Nebraska Farming: A Comprehensive Guide

• Introduction to Farm Financial Management
• Agriculture in Nebraska
• Core Components of Agricultural Management
• Farm Tax Planning & Compliance
• Agribusiness Performance Analysis
• Farm Estate Planning
• Farm Succession Planning
• Farm Risk Management
• Data Security for Farmers
• Contact Us

INTRODUCTION TO FARM FINANCIAL MANAGEMENT

Managing finances on a farm is not just about keeping the books; it’s about securing your farm’s future in an unpredictable world. Here’s why mastering the art of financial management is important for every farmer:

• • Navigating Market Volatility: The prices of crops can swing wildly, influenced by everything from weather patterns to global politics. Effective financial strategies allow you to make smart decisions about when to sell, which crops to focus on and how to price them to balance profit and risk. This ensures you’re not just reacting to the market, but strategically planning for stability.
  • Understanding Regulations: Every farm faces a complex set of rules that can vary by region and the type of farming you do. These might include guidelines on environmental conservation, animal treatment and food safety. Sound financial management helps you budget for these regulations, making sure that staying compliant doesn’t come at the expense of your profitability. It’s about turning what could be a hurdle into a step forward.
  • Handling Capital Needs: Farming demands significant upfront investment—think equipment, seeds and fertilizers. Since these costs arise long before you see any income, planning your finances carefully ensures you can cover these expenses without straining your cash flow. Smart financial planning helps navigate these choppy waters, so you have the resources when you need them.
  • Risk Management: The reality of farming includes risks like natural disasters, pests or disease outbreaks. By incorporating risk assessment into your financial planning, you can prepare more effectively. Whether it’s through insurance, diversifying your crops or investing in technology, you can safeguard your farm against the unpredictable, ensuring you’re prepared for whatever the season might bring.
  • Planning for the Future: Many farms are more than just businesses; they’re family legacies. Planning for succession is about safeguarding the transition of the farm to the next generation and maintaining its financial health for years to come. It’s about protecting not just your livelihood, but also your heritage.

By addressing these challenges through careful and strategic financial management, farms can enhance their efficiency, profitability and sustainability. This approach doesn’t just secure your own future—it contributes to the stability of the entire agricultural sector and ensures a reliable food supply chain for everyone.

AGRICULTURE IN NEBRASKA

Nebraska’s agriculture industry is a fundamental component of both its economy and its identity. The state is one of the leading agricultural producers in the U.S., known for its rich farmland and diverse agricultural output. This is evidenced by the state’s high ranking in crop production. According to the Nebraska Department of Agriculture, the state ranks nationally in several categories. This includes number two in proso millet production, number three in corn for grain production, number four in dry edible pea production, number five in grain sorghum products and number six in soybean production. In addition, Nebraska farmers, ranchers and other agribusinesses have a unique advantage of being in a “Golden Triangle.” This term refers to places where the combination of corn, livestock and ethanol production provide significant opportunity to add value across the production process.

Here’s an overview of the key facets of Nebraska’s agriculture sector:

Main Agricultural Products

• Corn – Nebraska is one of the top producers of corn in the U.S., primarily used for livestock feed, ethanol production and as a staple in many food products.
• Soybeans – Another significant crop, soybeans are used for animal feed, as well as in the production of various food products and biofuels.
• Beef – Nebraska excels in cattle production, particularly in beef. It ranks as one of the top states for beef production, with a vast number of feedlots and meat processing facilities.
• Pork – The state also has a robust pork industry, with extensive hog farming and pork processing sectors.
• Wheat – Wheat is another important crop, with winter wheat being the predominant variety grown in the state.
• Dairy – The dairy industry, while smaller than the beef and pork sectors, contributes significantly to the state’s economy.
• Sorghum – Grown both for grain and as forage for livestock, sorghum is a versatile crop that thrives in Nebraska’s climate.

