Protecting Profits When Markets Shift
Feature
Managing Uncertainty in a Volatile Market Year
Protecting Profits When Markets Shift
By Steve Sniff
Farming has always involved risk. And with risk comes uncertainty. However, the last few years have seen an unprecedented rise in uncertainty due to extreme weather conditions, dizzying input costs, drastic commodity price swings, and crippling labor shortages.
2026 has also brought an unstable geopolitical landscape to the party. But the goal of risk management is not to eliminate the risk; that would involve being able to accurately predict the future. But, as stated by the United States Department of Agriculture( USDA)
Risk Management Agency, it is“ about understanding [ the risks ] and making conscious choices to protect the farm business.” The goal is to manage risk well enough that one bad year does not threaten the entire operation. Play the long game.
That can be accomplished in several ways: through having a clear understanding of your cost of production, taking the emotion out of marketing, protecting your cash flow, and diversification. Have a plan— and then write the whole plan down.
Know Your Numbers
While that sounds simple, it can be surprisingly elusive. Some producers can rattle off the current commodity prices within a few cents and yet not know what their true break-even point is. In a stable market, that may not have a lot of effect on the bottom line. But when the market is as volatile as it has been, that can lead to decisions based on hope, habit, or emotion rather than on solid business data. As an old grain marketing proverb reminds us, " Hope is not a marketing plan."
Understanding cost of production means accounting for every expense that goes into producing a marketable crop. That covers a lot of ground. Seed, fertilizer, chemicals, fuel, repairs, labor, land costs, insurance, interest, and equipment depreciation all contribute to the final number. The goal is to determine what it actually costs to produce a bushel, bale, ton, or pound of product before it leaves the farm. Crunching all those numbers could involve a substantial investment in time, but it
Harvest Fall 2026 | www. FarmersHotLine. com | 9