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Business acumen important as farmers manage risks in 2026

January 6, 2026 | Bethany Baratta

Jim Knuth has seen a few things in his four decades in ag lending.

While revenue and cost cycles change in their magnitude and lag time, he knows this to be true: "It's not the color of machinery, the brand of soybean seed you buy or the inputs you use that'll save you when grain prices go south," he says. "It's the business acumen; understanding your working capital position and the financial impacts of your business decisions that separate those who succeed and those who struggle."

A sticky inflationary environment, unsettled trade deals with the largest soybean customer (China) and unsold grain stocks in storage are all weighing on farm prices, but it's those who truly understand their financial position and put their risk management plan to work that see the greatest benefit when an opportunity strikes.

Knuth offers five recommendations for the year ahead:

1. Understand your working capital position. "I think of working capital as kind of a farm savings account that you can draw on when margins are tight or times are tougher," he says. "Your working capital is your short-term risk bearing ability." Consider: Can you retain or enhance your working capital? Worst case scenario, what's your burn rate?
2. Meet with your lender early to understand your financial position. "Don't put that off," Knuth advises. Come to the meeting with a list of adjustments you've made or can make in the year ahead.
3. Be informed about the changes made to crop insurance under the One Big Beautiful Bill Act. "This is not a time to just close your eyes and just do what you did last year," he says.
4. Focus on fixed cost adjustments. Consider the cost of your owned acres, rented acres, machinery and equipment costs and expenses related to family living. Can you share equipment with others to bring down your costs? Do you have the skills and equipment already to diversify your income by custom farming for others? Is there an opportunity to adjust your rental rate agreements?
5. Be proactive with the first four recommendations. "Proactive adjustments were essential during the last cycle, and it was probably the most important thing our most successful customers did," Knuth says. "This is not a time to just hope next year's better; be proactive."

Review crop insurance coverage

As farmers consider what to cut and what to keep, crop insurance shouldn't be considered as an optional expense, advises Kathleen Bjerke, regional sales manager for Farmers Mutual Hail.

"Crop insurance is the one input that producers purchase that helps ensure they can farm next year," she says.

The One Big Beautiful Bill Act, passed in July 2025, made some positive changes to crop insurance coverage, she notes. The Act added premium support for various levels of coverage. This means a higher level of coverage at a lower cost, Bjerke says.

"With some of these changes in 2025, there's more flexibility than ever to find the right coverage option and manage risk in the cost of production in whatever area they're farming and whatever crop they're farming," she says.

Among the changes in crop insurance through the One Big Beautiful Bill Act:

• The premium support rate for the Supplemental Coverage Option (SCO) increased from 65% to 80%. This increase also applies to the Enhanced Coverage Option (ECO) and the Margin Coverage Option (MCO).
• Insureds can now purchase SCO regardless of their Area Risk Coverage (ARC) elections with the Farm Service Agency.
• Producers will have access to 90% or 95% coverage by electing ECO in 2026. ECO and SCO have the same support at 80%. In 2027, SCO coverage will expand to 90%, according to the One Big Beautiful Bill Act.
• The maximum insurable coverage level for the Whole-Farm Revenue Protection (WFRP) policy increased from 85% to 90%.

Capitalize on precise data

Farmers can save time and money by using the data they're already collecting for required crop insurance reporting, Bjerke says. By electronically sending precision data to their crop insurance agent, farmers can identify the actual areas of the field that are farmable — not the waterways or areas of the field they plant around.

"On average, we see Farmers Mutual Hail customers who take advantage of this precision data save three to five percent on their crop insurance coverage, which has large impacts on the overall bill," Bjerke says.

This data also allows crop adjusters to adjust a loss in a fraction of the time, resulting in faster claim payouts. Farmers can use the precision data to update their actual production history, saving time and ensuring the most accurate data is a part of their production records.

Beginning farmers

The Risk Management Agency announced in July 2025 additional benefits to beginning farmers and ranchers, which the agency now identifies as someone who hasn't actively operated or managed a farm or ranch for more than 10 crop years.

Under the new legislation, beginning farmers and ranchers will receive increased premium support during their first decade of farming. The enhanced benefits mean beginning farmers and ranchers will now receive:

• 15 percentage points additional premium support for the first two crop years
• 13 percentage points for the third crop year
• 11 percentage points for the fourth crop year
• 10 percentage points for years five through 10

These benefits build upon existing support that waives administrative fees and provides base premium support.

"Some of these changes are really going to have a multigenerational impact for the ag community for coverage at a good cost," Bjerke says. "Farmers looking at succession planning should be aware of these benefits and how that can benefit the operation as they make that transition."

As these new or beginning farmers are getting their foothold in production agriculture in 2026, Knuth provides this advice:

"Continue to lean into your education and that business acumen because agriculture is really becoming a business that needs to be managed," he says. "We don't believe that you can be successful by simply focusing on being a good producer. You also need to be a good business person."

Written by Bethany Baratta.

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