Economic Impact

Agriculture is a significant driver of Nebraska’s economy. The sector contributes billions of dollars annually, employing a large percentage of the state’s workforce either directly in farming or in related industries such as food processing, equipment manufacturing, and biofuel production. The industry also benefits from Nebraska’s central location in the U.S., which facilitates the transportation and export of agricultural goods.

Nebraska Agriculture Challenges

• Climate Variability – Nebraska’s farmers face challenges from weather extremes, such as droughts and floods, which can impact crop yields and livestock production.
• Market Fluctuations – Global and domestic market prices for crops and livestock can vary widely, affecting profitability.
• Labor Shortages – Like many agricultural states, Nebraska faces challenges in securing enough labor, particularly for seasonal agricultural work.
• Regulatory Issues – Farmers must navigate a complex array of state and federal regulations, which can impact everything from water usage to pesticide application.

Innovation and Technology

Nebraska’s agriculture industry is increasingly embracing technology and innovation. Precision agriculture, which includes the use of GPS technology, drones and other advanced tools, helps farmers increase efficiency and reduce costs. Biotechnology is also helping develop crops that are more resistant to diseases and adverse weather.

CORE COMPONENTS OF AGRICULTURAL MANAGEMENT

Recordkeeping and Bookkeeping

Maintaining accurate and up-to-date financial records is essential for any business, but it’s particularly important for farms due to the complex nature of agricultural operations and the volatility of the market. Good financial records provide several key benefits:

• Financial Analysis and Decision Making – Detailed records allow farmers to analyze their financial status accurately, make informed decisions about investments, and manage cash flow effectively.
• Compliance and Reporting – Accurate financial records are necessary for regulatory compliance, including tax filing. They ensure that all financial transactions are transparent and traceable.
• Loan Applications and Financing – Lenders require precise financial records when considering loans for farms. Well-maintained records increase the likelihood of securing financing.
• Efficiency Improvements and Cost Management – By keeping track of expenses and income, farmers can identify cost-saving opportunities and unnecessary expenditures.

Why Recordkeeping Matters

• Track Income and Expenses: Knowing exactly where your money comes from and goes allows you to identify areas for improvement, optimize spending and maximize profitability.
• Tax Preparation: Detailed records are crucial for filing accurate tax returns and taking advantage of beneficial deductions specific to agriculture.
• Loan Applications: When applying for loans or financing, lenders will require solid financial records to assess your farm’s economic health and creditworthiness.
• Performance Analysis: Analyzing your financial records allows you to track trends, measure progress toward goals, and identify areas for improvement.

Farm Accounting Software Recommendations

For those looking to integrate software solutions into their farm financial management, here are a few recommendations:

• AgriBuilder – Farm management technology is what makes it easier for farmers of all sizes to get more profits out of their land than ever before. Starting with solid accounting software and layering in agriculture-specific financial management software coupled with the advice of seasoned financial consultants who know Ag, you can have more accurate information – faster – to help you make better decisions.
• Xero – Accounting software allowing for the management of a farm’s budget and financial information with customized farm accounting software. Users can access numbers in real-time and keep on top of farming operations from anywhere. Several built-in automation features are designed to make it easy to manage repetitive tasks.

Enhance the way you manage your farm with AgriBuilder

Choosing the right recordkeeping method depends on the size and complexity of the farm, as well as the farmer’s comfort with technology. While manual methods may still work for some, the efficiency and accuracy offered by software solutions often make them a worthwhile investment for growing operations seeking to enhance their financial management and long-term sustainability.

Financial Analysis and Reporting

Financial analysis and reporting are critical components of managing a successful agricultural operation. Regular financial analysis helps farm managers make informed decisions that enhance profitability, sustainability, and growth.

