Cost reduction tactics
Farming in 2025 presents a landscape of strategic cost management and tight margins. As we delve into the new year, the agricultural sector is poised to make significant adjustments to cope with economic pressures. This newsletter will explore key areas where farmers are looking to cut costs, based on recent polls and emerging trends.
The following is a graph provided by Farm Journal, from a survey of 1,307 farmers when asked what they plan on changing in 2025 to cut costs:
Equipment Purchases: The most significant area identified for cost reduction this year is in equipment purchases. Nearly 80% of farmers are likely to scale back on new machinery acquisitions. This shift is in response to the declining demand observed in 2024, where sales of farm tractors and combines saw a decrease of 13% and 24%, respectively. Farmers are opting to maintain and repair existing equipment rather than invest in new machinery, which not only preserves capital but also reduces debt loads in a year predicted to have diminished farm income.
Fertilizer & Soil Management: With corn prices expected to fall below $4.50 per bushel, farmers are re-evaluating their fertilizer strategies. Experts from the University of Missouri Extension suggest that those with soil test levels near optimum might consider delaying applications of lime, phosphorus (P), and potassium (K) for one to two years without significant yield loss. This approach isn't a universal solution but offers substantial savings for those with high soil fertility.
When talking about Nitrogen(N), it remains critical to evaluate historic yields and application practices. While under-application is usually not an option, practices such as split application, inhibitors, and biologicals could be used to manage your program.
Reduced Tillage & Cover Crops: With a larger emphasis being placed on carbon sequestration recently, farmers are turning toward per-acre carbon programs for additional revenue. Reducing tillage will also save on fuel, labor, and machinery costs. Companies such as Truterra, Bayer, Indigo, and Nutrien, all provide some sort of tillage reduction and cover crop incentive. While it is important to analyze each parcel based on drainage and soil productivity, these contracts can be signed for 1-year terms, allowing farmers to adapt practices while not being locked in long-term.
Market and Policy Watch: Understanding the broader market dynamics and government policies will be crucial. With commodity price forecasts for 2025 indicating a challenging year, staying informed about international trade policies, domestic farm subsidies, and potential shifts in the Farm Bill can influence planting and marketing strategies. The agricultural sector's health is tied closely to these external factors, and proactive engagement with market intelligence will be key.
Our Take
As we move through 2025, the focus for farmers will be on doing more with less. The strategies outlined aren't just about cutting costs but also about smart farming practices that ensure profitability in the long term. From leveraging technology to adjusting traditional farming practices, the agricultural community is adapting with resilience and innovation. With every operation being vastly different, it is important to consult with every party involved in your operation. From talking about new practices with agronomists, asking seed dealers about resilient traits, negotiating lower rent with landlords, getting deals on equipment trades, and finding the right financing options with your banker, it is important to develop your 2025 Farm Plan now rather than later. Check out our Land Ledger Podcast to hear key voices in the industry, and what their plans are for this challenging year ahead.
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