Every spring, commodity analysts, private forecasters and USDA roll out their planted acres forecasts. Multiple surveys, crop rotations, weather conditions, market prices and other variables are accumulated to make an educated guess.
This macro information can give us some short-term marketing opportunities and possibly some idea of planting intentions. While paying attention to the macro-economic situation is important, so is paying attention to your micro situation, which has a more direct impact on your bottom line. What is your specific planted-acres scenario? Consider how crop rotations, weather conditions, marketing opportunities, agronomic choices and profit opportunities by specific crop will affect your profit potential.
Farmgate Analysis. Planting fence row to fence row and across marginal soils seems to be a standard practice during times of high commodity prices. Yet as commodity prices come under pressure, there is a reduction in planted acres with less profit potential.
Think of this trend on your own farm. Do you have some low-productivity farms or zones within productive farms that tend to provide a low probability of profit? We tend to farm across them for convenience.
We’ve done an outstanding job of adapting to variable-rate technology to apply inputs more efficiently and base our decisions on productivity.
Consider taking this concept one step further. What if we adjusted inputs and calibrated systems around profitability instead of productivity? This isn’t a new idea, though most of our variable-rate prescriptions are correlated to increase yield rather than generate a return on investment.
Take Action. Fortunately, there are tools on the market that can help us manage field zones for profit rather than simply yield. A multi-year yield map can be imported into these systems to quickly identify zones low in
productivity and profit. We probably already know about those areas, whether they are low wet spots in the field that drown out every other year, sandy ridges, end rows with significant traffic or loadout areas where trucks park during harvest.
It might seem counterproductive to manage small areas in our fields, but the economics can be quite compelling. Pollinator programs and various other conservation systems fit directly into this category. They can add revenue plus environmental benefits.
Additionally, using existing equipment to establish new boundaries is a simple task. Set up zones that are easy to farm through or around. Row shut-off sensors and other boundary-sensing equipment make crossing over irregularly shaped areas a non-issue. Even more compelling are the input savings.
For example, assume you have a 200-acre field with approximately 10 acres of low-productivity soils. Let’s assume the overall field typically yields about 185 bu. per acre, while the less productive zone yields about 75 bu. per acre. Assuming $4 corn prices, you’re looking at $300 per acre in gross income.
Your Choice. Now consider the variable expenses you’ve plugged into those acres such as seed, fertilizer, herbicides, equipment, grain handling and drying, and crop insurance. In most cases, it’s pretty easy to invest between $450 and $500 per acre in these variable inputs. That puts low-producing farmland at a loss of between $150 and $200 per acre.
Keep in mind another benefit of leaving some poor producing acres out of the equation is average yields on remaining acres will increase, improving your actual production history for the future.
Management of planted acres on your own farm is truly an individual decision. Only you can decide where to allocate working capital. The key is to place it carefully within parts of your operation that can generate a positive return. Saving working capital on some poorer producing areas can free up cash to increase productivity where there is potential.