Benefits of Regular Financial Analysis for Farms

• Informed Decision Making – Regular financial analysis provides a clear picture of a farm’s financial health, enabling farmers to make better decisions about investments, costs and operational changes.
• Early Problem Detection – Continuous monitoring of financial statements helps in identifying trends that could indicate problems, such as rising costs, decreasing sales or cash flow issues.
• Performance Benchmarking – Comparing financial metrics against industry benchmarks or historical performance helps in setting realistic goals and strategies to improve efficiency and profitability.
• Enhanced Financial Planning – Detailed analysis aids in more accurate forecasting and budgeting, which are essential for long-term planning and securing financing.

Key Financial Metrics Farmers Should Track

Profitability Metrics

• Gross Margin – Also known as the gross margin ratio, this metric is used to assess a company’s financial health and highlights the money it makes after accounting for the cost of doing business. It is calculated by subtracting net sales from cost of goods sold divided by the cost of goods sold. A good gross margin for most businesses is above 50% but can easily be higher depending on the type of farm or ranch.
• Net Farm Income – This reflects the income after expenses from production in the current year. It is calculated by subtracting farm expenses from gross income and takes into consideration cash, non-cash income, expenses and accounts for changes in commodity inventories. A result above 20% is considered good.
• Rate of Return on Farm Assets – This metric measures the how well the farm is using its assets to generate income. It is calculated by adding net farm income to farm interest expense and then subtracting it from the value of the operator’s labor and management and dividing total farm assets times 100. A result greater than 8% is considered strong while less than 4% means the business is vulnerable.

Debt Management Metrics

• Debt-to-Equity Ratio – This metric measures a company’s financial leverage. Comparing total liabilities against shareholder equity can reveal how reliant operations are on debt. It is calculated by dividing total debt into total shareholder equity. Since it is used to company’s businesses in the same industry scores can vary widely. However, a higher score indicates more risk is being taken while a lower one often indicates management is not leveraging debt to expand financing.
• Debt Service Coverage Ratio (DSCR) – This ratio is used to evaluate a company’s ability to pay debt which includes interest, principal and lease payments. It can be used to determine whether a business is generating enough net operating income to cover debt expenses. It is calculated by dividing net operating income by total debt service. A score about two is considered quite strong as the business can cover two times its debt. However, lower scores are often common and acceptable to lenders.

Budgeting and Cash Flow Management

Effective budgeting and cash flow management are essential elements of farm business planning. They ensure the farm operates smoothly across all seasons and under various market conditions. Here’s how they play an important role in agricultural success.

The Importance of a Budget

Creating a realistic budget is the cornerstone of financial health for any farm. It serves several vital functions:

• • Financial Control—A budget helps farm owners manage their finances by setting spending limits and guiding financial decisions.
  • Profit Planning – It enables farmers to forecast and plan for profits by estimating revenues and expenses, helping to identify the most profitable crops or livestock.
  • Resource Allocation – Budgets ensure resources are allocated efficiently, prioritizing critical areas contributing to farm productivity.
  • Performance Evaluation – By comparing actual financial outcomes with the budgeted figures, farmers can evaluate their farm’s performance and adjust as needed.

Managing Cash Flow Fluctuations

Cash flow management is particularly challenging in agriculture due to seasonal production and market fluctuations. Here are some strategies to manage these challenges effectively:

• Cash Flow Forecasting – Project cash inflows and outflows over the year to anticipate periods of cash shortage or surplus. This helps in making informed decisions about when to buy inputs or invest in equipment.
• Maintain a Cash Reserve – Building and maintaining a reserve fund can provide a financial buffer during off-seasons or unexpected downturns, ensuring the farm can continue operating smoothly.
• Flexible Credit Arrangements – Establish lines of credit with banks or suppliers that can be accessed when cash is tight. This flexibility is crucial for managing expenses during planting seasons or when unexpected costs arise.
• Diversify Income Sources – Diversifying farm activities can help stabilize income. These could include alternative crops, agritourism, or other complementary business ventures that can provide additional revenue streams.
• Cost Control and Reduction – Regularly review and control costs. Invest in cost-effective technologies and practices that enhance efficiency and reduce waste.

