Three Inputs to Focus On in 2018

November 27, 2017 04:04 PM
 
A Decade of Production Expenditures

Make sure you carefully examine every dollar you spend in the coming year to prevent “saving” your way to lower yields and profits.

“Changes to agronomic inputs can have a direct impact on yield, and ultimately income,” says Ryan Bristle, farmer and marketing consultant for Russell Consulting Group based in Iowa. “If you cut back on inputs and it has a detrimental impact on yield, you have to consider the opportunity cost of that decision.”

USDA estimates corn prices will average $3.20 and soybean prices will average $9.30 next year. Look over your inputs, both fixed and variable, and examine where you can save to stay profitable.

Once you figure actual costs for 2018, Bristle advises comparing them to 2017 and then benchmarking them with other farmers or your state’s Extension estimates.

“From there you can determine where you can try to make cuts—what are the big input costs? Land, fertilizer, seed and equipment. You may only realize marginal improvements in each, but they can add up,” he says.

First, take a look at land rent. Work closely with your landlords to discuss what’s going on in the farm economy and your operation. In some cases, there could be wiggle room on rental price or arrangements.

“In a lot of cases, I think renegotiation takes being transparent with landowners,” says Mark Licht, Iowa State University Extension agronomist. “It’s easy for landowners to hear yields are above normal but they don’t necessarily see what that means for profit considering commodity prices and other input costs.”

You might be able to negotiate a flex-lease agreement, which would mean the base cash rent is lower but the landlord receives a bonus payment based on profit, Licht adds.

Next, take a look at fertilizer cost. While prices have declined it can still represent a substantial expense.

“Don’t apply a rate because that’s what you’ve always done—fertilizer net returns are certainly different with $3 corn than $5 corn,” Bristle says.

In some cases, it takes money to save money, Licht says. Consider updating soil samples if yours are more than three years old. You might be able to cut back on fertilizer or try variable rate to get the most return for your investment.

“The next thing I look at is seed selection,” Licht adds. “We know from research by entomologists in corn–soybean rotations maybe we don’t need the highest traited seed.”

When you decrease traits, though, there is a trade-off. You have to scout more, and in tough insect years, you could end up spending as much or more money on in-season rescue treatments. Weigh those options before making seed changes, but know it could save $20 to $50 per acre, depending on the seed.

“Farmers should weigh carefully the choices they make,” says Pat Westhoff, director of the Food and Agricultural Policy Research Institute at the University of Missouri. “Don’t squeeze every dime if it has a negative effect on income.”

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