Financial planning to improve your chances to earn a profit in 2023

Jordan Howe
This time of year, uncertainties might be keeping farmers up at night. While there’s no crystal ball to know how the 2023 season will play out, producers can ease concerns with smart financial management that gives them maximum flexibility.

Wisconsin growers are likely feeling a mix of optimism, uncertainty and maybe even a little anxiousness about what lies ahead for the 2023 season. Every year comes with its own set of unique challenges. This year, growers are concerned about climbing interest rates, unpredictable commodity prices, and there’s always the weather. We’re coming into the first strong El Niño climate pattern we’ve seen in several years, which has contributed to a cool and wet start to spring, delaying the start of planting season.

Growers need support to navigate these variables. Regardless of what’s ahead this season, there are resources available to help manage your risk and to protect your crops against the unexpected. Taking a proactive approach will give you more control over your financial position, and help create some peace of mind around your chances for profitability this year.

Avoidable hidden costs

Most growers know, down to the dime what they are spending on seed, crop protection and nutrition products, but they are not as attuned to how their method of payment affects profitability. Overlooking the most economical way to pay for products could drive up costs.

These costs associated with borrowing money are variable. Whether it’s an operating line from a bank, or independent financing – such as co-ops, input retailers and credit cards – individual factors impact your interest costs. Pay attention to your credit report and how leveraged your debt load so you can qualify for the best rates. Lenders also evaluate a borrower’s character, capacity – or debt-to-income ratio – how much capital they have, and collateral to secure a loan. The conditions of the loan will also fluctuate based on how much you’re borrowing and the interest rate you can secure. In the current market, interest rates have been trending upward since last spring, which has folks watching interest rates closely to assess costs.

In just over a year, the Federal Reserve has increased interest rates 10 times.1 Interest rates are always fluctuating, but recent concerns over inflation, the employment market and commodity pricing have renewed focus on Prime rates, which make interest payments costlier for growers who don’t have a fixed rate loan.

It’s important to do some research to find the best financing options. Interest rates can dramatically impact your cost equation. For example, assume a grower is managing a 2,000-acre row crop operation with a budget of $400 per acre. With a borrowing rate of Prime + 1% in February 2021, their interest rate would be 4.25%. Assuming their inputs are financed for nine months, the interest expense on $800,000 is just over $25,000. In that same scenario today, the grower would spend more than twice that – near $54,000 – in interest at the 9.25% rate. On this 2,000 acre-operation, that’s almost a $15 price-per-acre increase that needs to be factored into the grower’s budget.

Many experts speculate that interest rates will continue to rise this year. Growers with variable rate loans are going to be exposed to more fluctuation, with less stability to predict costs. A fixed rate program can help improve profitability by controlling one more variable in your budget.

Plan early and adjust your plan often

The best way to set a strong financial foundation is to make a plan and reevaluate that plan any time your circumstances change. It’s important to exercise your contingency planning muscles as part of that, too. Consider the specific challenges that weather events, market conditions and other local forces might present this year. Make sure your financial plan has cash flow mechanisms and sound money management strategies in place to flex when you need to.

You can also benefit by putting your agronomic and economic goals on paper. Working backward, you can start to develop an actionable roadmap, with different options on how to get where you want to go and earn a profit, despite external forces.

Having a clear plan makes it that much easier to pivot when the unexpected happens. It will give you a greater sense of control and alleviates some stress knowing you’re doing everything you can to have a successful season.

Manage risk to protect profits

The most valuable financial plan is the one that reflects current realities. The variables growers contend with each season mean circumstances are often changing, so effective financial planning requires constant adjustment. Already this year, a lot has probably changed since you prepared to plant, including a cooler and wetter than anticipated spring.

The late season start means Wisconsin farmers will have shorter growing season. In some areas, early-season crop planning may shift. Other growers are anxious about the timing of fertilizer application, and how it will impact the growing season ahead. It’s advantageous to run a few different financial scenarios to see where you might end up, depending on weather conditions, yield predictions, and when you market your crop.

This time of year, uncertainties might be keeping you up at night. There’s no crystal ball to know how the 2023 season will play out, but you ease your concerns with smart financial management that gives you maximum flexibility. A strong plan will give you more control and greater ability to react to the unexpected. Working with experts can also help. Consult with folks you trust, who have your best interests at heart and who will expand your knowledge base. With that support network behind your decision-making, you’ll be in the best place to come out ahead in 2023.

Jordan Howe

Jordan Howe is a senior territory sales manager for Nutrien Financial. He provides financing expertise to growers across the Midwest to increase their buying power and maximize every opportunity for success. Learn more at