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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.

 

Matching Bushels & Expenses

Oct 17, 2011

 

One way to think about marketing is to consider how many bushels you need to cover expenses. As you analyze each individual expense it's important to have a clear understanding of the productivity required to meet each expense. With this information at your fingertips, you can determine price objectives for both expenses and income. Managing a successful farming operation in the future will depend on your ability to recognize margin opportunities immediately and be able to follow through with disciplined marketing.
Here is a tool which calculates bushels needed in order to cover your expenses.

Farm Name
Joe Farmer
Total Prod. $
$1,644,075.00
Total Acres
1,500
Expense/Ac.
$1,096.05
Crop
CORN
Gross $ /Ac.
$1,202.50
Market Price Goal
$6.50
Cost/Bu. Prod.
$5.92
Yield Est. / Goal
185
 $ Margin Ac.
$106.45
Total Grain Production
277,500
ROI
9.7%
 
 
 
CROP EXPENSE LIST
Expense PER/AC.
OVERALL $
PER/ AC. Bu.
OVERALL
Return to Management
$150.00
$225,000.00
23.08
34,615
Land Payment/Rent
$245.00
$367,500.00
37.69
56,538
Taxes
$25.00
$37,500.00
3.85
5,769
Interest
$15.00
$22,500.00
2.31
3,462
Insurance
$25.00
$37,500.00
3.85
5,769
Seed
$102.00
$153,000.00
15.69
23,538
Fertilizer
$86.22
$129,330.00
13.26
19,897
Nitrogen
$117.62
$176,430.00
18.10
27,143
Herbicide
$28.71
$43,065.00
4.42
6,625
Fungicide/Insecticide
$37.50
$56,250.00
5.77
8,654
Custom Spray 2 pass
$15.00
$22,500.00
2.31
3,462
Equipment/Fuel/ Labor
$173.00
$259,500.00
26.62
39,923
Grain Hauling
$37.50
$56,250.00
5.77
8,654
Drying Expense
$27.50
$41,250.00
4.23
6,346
Storage
$11.00
$16,500.00
1.69
2,538
Tile / Irrigation
$0.00
$0.00
0.00
0
Total Expenses / Ac.
$1,096.05
$1,644,075.00
168.62
252,935

 
 
This type of tool helps you to clearly visualize your production requirements. As you get a handle on expenses, you will be able to structure price and yield goals designed to cover all expenses.
A final thought; notice “return to management” is the first line item expense. Be sure to pay yourself first. Determine a reasonable profit level which suits your farm and be sure to include that in your overall expenses. When you're marketing your grain part of the expenses you are covering should be PROFIT.
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