Frustrated by Quest for Accuracy
Concerning the column in Top Producer’s January issue about knowing cost of production to 5¢ per bu. as a necessity: This is one of many articles by "experts" about knowing cost of production that frustrates me.
I am confident that I am as efficient as possible in my operation, and my lender agrees. The only place to cut costs is land rents, and that is not in my control. The only decision I can make concerning that is: Do I want to farm? I wonder how the "experts" can determine cost of production to such accuracy before the crop has been realized. Not knowing final yields makes it impossible to know cost of production to the degree you are advocating—let alone other variables.
It might sound arrogant, but my feeling is if I do indeed want to farm as long as possible, it is what it is.
Lynn Van Dyke
As a corn and soybean producer, my motivation for helping others improve is certainly not to be classified as an "expert." Every producer has a responsibility to know their own numbers. Additionally, they will be held accountable by family members, partners and lenders for making the best decisions for their farm; therefore, they need to be their own internal "expert."
I’m happy that your operation is efficient and you are confident with your financial position. However, there are many producers who are concerned about tighter profit margins moving forward. My goal is to motivate and help these producers calculate the best outcome possible.
I understand that many operations have a set rent, which is not likely negotiable until September. But I have worked with a number of farmers this year who have been able to negotiate lower rents during the midst of their contract. Most of these producers have been able to lower rents due to the fact that they proactively paid additional revenue during the past few years while they were achieving higher profit margins.
Also, land isn’t the only place that production costs can be lowered. For example, the price difference between liquid 32% nitrogen and NH3 is currently $35 an acre. If a producer plans to use 32% nitrogen, he could lower his production cost by $35 per acre or 20¢ per bushel.
Machinery is another area where I see a lot of creative cost reductions for 2014. Partnering on equipment, additional custom work or reevaluating new purchases are all areas where producers are cutting costs. There are also other line items that can be fine-tuned. On our farm, we analyze each line item as a moving target throughout the year.
With all the "experts" in the world, we just need to funnel down what’s important for our individual business and go with that—keep it simple.
Business Matters Columnist
Carson and Barron Farms Inc.
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- March 2014