The inflation rates in the US have reached records high in recent years. The annual inflation rate is 7.7% for the period ending October 2022. The country is widely affected by rising inflation and increased commodity prices. Although the GDPO growth is growing, many economic troubles remain for farmers and the farming industry.

The consumer has little to no control over the increasing prices at such times, and they can hardly take any steps to halt or slow the inflation rate. Of course, things are no different for the farming industry, as farmers and farm owners spend billions of dollars on expenses.

So, how can farmers continue farming without inflation having a considerable impact on their management?

Rising Inflation is Bad News for Farmers

Inflation has a diverse effect on the country’s economy. However, it often has a negative impact on industries like agriculture. Whenever inflation increases, the interest rates also go up, meaning farmers have to pay more on debts and insurance.

Moreover, the price of raw materials and farming goods like fertilizers, pesticides, seeds, and others will increase. Farmers will have to buy less, which affects their yearly yield. However, the right strategy, correct steps, and quick judgment of the economic situation can help farmers survive in harsh economic times. During these times, we will help guide you in the right direction based on your goals and needs.

3 Tips for Farm Management in High Inflation Times

During inflation, commodities and goods become more expensive, lowering the purchasing power of people and businesses. Apart from real income, inflation also affects farm loan interest rates. However, farmers can optimize their farm management with the following strategies:

Hold The Cash

In the farming industry, there is still considerable trade in cash. Many grains and other crop producers have significant cash in hand. The increasing prices for stored crops persuade farmers to deal in cash.

The excess cash for farmers allows them to think about investing it in getting long-term benefits. Farmers with long-term debts or liabilities can use the money to pay them off.

Moreover, holding cash during inflation can benefit farm management. It is better to hold on to cash reserves because economic anxiety and rising prices significantly impact crop prices and badly affect the cash flow.

Cash can also serve as an emergency back and achieving short-term goals. It can also cover unexpected bills and expenses like employee wages or machinery repair. Another significant advantage that cash can offer is that you can lock prices of raw materials and goods in advance. You can negotiate with the suppliers to vendors to book the order at current rates.

Paying the advance or full price on spot rates can save you from paying extra during inflation. Since cash is not a good route for long-term goals and plans, you can use it for short investments. Cash reserves can cover shortfalls and pay specific expenses. Additionally, it can limit refinancing costs. All these cash-in-hand benefits can boost the farm management process.

Optimize Your Operations

Inflation has a direct relation to consumption and spending. In such times the key to business survival is to operate efficiently. Farms must optimize their farm management process and reduce the operation and consumptions cost as low as possible.

We are already facing an increase in fertilizer prices not only because of inflation but also from supply and demand factors. We all know that fertilizers are necessary for crops, and higher fertilizer prices mean less purchasing, resulting in less yield. To counter the fertilizer problem, many farmers use excess fertility to keep up with the demand.

Finding good farm labor has become complex and costly. Producers have to optimize the labor with the land. You have to get the maximum utility from the laborers and provide them with the necessary resources. It also includes making hard decisions like laying off unproductive employees.

One of the most significant expenses for farming is the equipment. Farming equipment can cost thousands of dollars, and it takes a considerable cost to maintain and operate them. Farmers should place non-necessary equipment in storage to reduce operational costs, and if they are not providing any benefits, selling the equipment can be an option to raise capital and eliminate insurance expenses. Analyze which equipment is beneficial for the farm and which ones are not.

Operating under high inflation is challenging, but learning from our past experiences and carefully optimizing the mechanical, economic, and labor factors. Farmers can maintain their yield in inflation years.

Lock in Farm Loans Interest Rates

Farm loan interest rates are also on the rise. The Feds have decided to increase interest rates to counter the rising inflation, which results in reducing the money supply. Supply-chain and demand forces were severely affected during the pandemic, resulting in farmers acquiring agriculture loans. Rising inflation can be alarming if farmers have received loans at variable rates.

However, you can use the following strategies to mitigate the risk:

It is better to lock the interest rates so that you don’t have to pay extra for the debt. If you have other loans at variable interest rates, try to lock them up at fixed rates to save on interest costs.

Secure Your Farming Business With United Farm Mortgage

Inflation is a part of the macroeconomics of a country. There will be times when inflation rates will be high or low, and these fluctuations are inevitable. However, farmers can take steps and adopt specific strategies to use the above tips to counter the rising inflation.

In addition, farms need a secure and reliable source to acquire mortgages and farm loans. United Farm Mortgage is the name you can trust for financing your farm needs.