase in farm management expenses has mostly been fueled by supply chain bottlenecks and increased commodity processes, which are beyond the farmers’ control. While that is the case, there are still ways farmers can reduce expenses and preserve working capital.
1. Leverage Agricultural Precision Technology
Precision technology helps farmers use farm inputs economically. Accurate use of fertilizers and seeds can reduce waste and increase productivity. Precision technology aims to help farmers produce more with less input.
Common precision technology used in farm management includes drones, GPS, and satellite images. The technologies give farmers access to information on key components of agriculture and farm management, ranging from weather forecasts, crop status, and environmental changes to security on the farm.
How does this data help save costs? For instance, when it comes to security, farmers don’t need to fuel their vehicles and drive along the farm’s perimeter every day to track unusual activity. Using drone technology, they can monitor their farms from the comfort of their homes and save on fuel.
Through satellite images, farmers can get accurate information on sections of their land that have been affected by pests. Instead of spraying pesticides on the entire farm, even in the unaffected areas, they can pay attention only to affected areas, reducing the amount of pesticides used.
Drones and satellite images can also provide farmers with data that will tell farmers areas of the farm that need fertilizers.
Drip irrigation is also a form of precision farming that can reduce water consumption by 60% and increase yields by 90%.
2. Strategic Chemical Purchasing
Farmers need to evaluate their chemical consumption and purchasing strategies to save costs. Research is a critical step in purchasing fertilizers, herbicides, and pesticides. Simply picking the cheapest products in the market does not cut it.
Using low-cost chemicals only to experience a surge in resistant weeds is not exactly the definition of saving costs.
You should keep in mind several things as you review the efficiency of your chemical purchase. For instance, it may be time to consider alternative generic herbicides or equally effective pesticides that come at a lower cost. Invest some time in research to find the chemicals.
Don’t be too fast to embrace a guarantee or warranty on farm chemicals. Evaluate alternatives to the product with a warranty, and you will be surprised that even after re-spraying, you will still pay much less.
Be careful with the promotions. If you look at it objectively, you will end up spending more on quantities your farm doesn’t need. Avoid the temptation.
You can also reduce the amount of money you spend on pesticides through integrated pest management techniques like planting disease and insect-resistant crops.
3. Save Money on Seeds
The cost of purchasing seed is significant to your overall farming expenses. Being smart when purchasing seeds can bring you great savings. You need to find a way to access the best seed quality available at a low cost.
Tracking your previous usage and inventory will help you create a good plan. Identify your farm needs, how much seed you require, your previous purchases and whether they worked. This way, you can tell if you have been buying too much or little seed.
While buying in excess causes unnecessary expenses and wastage, buying too little and then having to re-purchase to fill the gaps can make you miss out on economies of scale. Buying the right quantity always helps.
Buy in bulk and never miss out on an opportunity for economies of scale. Buying in bulk also earns you amazing discounts that can help you save money in the long run. Placing early orders can allow you to negotiate the prices and shield yourself from price volatility.
4. Restructure Your Farm Loans
Operating loans can support farming operations by financing the purchase of seeds, livestock, and equipment. Farmers can construct farm buildings or expand a ranch through farm ownership loans. You could also use emergency loans to recover from drought, natural calamities, and pest infestation losses.
Restructuring your debt can save you loan repayment costs and ensure you have enough working capital. Part of the restructuring you could do is consolidate your farm loans into a new loan with favorable payment terms.
When servicing a loan with lower payments, you can increase your working capital and inject funds into farm improvements and operations that can improve profits.
Stretching amortization can also increase your liquidity. You can stretch amortization to make lower payments. While stretching your loan payment schedule will slow down the rate you pay back your loan, cash flow will not be restricted.
Restructuring existing loans can reduce the cost of debt by lowering the interest. If your consolidated farm debt has less interest than the individual loans you had, you can use the opportunity to increase the size of your installments to complete payments faster. This way, you can even save more interest in the long run.
Cut Down Large Scale Farming Costs with The Help of Farm Management Professionals
While large-scale farmers often face financial challenges beyond their control, there are many ways they can reinforce the financial power of their operations.
Cotton Grace farm management professionals can help you reduce the cost of farming without trading your productivity. We offer a wide range of farm management services that can help you increase the cost-efficiency of your farm operations.
Contact us to learn more about how you can build a thriving and sustainable financial foundation for your farm.