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RSS By: Chris Barron

Chris BarronHave a margins question? Through this blog, you will gain insight into improving your bottom line, as a margins expert answers questions and provides farm business advice.

 

Margin Enhancement Opportunities

Jan 31, 2011

 

With current price levels growers will be producing an extremely valuable crop. As the value of our crop improves so do the opportunities to use products that can enhance our yields and ultimately widen our profit margins.
The current crop value for the 2011 corn crop is in excess of $1000 per acre for many operations. Obviously there are many expenses on the other side of the ledger; however, if we are precise in our purchasing decisions we have some opportunities to explore new technological improvements and products. The higher we can get our grain marketed the faster the returns from our yield improvement products.
If you assume that a particular product or technology can improve your yield by 10 bushel per acre, there is a much wider margin for return potential with $5.50 corn than with $3.50. Using this scenario, there is an extra $20 per acre of income to work with for every 10 bushel per acre of increase. This instantly increases the likelihood of a positive return as we consider using additional crop protection or yield improvement products. Using a $5.50 corn price and making the assumption that a particular product would cost $10 per acre, you would only need 1.8 bushel to cover your cost. After covering your costs you still have an income return of $17.50 per acre!  (See chart below) When market prices are strong there are large paybacks for increasing yields.  Many of the products and technologies that we have to choose from will provide more than 2 bushel per acre in performance improvement.
Consider building your own calculator to consistently measure improvement opportunities one product at a time. If you are interested in some decision-making tools feel free to send me questions.

 

        Margin Enhancement Calculator
Product / Technology Price
$10.00
per/ac.
 
Grain Market Price
$5.50
per/bu.
Yield Improvement prediction
5.0
Bu./ac.
 
Income / ac. Enhancement
$17.50
per/ac.
Bu. needed to cover product cost
1.82
Bu./ac.
Total Acres of application
100
Total Income / Return $$$
$1,750.00

 

 
Obviously, there are loads of options to choose from as we try to improve our yields. Here is just a short list of considerations to encourage you to think about individual product and technology options that may help to improve margins.
1.       Nitrogen Stabilizers                                                 
2.       Rootworm Corn
3.       Seed Treatments
4.       Variable Rate and Swath Control equipment
5.       Planter attachments or new equipment
6.       Spatial and Soil type mapping
7.       Tile/Drainage
8.       Fungicides
9.       Herbicides
10.   Crop Scouting Service
 
Every operation is unique as to what products and technologies may enhance profits. Some product decisions will be made depending on how the growing season plays out. Agronomic conditions will determine if some products may be needed or excluded. The basic concept is to develop a plan that is applicable for your own operation. It's up to you to maximize your margin opportunities.
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