Farm Horizons, Feb. 2016
Tightening belts in 2016
By Dave Schwartz
I attended a two-day crop conference recently in Minneapolis, and one of the speakers discussed the agriculture outlook for 2016. His presentation was titled “Turbulent Times in Agriculture.”
It was one of many presentations I heard during the conference, but it is the one presentation that stuck in my mind.
The speaker, Bob Craven with the University of Minnesota Center for Farm Financial Management, shared with the audience adult farm management record data from the past few years, so it included average expenses and income of farms from across the state.
In general, farmers enjoyed very good income years from 2010 to 2012, when corn prices rose at their peak to more than $7 per bushel. This drove up land values and rents to record levels.
This is not the situation anymore.
Corn is expected to be somewhere between $3 and $3.25 per bushel next fall at harvest, and soybeans in the $8 per bushel range. These prices make it difficult for most farm operations to cash flow, so let’s see where growers may be able to reduce costs, yet maintain grain yields and be profitable.
Seed As a seed dealer, I sold more straight Roundup corn hybrids, and even conventional seedcorn to help growers manage costs. For the most part, I only sell smartstax hybrids in situations where growers absolutely need continuous corn.
Fertilizer Very few university studies have found micro nutrients, such as Boron or foliar fertilizers, to be cost-effective. When fertilizing corn, for the most part, I recommend growers stick with the basics: nitrogen, phosphorus, and potash. These are considered the macro nutrients that are required most by corn plants.
Over the past 10 years, we have seen a benefit by adding 10 to 15 pounds of sulfur per acre.
The other nutrient that may be needed is zinc, but only if soil tests call for it. Be sure to soil test fields every three to four years, so we know exactly what to apply.
Land rent Negotiate land rents down to a level where crops cash flow. If that is not possible, it may be wise to look for other land.
This may be the time to learn more about flexible rent leases, where a base rent is set with incentives to pay more if yields or the grain markets are above average.
The University of Minnesota Extension office is a good source for this type of information.
For growers facing cash flow problems, it may be best to address the issue now with your lender, rather than put it off, to only see the situation worsen.
Try to be proactive, by working with lenders now on cash flows and doing whatever it takes to make the operation profitable.