Reducing fixed costs impacts financial strength of farm operation

SEYMOUR, Ill. — Good farm management is a multiyear process.

“Be disciplined in the good years and committed in the lean years,” said Ben Brown, senior research associate and Extension agricultural economist at the University of Missouri.

“That is different for every individual producer,” said Brown during a presentation at a BASF Field Day, held at the BASF Midwest Research Farm in Seymour in east-central Illinois.

Brown works with 900 farms across the United States to track their management and finances.

“Data has consistently shown that investing in the direct costs associated with growing the crop shows a return,” he said.

“For reducing costs, the area that needs the most focus is fixed costs such as land, machinery and labor, but those are hard categories to control,” said the ag economist who comes from a family farm in west-central Missouri.

For Illinois, Brown said, cash prices for all of the major row crops are 25% to 30% lower from where they were three years ago.

“Commodity prices go in cycles, and if you go back to 2010 to 2011, we have lower prices today than we did then,” he said. “Oats is the only crop in Illinois that has seen a price increase.”

Since farmers cannot set prices for their crops, Brown noted the importance of increasing yields and finding ways to minimize the variability in those yields.

“The second thing to manage is growth to spread your fixed costs over more acres,” the ag economist said.

“Fixed costs have steadily crept up and in the last 10 years have increased 120% per acre,” he said. “Those fixed costs are dangerously stubborn.”

From the farm data, Brown has found a major difference in the farms.

“The farms that can reduce their fixed costs, for the next three to four years, are on average about 20% more successful financially than those that reduced their variable costs,” he said.

Brown encourages farmers to maintain their working capital.

“If you burn all your working capital and you have no cash on hand, when opportunities arise in the next year or two, you have no flexibility to act,” he said. “Right now there are some really good deals in the equipment market.”

Building working capital is also important when possible.

“Maybe it’s even selling a few assets you don’t use, to be able to take advantage of opportunities when they are presented,” Brown said.

The ag economist works on budgets for the university.

“Our budgets are dynamic, so as you change the price or yield, it changes other things in the budget,” he said. “If there is more yield, there will be more bushels to haul, so the hauling price per acre goes up.”

Therefore, at multiple points during the summer, it is helpful to evaluate different yield and price expectations to see the impact on cash flow.

“If you are short on cash flow, start thinking about what you are going to do about it,” Brown said. “The worst calls are at harvest, when a producer says he didn’t make anything on his crop because at the point we’ve lost some options. You always have more options, the earlier you start.”

Farm management is based on strategic decisions, intentional decisions and evaluation.

“Producers are really good at intentional decisions and putting things into action by getting on a tractor and doing it,” Brown said. “They are kind of OK at planning, but they are terrible at evaluations.”

At the end of the year, farmers often jump right into the next year, without doing much evaluation of what worked, what didn’t work and what needs to be changed.

“One of the things that continuously shows up in our data is the early-season discounts, volume-based discounts or all-cash discounts have a $30 to $40 per acre benefit, but they are under-utilized,” Brown said. “So, this is one of the ways we can reduce costs.”

Farmers have the opportunity to manage the production risk of their operation through crop insurance.

“There were more changes to crop insurance in 2025 than we’ve seen in any year in the past three decades,” Brown said.

Grain marketing plans can also help farmers improve profitability of their operations.

“The number of Midwest producers that have an intentional grain marketing plan is 12% to 14%,” Brown said. “For the 900 farms that we track, if they have a marketing plan, they get 11 cents more per bushel than farmers that don’t have one.”

“With 200-bushel corn, that’s over $20 per acre in additional revenue, just by having something written down,” he noted. “That’s something that can help provide some money to continue to invest in the crop over the long run.”

Fungicides

“Think about all the dollars we’ve put into the crop this year,” said Jared Roskamp, BASF technical service representative. “We want to protect that investment.”

Fungicides are one option for protecting crops.

“We have a lot of tar spot west of us and we’re starting to see it develop in Illinois,” Roskamp said. “We are going to continue to monitor and watch this and you need to be prepared with a plan.”

“Our national data shows Veltyma beats a generic fungicide by 7.3 bushels,” he said. “At $4 corn, that’s $29.20 per acre, so picking the right product does matter.”

With any fungicide for both corn and soybeans, application timing is important.

“If you spray corn today, there are a lot of leaves that aren’t there, so those leaves are going to be more susceptible to tar spot because they are not protected,” Roskamp said.

The critical window to protect the corn yield is from pollination to R4.

“When I start to see tassels, I am going to spray because I want to beat the disease to the field,” Roskamp said. “And I also want to reduce the stress on the plant during grain fill.”

“I think fungicides are always a great investment on your farm, tar spot or without,” he said. “And when we have tar spot, the risk bucket changes.”