Our Budgeting Solutions

Adams Brown farm business planning services are designed to assist farmers in setting and achieving realistic financial goals through structured planning and strategic guidance:

• Tailored Budgeting Solutions – We work with you to develop a budget that reflects the unique aspects of your farm’s operations and market conditions.
• Advanced Cash Flow Management Tools – Our services include the use of advanced tools for detailed cash flow forecasting and scenario planning to help you prepare for different financial situations.
• Goal Setting and Progress Tracking – We help you set achievable financial goals and track your progress against these goals, providing regular feedback and adjustments to stay on track.
• Strategic Financial Advice – Our team offers expert advice on financial planning, investment decisions and risk management tailored to the agricultural sector.

FARM TAX PLANNING & COMPLIANCE

Effective tax planning and compliance help farmers maximize financial efficiency and minimize liabilities. Understanding the intricacies of tax regulations that apply to farming can lead to significant savings and avoid potential legal issues.

Importance of Tax Planning

Farmers understand the importance of planning for the future. Tax planning is an essential part of farm financial management, and it can be beneficial to plan to ensure the business is taking advantage of all available deductions, credits, and other tax savings opportunities.

Some farmers have a goal of never paying taxes. No one likes paying taxes, but paying some taxes also can provide multiple benefits to the farmer. A goal for a farmer should be to pay taxes at the appropriate level, thereby utilizing the lowest tax brackets that are available each year and implementing a plan so they do not pay unnecessary taxes.

Advantages of Showing Profit

Farmers showing a profit and paying taxes allows them to reinvest money back into their business to ensure their long-term sustainability and success. When farmers reinvest money into their business to cover production costs, without building a larger debt load, that eventually becomes more and more difficult to manage.

Banks evaluate the risk level of each of their clients which dictates the availability and terms of their loans to that customer. Farmers who consistently show some profit each year demonstrate an ability and mindset to properly manage their debt which leads to better lending terms.

Security of debt alone doesn’t minimize the risk, which leads to better terms. Banks are directed through regulations to evaluate the customer’s ability to repay debt through normal operations, rather than simply the security of such debt. Improved terms can drive lower interest and possibly a lower payment requirement which in turn improves profitability and cash flow as a result. This can help farmers access the capital they need to grow their business and expand operations as well as minimizing the perpetual cost of their debt.

R&D Tax Credit for Farmers

When it comes to research and development (R&D) tax credits, most people think of large industries like pharmaceuticals, aerospace or technology. But farm owners are increasingly benefiting from R&D tax credits as the government seeks new ways to strengthen the American food supply.

Available to other traditional industries for many years, R&D tax credits were expanded to farmers just within the past few years. Recognizing that the nation’s farmland was remaining stable as the American population grew rapidly – we’ve more than doubled in the past 100 years – Congress, with bipartisan support, expanded the R&D tax credit to farmers to incentivize ways of producing more food on the same amount of land.

Why the congressional concern? Food production is considered a national security issue. In a complex world with changing geopolitical pressures, a nation the size of the U.S. that becomes too dependent on foreign sources to feed its population could find itself politically beholden to a foreign power, or worse, unable to provide the food its people need. The U.S. government wants to make sure we are independent when it comes to the food supply.

To ensure food independence, American farmers must continue to improve their processes and farming techniques so they can produce enough food for a growing population in the future with the same resources they have today.

The R&D tax credit supports a wide array of farming innovations, incentivizing farmers with tax breaks to offset the costs of such activities as:

• Developing or utilizing improved hybrid strains of crop, plants or livestock
• Process improvement to increase yield
• Utilizing new or improved technologies, techniques, processes to advance harvest life cycle
• Developing or utilizing improved fertilizers, irrigation systems, soil development, etc.
• Developing or utilizing new or improved feeds or feeding techniques
• Utilizing new techniques to protect crops from disease
• Utilizing new or improved breeding techniques for livestock

No-till Planting

In essence, the R&D tax credit supports a wide array of tactics that an individual farmer is willing to try to see if it will improve on what has been done in the past. A good example is no-till planting.  Although this may be a common practice for some in the industry, if it is a new experiment for you to see if it can improve yield while reducing costs it may qualify for the credit.

