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 However, while crop yields were high, the financial return was
lower than anticipated. Prices dropped considerably as the harvest
season moved on.
As is the case with any business, the goal of farming is not just to
produce a product but to make a profit while doing so. Illinois
farmers will no doubt be looking for ways to minimize potential
losses in the future and make up for losses suffered after years
such as 2014.
One way to minimize potential losses in the business world is to
reduce costs going into production. Illinois farmers will be looking
at their budgets and cutting costs where they can to help secure a
greater profit. Again, this is a standard way of thinking in the
business world, but such a way of thinking does not come without its
own risks.
There are several areas of expenditure that may come to mind when
looking to save money in the field:
Overall acreage
A farmer may likely consider trying to expand their farm ground in
order to bring in a potentially higher profit at the end of the
season. Theoretically, a greater amount of product sold would make
up for a lower price of sale. However, as we have seen after 2014,
that line of thinking is not favorable for more than one or two
years in a row. Additionally, farmers would face the increased cost
to operate a greater amount of acres. The alternative is to reduce
the amount of land farmed to try and negate potential losses, but
such a move will also reduce a potential profit even farther should
the price be too low at harvest.
Pesticides
The expense of pesticide could be reduced if a farmer decided to use
a different brand of chemical. However, cheaper pesticides are
similar to other cheaper merchandise in the sense that buying cheap
is not always smart. A cheaper pesticide may be cheaper for buyers
because it costs less to manufacture, which means the ingredients
may not be as effective. In addition, crop ailments may become more
resistant to pesticides as years go on, and switching to a cheaper
(but potentially less effective) formula may not protect the crop
and profit.
Seeds
Seed, much like pesticides, should be approached with the same
method of thinking. Cheaper seeds, much like cheaper foods in the
grocery store, may not come with the same quality of product in the
long run, which may result in lower quality and quantities to market
after harvest.
 Labor
Farmers may be thinking of reducing the amount of farmhands that
they bring on to help with the everyday operations of a farm.
However, with a reduction of labor comes a greater demand on the
farmer himself. This may not necessarily result in a poor product in
the same vein as saving on seeds or pesticides. However, the toll of
such savings could be a loss in an emotional sense, creating stress
for the farmer and any family they may have. As a result, the
savings kept from not paying farmhands may be needed for medical
expenses in case of injury or stress-related problems.
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Machinery
Farmers looking to purchase new machinery with last year’s profits
may decide to hold off on buying new parts or vehicles. That
certainly makes sense, given the high cost of such equipment.
However, holding off on new mechanical purchases assumes the risk
that existing machines will not break down due to age or wear and
tear. On top of that, many modern machines come with digital
technology that operates them, which requires constant maintenance.
Is it necessary to keep upgrading every year? Not necessarily, but
this measure of savings comes with a very high potential cost. On a
related note, some farmers may decide to stretch their schedules on
routine maintenance, such as oil changes or part replacements. Much
like owning a car, scheduled maintenance can be altered, but routine
maintenance can often prevent expensive problems down the line.
Crop Insurance
Crop insurance can be a major cost for farmers. According to
estimates provided by the University of Illinois, premiums for crop
insurance are set to be higher for 2015 than in 2014. Some farmers
may decide to forego crop insurance in an attempt to save on
expenses. There is nothing stopping them from doing so, but, as is
the case with any type of insurance, it only takes one emergency to
make someone rethink. The year a farmer does not buy insurance could
also be the year a late frost with no opportunity to replant, freak
flood, prolonged wet and cold conditions, drought, tornado,
straight-line winds, hail, fire could all decimate hundreds of
acres.
The above are all ways in which farmers could try to cut down on
their costs to recover after a year such as 2014. Unfortunately,
while these measures do cut down on expenses, each one comes with
multiple risks that carry potential greater loss of profits.
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