Don’t let “hidden” costs destroy your profitability.

22 Jun

Don’t let “hidden” costs destroy your profitability.

Don’t let “hidden” costs destroy your profitability.

In agriculture, we can protect ourselves against commodity prices using contracts, options and price insurance, but don’t forget to protect yourself from the “hidden” costs that are destroying farm and ranch profitability.  A few years ago, a big culprit was $4+ diesel, but thanks to US shale oil producers, we have some price relief for the moment (although it’s still a future risk).

Today’s hidden costs fall into several areas – the increasing cost of seed, chemicals and fertilizer; the increasing costs of insurance (worker’s comp, health, & liability), and rising interest rates.

For seed, find out if you’re really getting a better yield, considering the extra cost. For chemicals and fertilizer, identify if you are being sold too much (check with neighbors, Ag Ext. officers, etc.) and if you’re getting the promised bang for the buck from higher dollar brands.  For insurance, review all of your policies and talk to your agent or go online to compare.

Finally, don’t forget the cost of money (the interest rate).  On June 14th, we had the 3rd interest rate increase since the election (up 0.75% so far).  If you have $1 million of land and equipment loans at variable rates, it’s costing you $7,500 extra per year; money that could have bought ten more head of cattle or paid for a hard earned vacation.

Give us a call today to help protect you from rising costs.

 

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