Putting in seed without tilling the previous crop’s surface stock strikes some farmers as messy and wrong. But there are advantages. If you are planting during a dry spell, leaving the ground untilled preserves the moisture that is already there. Moreover, skipping the tilling stage contains costs. On the other hand, seeds may take longer to germinate in untilled soil, so trying no-till planting can be a gamble.

A farmer with a dozen fields may try no-till planting on two or three fields while planting in the traditional way on the rest. For those two or three fields, the farmer could get the R&D tax credit for costs such as seed, water, fertilizer and consulting. To qualify for the R&D tax credit, the farming costs must be incurred with the goal of increasing yield or efficiency.

Harness the Power of Strategic Tax Planning

Each year’s tax plan should be in alignment with your long-term strategic plan and vision for the success of your farm as well as personally. Showing a profit and paying taxes each year can be important for farmers because it allows them to take advantage of government incentives and tax breaks. Here are some of the fundamental tax planning tools for farmers:

• • Deferring income on production-related crop insurance and deferring income using commodity contracts
  • Using 199A deductions (which are lost each year they are not used)
  • Bonus depreciation & Section 179
  • Entity structures planning to reduce effective tax rates
  • Income averaging
  • Use of tax credits such as Research and Development credit
  • Charitable giving of commodities

These are just a few of the planning options to consider. Tax planning requires creative thinking and a strong understanding of the tax code. Currently, the tax code recognizes the difficult environment that farmers face and allows CPAs to use various tools to manage taxable farm income annually.

AGRIBUSINESS PERFORMANCE ANALYSIS

Analyzing the performance of agribusinesses, particularly in agriculturally rich areas like Nebraska, involves various specialized techniques and tools that help stakeholders understand productivity, profitability, resource utilization, and sustainability. Here are some key techniques and tools used for performance analysis in this sector:

Financial Analysis Tools

• Farm Financial Ratios and Benchmarks – Tools such as FINBIN provide databases of farm financial performance which can be used to compare an individual farm’s financial ratios against regional benchmarks. It was currently updated to include information from 2023.
• Enterprise Budgeting – Software and spreadsheets help calculate the cost of production per unit (like bushels of corn or soybeans), enabling farmers to make informed planting and marketing decisions.

Precision Agriculture Technologies

• GIS and Remote Sensing – Technologies like Geographic Information Systems (GIS) and remote sensing are used to collect data on crop health, soil quality and water usage. This data helps in making precise farming decisions.
• Yield Monitoring and Mapping – Tools that track yield variations within fields. These systems can be integrated with GPS to create yield maps, which are crucial for assessing the effectiveness of different farming practices.
• Sustainability Metrics – Indicators related to environmental impact, such as carbon footprint and water usage efficiency, are increasingly important. Tools like the Fieldprint Platform help farmers assess their operations against sustainability metrics.
• Life Cycle Assessment (LCA) – This method assesses the environmental impacts associated with all the stages of a product’s life from-cradle-to-grave (i.e., from raw material extraction through materials processing, manufacture, distribution, use, repair and maintenance, and disposal or recycling).

Operational Efficiency Tools

• Supply Chain Analysis Software – Programs optimizing the supply chain from production to market, which is crucial in reducing costs and improving profitability.
• Labor and Machinery Management Systems – Software that helps optimize the allocation and use of machinery and labor to ensure that resources are used efficiently across the farming operation.

Risk Management Tools

• Weather Tracking and Simulation Models – Tools that predict weather patterns and their impact on crop production, which are vital for managing risks related to weather variability.
• Commodity Price Tracking Software – Helps in monitoring commodity prices and market trends, which is important for making timely selling and hedging decisions.

