Protect Your Farm with Integrated Risk Management 

The challenges farmers faced in 2024 will likely follow us into 2025—making integrated risk management key to success. 

In 2024, farmers faced market volatility, rising input costs, labor shortages, and foreign policy challenges. In ​​2025, net farm income is expected to decline, continuing a softening trend after record highs in 2022. Input costs are stabilizing but remain elevated for labor and maintenance. Farm debt levels are projected to rise due to increased borrowing and high interest rates, though asset appreciation has kept debt-to-asset ratios relatively low. As we plan for the year ahead, it’s more important than ever for farmers to use integrated risk management to set up their operations for success in 2025 and beyond.  

Want to learn more about how you can increase financial resilience amid economic challenges? Read AgAmerica’s free report, ​​The 2025 Economic Outlook for U.S. Agriculture. 

What is Integrated Risk Management for Agriculture? 

Integrated Risk Management (IRM) for agriculture is a way for farmers to handle different types of risk—like market changes, bad weather, or financial challenges—by looking at the big picture. Instead of addressing risks one by one, IRM combines tools and strategies to manage them together. This approach helps farmers make smart decisions, balance risks with rewards, and keep their farms running smoothly, even during tough times.  

How Can Farmers Reduce Integrated Risk?  

A farm’s business strategy should align resources with risks. This means taking calculated risks to differentiate the business while managing larger threats. This approach balances risk and reward, focusing on resource use now and preservation for the future. 

The key question for farmers is how to align risks with capable resources to build this strategy effectively. Luckily, farmers have a toolbelt they can use to build resilience. Customized loan structures, asset management, and the futures market all have important roles in integrated risk management on the farm. 

Using Customized Farm Loans for Adaptability 

As conditions shift in the new year, farmers must remain adaptable. A customized farm loan can offer flexible repayment schedules and competitive rates designed to meet the specific needs of your unique operation.  

If farms face the financial difficulties many experts predict in 2025, a customized farm loan could allow for debt restructuring and provide liquidity relief. This flexibility helps mitigate financial risks and ensures the farm can continue operations without being overwhelmed by a marginal squeeze. 

How Asset Management Can Increase Resilience 

As with most businesses, it can be easy to fall into a mindset of reactivity on the farm. While it is important to adapt quickly to market changes, managing the assets you already have effectively helps put you in the best possible financial position. There are several ways you can do this. 

Land Management 

By rotating crops, improving soil health, and investing in sustainable farming practices, you can increase the fertility and production of your land over time while reducing soil degradation and input requirements. These initiatives can also open doors to government grants or incentives. 

Technology and Tools 

Using technology as an asset—such as precision farming tools, climate forecasting, and data analytics—can help you make better decisions, optimize crop yields, and reduce waste. Smart irrigation systems, for example, can lower water usage during droughts, and predictive analytics can help manage planting schedules and inventory, reducing exposure to environmental risks. 

Insurance 

For high-value assets like buildings, machinery, and livestock, farmers can secure insurance to protect against loss due to natural disasters, theft, or accidents. This mitigates financial risks and provides a safety net in case of unexpected events. 

What Are Futures Markets?  

Futures markets are tools that help farmers and buyers manage the risks of fluctuating prices for crops or goods. This process, known as “hedging,” allows both parties to secure more predictable income and costs, making it easier to plan and operate their businesses. Futures contracts are traded on regulated exchanges with standardized terms, removing the need for individual price negotiations. 

Hedging in Action 

Picture this—you’re a cattle farmer in Wyoming, expecting to sell 100 head of cattle in six months. But you’re concerned that beef prices might drop, cutting into your earnings. To safeguard your income, you enter a futures contract to sell cattle at a set price—say, $1.50 per pound. If the market price falls to $1.30 per pound, you’re still guaranteed $1.50 per pound through your contract. 

What If the Market Price Increases?  

Let’s say the market price rises above $1.50 per pound. Before your contract’s delivery date, you can “offset” the futures contract by selling it back on the market. This allows you to sell your cattle locally at the higher market price, benefiting from the price increase while avoiding the lower contract price. 

Most futures contracts don’t result in physical delivery. Instead, they’re settled through offsetting trades. This keeps futures prices aligned with real market values, giving farmers an effective way to manage price uncertainty and protect their livelihoods. 

Future-Proof Your Farm with a Trusted Farm Finance Expert 

As a trusted financial partner for farms across the U.S., AgAmerica provides expert guidance and tailored financial solutions to help you integrate risk management into your business strategy. Whether through customized farm loan structures, strategic advice on leveraging assets, or effective utilization of tools like futures markets—we’re here to support your success.  

Contact us to discuss how we can help you build a risk-resilient operation designed for long-term growth.