Managing risk in 2025

Experts weigh in on the opportunities ahead

It’s no secret that farmers face several headwinds heading into the new year. Higher grain supplies, a sticky inflationary environment, a stronger U.S. dollar and continued higher interest rates are all putting pressure on returns, all while making U.S. products more expensive to trading partners.

“The 2025 environment will be the continuation of a high cost-low or negative margin environment,” says Jim Knuth, senior vice president of lending for Farm Credit Services of America. “This is the highest risk scenario for producers.”

A strong focus on your working capital should be a top priority in 2025, Knuth says.

“Farmers are investing a lot of dollars per acre with uncertain returns. This means a strong focus on your working capital and short-term risk bearing ability, risk management decisions, operational costs and break-evens and making proactive adjustments become more important than ever,” he says.

Crop insurance coverage

As budgets tighten, farmers look at ways to cut costs. Knuth advises against trimming crop insurance coverage.

“We have better crop insurance products today than we had 10 years ago going through the ethanol boom. We have the ability with some of these supplemental products to increase coverage levels,” he says. “A lot of our customers understand that while they’re spending more, it limits their downside, too, and that’s what I’m more concerned about.”

Historically, less than 2% of farmers’ costs are attributed to crop insurance, says Kathleen Bjerke, assistant vice president of sales for Farmers Mutual Hail.

“There’s a lot that goes into having a great crop, but if it doesn’t grow, it’s crop insurance that lets you farm next year,” Bjerke says.

Consider the following: spring price for soybeans in 2022 was $14.33 per bushel. The harvest price for soybeans in the fall of 2024 was $10.03 per bushel.

“We’ve lost a lot of price protection; there was a huge drop in commodity prices in what crop insurance is guaranteeing,” Bjerke says. “Now is not the time to take our foot off the gas when we’re thinking about the future crop.”

There are several crop insurance products for farmers to consider in 2025. Bjerke suggests reaching out to your agent and the local Farm Service Agency office to learn more and ensure you’re properly enrolled and covered.

Equipment sharing

Farmers should take an inventory of their farm. What under-performing or non-performing assets can be sold?

Knuth says farmers should look inside their machine sheds, too.

“You don’t make money by owning all of that equipment, you make money by utilizing it,” he says.

Perhaps you could work with another local farmer to share equipment to keep the costs of owning and maintaining equipment down. Sharing it with two or three neighbors could lower the machinery costs even further. Is custom farming something you consider in 2025 either as something you offer or something you hire? Doing so spreads out the cost of owning machinery or equipment.

Multiple income streams

Just getting your start in agriculture? If so, consider multiple income streams.

“When you’re just starting out, it’s not likely that you have the ability to wait an entire year to harvest a crop and hope it’s profitable,” he says.

Off-farm income can provide the income support for the farm. Think about hauling grain, custom manure hauling, and other opportunities in agriculture.

“Young people are willing to do the labor, willing to hustle and willing to be entrepreneurial. They can diversify income streams without putting all their eggs in one basket,” Knuth says.

No matter the age or experience, having a risk management plan that fits your risk-bearing ability is essential.

“Holding grain and hoping the market turns higher isn’t a strategy,” Knuth says. “You must have a proactive plan.”