By employing these techniques and tools, Nebraska agribusinesses can enhance their decision-making processes, optimize their operations,, and improve their overall performance in a competitive market.

FARM ESTATE PLANNING

Estate planning is crucial in safeguarding farm legacies in Nebraska, where agriculture plays a significant role in the state’s economy. Proper estate planning ensures farms can be successfully passed down through generations without being burdened by financial and legal complications. Here are some key aspects of why estate planning is essential and the specific legal considerations unique to Nebraska:

Importance of Estate Planning for Farm Legacies

• Continuity of Operations – Estate planning helps ensure that farms continue operating across generations without disruption, preserving the family’s livelihood and the agricultural heritage.
• Minimizing Tax Liabilities – Effective estate planning strategies can help minimize the impact of estate taxes, inheritance taxes, and other related taxes that could otherwise threaten the financial stability of a farm after the owner’s death.
• Conflict Prevention – By clearly outlining the distribution of assets and roles, estate planning can prevent disputes among heirs, which are often a significant risk in the absence of a clear plan.
• Protection of Assets – Estate planning helps protect the farm from potential creditors and legal disputes, ensuring that assets are preserved for future generations.

Legal Considerations in Nebraska

Nebraska has specific legal considerations that must be addressed in the estate planning process for farms:

• Nebraska Inheritance Tax – Unlike many states, Nebraska imposes an inheritance tax, which varies depending on the relationship of the heir to the decedent. Planning how to manage or mitigate this tax is essential for preserving farm assets.
• Land Use Regulations – Local zoning and land use regulations can affect the transfer and use of agricultural land. It’s important to ensure that estate plans are compatible with local laws to avoid potential legal conflicts.
• Special Use Valuation – Nebraska allows a “special use valuation” under certain conditions, which can reduce the value of farm real estate for estate tax purposes if the land continues to be used for farming. This can be a crucial benefit in estate planning.
• Conservation Easements – These are voluntary legal agreements that permanently limit the uses of the land in order to protect its conservation values. They can be a tool for estate planning, providing tax benefits while also ensuring the land remains undeveloped.
• Business Structure Considerations – The structure of the farming business (such as a corporation, partnership or limited liability company) can have significant implications for estate planning. Each structure has different implications for liability, taxation, and inheritance.

Effective Estate Planning

A properly structured estate and trust plan provides you with peace of mind knowing that your spouse, children and business are taken care of and accounted for after you’re gone. The orderly transfer of your assets to beneficiaries should be accomplished in a way that provides security for your heirs. A solid plan should also accomplish your personal, charitable and philanthropic goals while reducing or eliminating tax burdens.

There is a wide variety of estate and gifting strategies and formats that have legal, tax, compliance, and administrative consequences, including:

Estate, Trust & Gift Planning Solutions

Individuals, business owners, trustees, executors and other related parties look to us for tax planning and consulting services, business succession planning and fiduciary tax preparation services. Estate planning solutions include:

• • Estate & trust settlement guidance and planning
  • Federal estate & gift tax projections
  • Federal & state estate tax return preparation
  • Federal & state fiduciary income tax return preparation & projections
  • Financial statement preparation & related accounting services
  • Representation before the IRS on examination issues

FARM SUCCESSION PLANNING

Estate planning is crucial in safeguarding farm legacies in Nebraska, where agriculture plays a significant role in the state’s economy. Proper estate planning ensures that farms can be successfully passed down through generations without being burdened by financial and legal complications. Here are some key aspects of why estate planning is essential and the specific legal considerations unique to Nebraska:

Importance of Estate Planning for Farm Legacies

• Continuity of Operations – Estate planning helps ensure that farms continue operating across generations without disruption, preserving the family’s livelihood and the agricultural heritage.
• Minimizing Tax Liabilities – Effective estate planning strategies can help minimize the impact of estate taxes, inheritance taxes and other related taxes that could otherwise threaten the financial stability of a farm after the owner’s death.
• Conflict Prevention – By clearly outlining the distribution of assets and roles, estate planning can prevent disputes among heirs, which are often a significant risk in the absence of a clear plan.
• Protection of Assets – Estate planning helps protect the farm from potential creditors and legal disputes, ensuring that assets are preserved for future generations.

