OMAHA (DTN) -- With farm income under pressure and facing another year of tight margins, producers should concentrate on the few expense categories where management decisions can still make a difference.

That was the message from Gregg Ibendahl, associate professor in the Kansas State University Department of Agricultural Economics, during a farm management webinar this week.

About 30% of farms in the Kansas Farm Management Association database lost money in 2024, he said, a reminder that trimming costs can be the difference between surviving the downturn or sliding deeper into it. "Even though 30% of our farms lost money in 2024, that really means, if you want to be on the positive side, you can say about 70% of our farms actually made money," Ibendahl said.

Here are the areas that deserve the closest look.

1-MACHINERY

Machinery is usually the single biggest expense on the farm, taking up roughly 34% of total expenses.

Depreciation of farm equipment itself is a big-ticket item. Depreciation on farm equipment accounts for about 10% of total farm expenses. "Just the fact that you have something sitting in your shed and the value goes down, that's contributing 10% of your total expenses," Ibendahl said. He added, "Just keep that in mind when you go out and buy something new."

Farmers are tightening their belts when it comes to new machinery purchases. The Association of Equipment Manufacturers latest report shows sales of 100-plus horsepower tractors were down more than 25% in January. In 2025, total new farm tractor sales were down 9.9% from a year earlier.

Self-propelled combine sales in 2025 were also down more than 35% from a year earlier, AEM reported. Combine sales, though, picked up in January and were 68% higher than a year earlier.

Ibendahl highlighted a new basic model combine with a corn head is going to run about $900,000. He suggested there may be more attractive options with used equipment.

"We kind of lost our way with machinery," he said, adding the trade-off of an older combine is that it has less tech technology and is likely more prone to repairs. "But to me, the whole equipment side has kind of gone out of whack and we've got to look at ways of getting more hours on these combines."

2-FERTILIZER

Fertilizer is typically the next-largest bill and one that has climbed faster than many other inputs in recent years. on central Kansas farms, fertilizer made up 16% of farm expenses in 2024.

As DTN Retail Fertilizer Trends also highlights, all eight fertilizers DTN tracks on a weekly basis are higher than they were a year ago. Anhydrous, for instance, at $860 a ton is up $119 from last year.

Farmers can't control market prices, but they can control usage. Ibendahl pointed to the University of Nebraska, which is no longer recommending farmers apply nitrogen in the fall, but recommends spring applications or side-dressing nitrogen.

"The main way you control fertilizer use is by the choice of crop," Ibendahl said, pointing to soybeans' ability to supply their own nitrogen. He added, "If you are worried about the nitrogen price, you know certainly soybeans are going to be an attractive option."

Soil testing can also guide whether phosphorus or potash rates can be reduced or skipped in certain years.

3-CASH RENT

There's some ability to negotiate and change rental rates. Ibendahl suggested tenants have some advantages mainly because they have more information about the agricultural economy and follow markets more closely than absentee owners.

That knowledge can be an advantage, though landlords may counter with stronger land values or government payments as justification for holding rates firm.

"So again, there is some give-and-take either way, but whoever has more information about what is happening out there in the farm economy probably is at an advantage when it comes to negotiating cash rental rates," he said.

4-INTEREST RATES

Debt-to-asset ratios today remain far healthier than during the 1980s farm crisis, largely thanks to high land values. But if asset prices decline, those ratios can worsen quickly.

Short-term rates may be largely outside a farmer's control, but total interest paid is heavily influenced by how much capital is borrowed.

Choosing to rent land instead of buying, or postponing major purchases, can keep debt loads from creeping higher and preserve working capital during lean years.

5-LABOR AND OPERATION EFFICIENCY

Trying to save by hiring the cheapest available help can backfire, Ibendahl warned. Putting an inexperienced operator in high-priced machinery raises the risk of breakdowns or mistakes that dwarf wage savings.

"With equipment costs being so high, I would argue it's probably worth it to spend a few dollars higher to get a really good driver to take care of your equipment," he said.

In some cases, investing in technology that can reduce labor needs may be more economical than cutting payroll. "So, can you buy more machinery that kind of reduces the need for physical labor out there?" he said.

WHERE NOT TO CUT

Ibendahl singled out crop insurance as a place many farmers consider trimming but probably shouldn't. For a typical central Kansas farm, crop insurance takes up about 3% of expense costs. Historically, indemnities have tended to exceed premiums, making it one of the few items that often pays for itself over time.

"Crop insurance is the net gainer on farms, practically on average, across the state here," he said. "So, cutting back on something that's making a little bit of money is not the way to go about saving money."

To watch the full webinar, go to: https://agmanager.info/….

See, "DTN Retail Fertilizer Trends: Urea Up 5% From Month Ago, Other Fertilizer Prices Remain Varied," https://www.dtnpf.com/….

Also see, "Will Farmland Values, Lower Interest Rates Save Midwest Farmers in 2026?" https://www.dtnpf.com/….

Also see, "After USDA Criticism, Corn Growers Press Attorney General on Fertilizer 'Duopoly'" https://www.dtnpf.com/….

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on social platform X @ChrisClaytonDTN

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