Smart Cash Flow Strategies to Keep Your Operation Thriving in 2025

March 31, 2025 | AgFocus-Ag Focus

In today’s environment of rising input costs, shifting markets, and tightening margins, cash flow planning is more critical than ever. The producers who succeed in 2025 will be those who stay disciplined, understand their numbers, and prepare for both opportunity and volatility. Strong cash flow management isn’t just about surviving the season – it’s about positioning your operation and your family for long-term strength and success.

 

Cash Flow Considerations for 2025

By: Lee Potts, Vice President/Senior Credit Officer, Security Bank

As we move closer to the 2025 growing season, and with 2025 spring calving getting started for people, everyone in agriculture can’t help but ask the question of what this next year will bring. The 2024 year was interesting to say the least, especially for those involved in row crop production. Corn prices, $1.00 to $2.00 lower (depending on the frame of reference) and soybean prices a solid $3.00 lower coupled with high input costs led to some results that we haven’t been used to for the last several years. Add on top of that some crop disease pressure as well. On the livestock side, cattle remain at all-time highs, which is good for those selling the calves, and there are opportunities on the feeding side as well, but that also has translated into all-time high heifer and cow prices for those looking to expand the herd. In other words, challenges were plentiful in 2024, and we are looking at similar things for 2025.

So, what does 2025 look like? One way to look at that is by updating your cash flow projection. I feel like I have said this 100 times this year and some of our readers have likely heard me say this as well, “We can put together 50 different cash flow projections and that is probably still not how the year will end up.” After all, it’s farming……there are many moving parts to any operation that can affect the outcome in varying ways every year. However, the exercise of updating a realistic cash flow projection can at least give insight as to what various scenarios mean in terms of financial impact. This is very empowering because it can help lead to management decisions to either prevent loss from happening and/or capitalize on opportunities that may not have been noticed before.

Here are some questions to ask as you update your cash flow projection for 2025:

  • Are the yields, prices, and expenses I am projecting realistic? For example, does the operation have to rely on 275-bushel corn at $5 (a “home run”) just to breakeven? Or can there be a profit projected with conservative yields and prices?
  • How do the operation’s expenses line up with others seen throughout the bank? Are they toohigh? Are there tweaks that can be made to the crop management plan to save money?
  • How does the projection change with possible changes in crop rotation?
  • What does the projection show as the peak operating needs and when during the year? Might this impact when old crops are marketed? Might this impact on the new crop marketing plan?
  • Does this projection suggest an increase or decrease in working capital and equity? If a decrease, is it sustainable? Or does the decrease spell potential financial trouble on the horizon? If so, what can be done about it now?
  • Sensitivity Analysis: What size of revenue decrease, expense increase, and/or change in interest rates can the operation withstand before profit margin is depleted?

One thing you may notice in the above questions is that a lot of those things, at least to some extent, are things that can be controlled in an operation. When it comes to government programs, tariffs, changes in markets and interest rates, these are things beyond anyone’s control. The trick is to be able to build resiliency in the operation regardless of what the uncontrollable forces do. Also, it might be prudent to keep all options on the table to combat tougher times. In other words, lose a battle or two in order to “win the war,” as they say. This is easier said than done, but without updating and dissecting projections, how would you know otherwise?