3 Steps Every Farmer Must Take to Strengthen 2026 Margins
- Grant Wiese
- 6 days ago
- 4 min read
SW Financial Literacy
How to Recover from a Tough Year: 3 Steps Every Farmer Must Take to Strengthen 2026 Margins
For many farmers across the Midwest, this past year was one of the hardest in recent memory. High input costs, softening commodity prices, and stubborn interest rates squeezed already thin margins. And when the dust finally settled, a lot of operations discovered the same painful truth: they lost working capital.
Maybe that number for you was $175 per acre, or more. When you spread that across all your acres, it’s a gut punch. Not only because of the size of the loss, but because of what it means: you have less cushion, less flexibility, and less room for error heading into 2026.
And you’re not alone. Many operations ended the year with negative operating margins. That doesn’t mean you failed. It means the environment changed faster than most farms could respond. But here’s the encouraging part: you can rebuild, and 2026 can look dramatically different if you take the right steps, starting now.
Below is a clear, practical three-step process to understand where you stand and begin improving your position for next year.
STEP 1: Lock in a Realistic Gross Income Number for 2026
This is where most farmers accidentally sabotage their projections, they start with optimism instead of reality.
If you lost around $175 per acre this year, your first instinct might be to make that up through higher yields or better marketing. The problem? Those variables are the least predictable part of your operation. Commodity prices, futures spreads, basis levels, unexpected weather, and global events—none of these are in your control.
Unless you intentionally pulled back fertilizer so severely that your yield was artificially low this year, you should not count on significantly higher yields in your projection. And counting on marketing wins or $1+ rallies is even riskier.
This is why the smartest move is to anchor your plan to your three-year average gross income per acre. That number reflects:
Your actual yield capability
Normal year-to-year volatility
Realistic price outcomes
Your three-year average already includes the good years, the lean years, and the average years. It’s the truest picture you have of what your operation can reliably generate.
Once you plug in this number, you’ll have a realistic benchmark for what your farm can earn next year without relying on luck. It’s steady, fair, and grounded in your real production history.
STEP 2: Improve Your Input Expenses (and Consider Asset Sales to Reduce Debt Load)
Once you establish that your income side is essentially fixed, the only place left to go is expenses. This is where tough decisions must be made.
You’re looking for $175 per acre of savings or margin improvement, and you won’t get all of that from tweaking seed, chem, or fertilizer. Even aggressive shaving of inputs, without hurting yield, usually only moves the needle so far.
So you take the next step: Break your expenses into categories and analyze where the true burden lies.
Loan payments
Land rents
Operating inputs (seed, fertilizer, chem, fuel, crop insurance, drying, etc.)
Some adjustments can be made inside each of these, but the hard truth is this:
A major portion of that $175 per acre loss may be coming from debt service.
If interest and principal payments have climbed dramatically, you may not solve this problem by “cutting costs.” In many cases, the only meaningful lever is reducing those payments—either by refinancing or, more realistically, selling underperforming assets and using the proceeds to pay down debt.
This isn’t a sign of failure. It’s a sign of discipline. Selling an older tractor, a parcel that isn’t cash flowing, or unused equipment may improve your long-term cash position far more than trimming $3/acre off chemical programs.
And yes, these decisions hurt. But many farms that come out stronger after a tough year have one thing in common: they made decisive adjustments while others hoped for better prices.
Once you’ve trimmed inputs responsibly and reviewed your debt structure, you’ll have done everything you can on the cost side without jeopardizing your ability to produce a crop.
STEP 3: Increase Your Income Potential Using the Assets You Already Have
After you’ve stabilized your income expectations and tightened your expense structure, there is one final lever to pull:
Increase revenue using the land, equipment, and skills you already own.
This doesn’t mean expanding acres or buying more ground, those steps only increase your risk during a tight year. Instead, it means finding ways to create additional income streams with what’s already sitting in your yard.
Some examples include:
Custom spraying, planting, or harvesting
Trucking for local grain companies or neighbors
Specialty crop acres
Cover crop seed production
Grazing or haying marginal acres
Machine rental when equipment is idle
Off-season income using farm machinery or labor
Your goal isn’t to overhaul your entire operation, it’s simply to close the remaining gap after expenses have been optimized. Even adding $50–$100 per acre of additional income can be enough to get your working capital trajectory back on track.
This step is often overlooked, yet it’s one of the most controllable ways to grow margin without adding acres or unnecessary risk.
A Final Word: You’re Not Behind—You’re Early
A tough year doesn’t define a farm. What defines it is how quickly and clearly the operator responds. By facing the numbers head-on, locking in realistic income expectations, reducing unnecessary financial weight, and finding new ways to generate revenue, you’re doing what strong operators do—you’re building resilience.
Many farms will procrastinate until they’re forced into change. You’re choosing to lead before the pressure hits.
You may have lost $175 per acre this year. But that loss can be the turning point that sets you up for the strongest run of your career, if you take action now. Strengthen 2026 margins.
Need help with your operation's financials?
I have limited spots available for 1-hour consultations helping you:
Understand your farm's financial position.
Prepare for future growth opportunities.
Discuss purchase & finance options on farm transactions you are working through now.
Sign-up here if my services can benefit your operation:
Have a great week!
Grant