Legal Considerations in Nebraska

Nebraska has specific legal considerations that must be addressed in the estate planning process for farms:

• Nebraska Inheritance Tax – Unlike many states, Nebraska imposes an inheritance tax, which varies depending on the relationship of the heir to the decedent. Planning how to manage or mitigate this tax is essential for preserving farm assets.
• Land Use Regulations – Local zoning and land use regulations can affect the transfer and use of agricultural land. It’s important estate plans are compatible with local laws to avoid potential legal conflicts.
• Special Use Valuation – Nebraska allows a “special use valuation” under certain conditions, which can reduce the value of farm real estate for estate tax purposes if the land continues to be used for farming. This can be a key benefit in estate planning.
• Conservation Easements – These are voluntary legal agreements that permanently limit uses of the land in order to protect its conservation values. They can be a tool for estate planning, providing tax benefits while also ensuring the land remains undeveloped.
• Business Structure Considerations – The structure of the farming business (such as a corporation, partnership or limited liability company) can have significant implications for estate planning. Each structure has different implications for liability, taxation and inheritance.

Steps to Effective Estate Planning

• Create a Will and Trusts – These documents are fundamental in directing the distribution of assets and managing legal issues after death.
• Plan for Succession – Establishing a clear succession plan helps ensure smooth transition of management and ownership roles.
• Consult with Legal and Financial Experts – Given the complexities of estate taxes and local agricultural laws, consulting with professionals who specialize in agricultural law and estate planning, including those at Adams Brown, is advisable.

FARM RISK MANAGEMENT

Risk management is a key aspect of farming, especially in Nebraska where agricultural production plays a significant role in the state’s economy. Understanding and implementing effective risk management strategies can help farmers minimize losses and stabilize income. Below are key strategies and tools that Nebraska farmers might consider:

Crop Insurance

Crop insurance is a fundamental risk management tool for farmers in Nebraska, given the state’s susceptibility to unpredictable weather patterns. It provides protection to both farmers and ranchers against declines in crop yields and revenue. There are two categories of insurance including multiple-peril crop insurance (MPCI) and state regulated crop insurance, amongst other policy types. According to the NAIC, in 2022 alone, $19B in premiums were written for MCPA coverage and over $1.4B for private crop insurance.

Key Crop Insurance Policy Types

• Crop Hail Insurance – This type covers damage and destruction caused to crops by hail and fire. It is specifically designed to protect crops still in the field that have not yet been harvested. It is typically sold on an acre-by-acre basis, this insurance compensates farmers for the value of the products lost in the field. Coverage does not need to be secured for the entire farm but can be secured only for those acres with the highest risk profile. This is an especially important insurance product for Nebraska farmers, where hail is common.
• Multiple Peril Crop Insurance (MPCI) – This insurance provides coverage for crop losses due to a variety of natural events including frost, hail, wind damage, disease, famine, flooding, fire and even insect damage. The cost of the insurance and benefit amount is dependent on the value of the covered crop. It is federally supported and regulated and served by private insurance companies. More than 90% of farmers that purchase crop insurance rely on MPCI coverage.
• Crop Revenue Insurance – Farmers may also decide to manage risk with the purchase of crop revenue insurance. This type of coverage provides protection in years when crops have a low yield/or the crop price is unusually low. The amount paid by an insurer is determined by how much lower a year’s revenue is when compared to the prior year’s earnings. This type of coverage is essential to protecting against unexpected and drastic swings in crop prices, whatever the cause.
• Pasture, Rangeland & Forage Insurance – This insurance provides coverage against loss of pasture and forage due to low rainfall and declining vegetation. Policies are written for specific periods of time and acreage, allowing farmers to insure the highest risk areas. It also allows owners to manage the potential payouts should the unforeseen occur.

