THIS WEEK'S FARM BUSINESS BRIEFING

Farm revenue can look healthy on paper while your bank balance tells a very different story.

Between equipment payments, fertiliser bills, fuel costs, labour expenses and loan repayments, even a productive farm can struggle to generate enough cash to stay financially comfortable.

And the latest figures from the United States make this issue difficult to ignore. A Reuters report published on 8 October 2026 highlighted that US farm debt had reached a record level of more than $605 billion, with concerns that some non-traditional borrowing may not be fully reflected in official estimates.

For farmers, the lesson is bigger than the debt figure itself: revenue is not profit, and profit is not the same as available cash.

So, how can farm owners protect their margins when borrowing costs and operating expenses put pressure on their businesses?

Here are five practical steps worth considering.

Before deciding which crop to plant, which animal enterprise to expand or whether to buy another machine, calculate what your current operation actually costs.

Include more than seeds, feed and fertiliser. Your calculation should also account for:

Consider a simple example.

Suppose a farm sells its produce for $80,000 in a year. If total operating expenses are $58,000, the remaining $22,000 is not necessarily the final profit. Interest, taxes, depreciation and other omitted costs may reduce it further.

This is why knowing your true cost per acre, animal, kilogram or unit matters. It helps you identify which activities genuinely contribute to your bottom line.

Borrowing can help a farm expand, improve efficiency or manage seasonal cash shortages. The problem begins when new debt is added without a realistic repayment plan.

Before taking out another loan, ask three questions:

Compare the full borrowing cost, including interest, fees, repayment terms and any variable-rate exposure.

A machine that saves labour and increases output may be a sound investment. A machine purchased mainly because a larger operation looks impressive is a rather different proposition.

The goal is productive debt, not debt for its own sake.

Annual profit figures can hide short-term financial trouble. Farms often pay for inputs months before receiving income from harvests or livestock sales.

A rolling 13-week cash flow forecast helps you see potential shortages before they become urgent.

Update it weekly with:

Use realistic estimates rather than assuming every customer will pay on time or every crop will achieve its target price.

If the forecast shows a cash shortage six weeks ahead, you have time to review spending, follow up on outstanding invoices or discuss options with your lender. That is much better than discovering the problem when a payment is already overdue.

Cutting costs indiscriminately can be expensive in the long run. Skipping essential maintenance or reducing important crop inputs may lower this month's bills while damaging future yields.

Instead, focus on costs that can be reduced without compromising productivity.

For example:

Measure the result. If a new practice saves $2,000 annually but requires $1,500 in additional costs, its net annual benefit is $500—not $2,000.

Small improvements across several cost categories can add up, particularly when farm margins are tight.

A profitable farm still faces weather disruptions, market volatility, equipment failures and unexpected bills.

Where financially feasible, build a reserve that reflects your farm's seasonal cash needs and risk exposure. There is no single emergency-fund target suitable for every operation.

You can also consider whether your business depends too heavily on one buyer, crop, livestock enterprise or source of income.

Diversification may help, but it should be evaluated carefully. A new enterprise brings its own startup costs, skills requirements, marketing challenges and risks.

Before investing, estimate the expected revenue, total costs, time to break even and worst-case cash requirement.

The objective is not to diversify at any cost. It is to build a business that can withstand setbacks without relying on emergency borrowing every season.

Before making your next major financial decision, calculate these four figures:

Review these measures monthly and before major investments. For more complex operations, an agricultural accountant or financial adviser can help assess debt capacity and repayment risks.

Farm debt is not automatically bad. Sensible borrowing can finance productive assets and support long-term growth.

But rising debt makes financial discipline even more important. Farmers who understand their true costs, forecast cash flow, evaluate investments carefully and maintain an appropriate financial buffer are better equipped to make decisions when markets turn against them.

The most useful question is not simply, “How much can my farm earn?”

It is this: How much cash will remain after the bills, repayments and risks are accounted for?

That is the number that helps keep a farm business resilient.

Your Turn

What puts the most pressure on your farm's finances: input costs, loan repayments, labour, energy or unpredictable selling prices?

Reply to this email and share your experience. Your perspective may help other farmers make better financial decisions.

Explore more practical guides on farm costs, insurance and profitability.