Posted on May, 8, 2025 at 08:38 am
Farmers face growing uncertainty as commodity markets have declined in the 2024-25 marketing year for corn and soybeans and input costs remain high. According to University of Illinois ag economists, the breakeven price per bushel to cover all costs ranges from a cash price of $4.59 to $4.66 for corn and $11.01 to $11.56 for soybeans — higher than current cash grain prices of $4.48 for corn and $9.96 for soybeans.
With new potential tariff implications, the outlook for grain prices in the coming months remains uncertain, causing farmers to reevaluate best practices and strategies for their operation.
Ben Brown, Extension economist at the University of Missouri, believes it’s crucial to make smart and intentional business decisions when economic markets are strong, so when things get rocky, you have the discipline to keep your farm running. He points to the old saying, “Be disciplined in the good times and be committed during the bad times.”
He offers up these five strategies to protect your operation during tough grain markets:
1. Reevaluate land leases. Uncertain markets make it challenging to set a price for fixed cash leases. University of Illinois ag economists, including Nick Paulson, say that variable cash leases, also known as flexible or hybrid cash leases, spread risk between the landowner and farmer. They offer more risk protection than cash rent but less than crop share.
Variable cash leases have many different structures depending on the farm. More than likely, each variable cash lease will look different, and guidelines from economists should be viewed as a basic starting point that can be tailored to your operation.
U of I ag economists use a structure that has a minimum base rent and a maximum rent. The minimum rent allows the lease to be considered a cash rent lease by the Farm Service Agency, so the farmer can receive commodity program payments. The maximum provides upside protection for the farmer on how much rent they pay, and the minimum helps provide the landowner downside protection.
A very basic guideline from U of I ag economists suggests that the base rent for a variable cash lease is $100 lower than the current fixed cash rent average in the area, and the maximum is $100 above the cash rent average.
The final rent level for the year is based on a percentage of gross revenue, also known as a rent factor. The gross revenue is figured through yield and the agreed-upon price average. The rent factor provides a percentage that draws the line on whether the farmer pays the base, the maximum or somewhere in between. U of I ag economists say rent factors range from 23% to 31% on corn and 30% to 41% on soybeans.
For example, if the rent factor is 30%, then 30% of gross revenue will be compared to the base rent and the maximum to set the rent price for the year. If that amount is less than the base rent, the farmer will pay the base. If it’s larger than the maximum, the farmer will be capped at the maximum. If the 30% falls somewhere in between, that specific number is what the farmer will pay.
U of I ag economists say that economic conditions since 2023 have resulted in potentially negative returns for farmers under this structure, due to crop revenue and the rates often being figured through gross revenue, which fails to include high production costs.
Be aware of various lease structures that may benefit your farm during different economic conditions. Working with landowners to re-negotiate land leases can be a strategy to help your operation succeed.
2. Track financial performance. The Farm Financial Standards Council produces a set of guidelines for agriculture businesses, called the Financial Guidelines for Agriculture. Tracking information specific to your farm every year is a good step toward monitoring financial performance and measuring progress.
Progress is measured through ratings that are green, yellow and red. Brown says that just because you’re in the red zone for one year doesn’t mean you need to stop farming — but if you go three years in the red zone and it’s continuing to get worse, then something needs to change.
The guide is meant to be a management decision tool to track and identify financial performance on the farm, Brown says.
The scorecard is based on five categories:
liquidity
solvency
profitability
repayment capacity
financial efficiency
Brown recommends using the guide from the link above to track your farm financials.
3. Make a grain marketing plan. Every grain farmer must market their grain, and Brown recommends having a written grain marketing plan to aid this process. If this is intimidating, start by writing down what you’re currently doing. This creates an intentional strategy and a way to evaluate performance for marketing crops.
Another key point? Keep it somewhere you will be able to find it, Brown says.
4. Assess tax management strategies. While no farmer will tell you paying taxes is a highlight of their job, meeting with accountants and filing taxes is an annual necessity. How taxes are managed in “good” years vs. “bad” years is vastly different.
For example, consider depreciation strategies for equipment. Brown says there are two common systems for calculating machinery depreciation. The first is when a farmer depreciates the entire asset in the first year of ownership through Section 179 of the U.S. IRS Code. When there’s adequate income or extra money to be spent, this leads to the entire asset being depreciated, and farmers don’t have to pay taxes on that portion of income.
The second common system for calculating machinery depreciation occurs when the machinery is depreciated over a seven- or 11-year period, depending on the type of equipment. In low profit-margin years, Brown says to consider depreciating assets over a longer period of time.
“In low-income years, you want to lengthen that and spread it out to where when you do have income, you have more depreciation to offset that higher income,” Brown says.
For the sake of your farm’s best interest, make sure you have someone knowledgeable about this in your corner, Brown says.
5. Capitalize on government programs. Although funding and the future of specific programs is uncertain right now, stay up to date on programs available and take advantage of them when you can.
For example, $10 billion was approved in March for distribution to farmers through the Emergency Commodity Assistance Program.
In addition, several crop insurance changes in 2025 have affected provisions for double crops and subsidy levels on higher-value insurance products.
“Double-crop soybeans can now be a separate crop, and they don’t have to bFare filed with your full-season soybean crop,” Brown says, adding that the still-unpassed farm bill could have additional provisions.
“If we pass a new farm bill this year, there might be some provisions in the ARC or PLC program elections for 2026 that need to be revisited,” Brown says.
Even though these strategies will help protect your farm during tight margin years, they’re helpful during high-profit years, too.
“My message around what to do isn’t that much different now than what it has been the last couple of years,” Brown says. “The difference is people are listening.”
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Source: Farm Progress