Additional Risk Management Tools

Beyond crop insurance, several other tools can help manage risks associated with farming in Nebraska:

• Futures Contracts and Hedging – By locking in prices for crops before they are harvested, futures contracts can protect against price fluctuations. Hedging can offset potential losses in crop prices and is an essential tool for financial stability.
• Diversification – Planting a variety of crops can spread risk and reduce dependence on the success of a single crop. Diversification might also include integrating livestock into the farm business or developing alternative income streams like agri-tourism.
• Conservation Practices – Implementing soil and water conservation practices can enhance the resilience of the land. Practices such as no-till farming, cover cropping and proper irrigation management help preserve the farm’s productivity and protect against environmental risks.
• Technological Advancements – Using precision agriculture technologies like GPS-guided equipment, drones and field sensors can help monitor crops and soils more effectively, allowing for better-informed decisions and efficient resource use.
• Government Programs and Assistance – Participating in government programs such as those offered by the USDA can provide additional support. Programs might include disaster assistance, conservation grants or subsidized loans.

By combining these tools and strategies, Nebraska farmers can better manage the risks associated with their agricultural endeavors, potentially leading to more sustainable and profitable operations.

DATA SECURITY FOR FARMERS

As agriculture increasingly relies on technology, the importance of cybersecurity in this sector has grown substantially. Nebraska’s farmers, who often utilize advanced technological farming practices, must protect their data against cyber threats. Here’s a deeper look into why cybersecurity is becoming essential in agriculture and some practical measures Nebraska farmers can implement to secure their farm data.

Growing Importance of Cybersecurity

• Technological Integration – Modern farms use a variety of digital tools and platforms, from GPS and automated irrigation systems to crop sensors and drone technologies. These systems gather and store valuable data, making them targets for cyber-attacks.
• Data Value – Farm data includes detailed information about crop yields, soil health and livestock management, which can be extremely valuable for competitors or malicious entities.
• Operational Continuity – A cyber-attack can disrupt essential farming operations, leading to significant financial losses and operational downtimes.
• Compliance and Trust – With increasing data privacy regulations, farmers must ensure their data handling practices comply with legal standards to maintain trust with partners and customers.

Practical Cybersecurity Measures

• Secure Internet Connections – Use encrypted Wi-Fi networks and avoid public Wi-Fi for accessing or transmitting sensitive farm data. Also, consider implementing VPNs (Virtual Private Networks) for remote access to farm networks, ensuring that data is encrypted and secure during transmission.
• Regular Software Updates and Patch Management – Regularly update all farming software, applications and operating systems to protect against vulnerabilities that could be exploited by hackers. Automate necessary updates where possible to ensure timely application.
• Employee Training and Awareness – Conduct regular training sessions for all farm staff on basic cybersecurity practices, such as identifying phishing attempts and secure password practices. Establish protocols for handling sensitive information and educate staff about the potential cyber threats specific to agriculture.
• Access Controls and User Management – Implement strong authentication methods, including multi-factor authentication, to access farm data systems. Limit access rights based on user roles, ensuring that individuals only have access to the data necessary for their job functions.
• Data Backup and Recovery – Regularly back up all critical data in multiple secure locations (e.g., cloud storage and physical backups offsite). Develop a comprehensive disaster recovery plan to restore data and resume operations quickly in the event of a cyber-attacks.
• Use of Security Software and Hardware – Install and maintain reputable antivirus and anti-malware software to protect against threats. Consider deploying firewalls to monitor and control incoming and outgoing network traffic.
• Engage Cybersecurity Professionals – For more extensive farm operations or particularly sensitive data, consider consulting cybersecurity professionals to assess risks and implement tailored security measures.

By adopting these measures, Nebraska farmers can significantly enhance the security of their farm data, protect themselves from cyber threats, and ensure the continued success and sustainability of their operations.