Threats of winter storm warnings and corn crops still standing in some fields may have kept a number of producers away but the GrowingOn 2019 conference on Yankton last week still carried on with insights, tools and strategies for the upcoming farming year.
Steven D. Johnson, Farm & Ag Business management specialist with Iowa State, talked to producer members of Farm Credit Services Friday about managing crop risks and controlling the controllables.
“It’s important to remember before you can get bigger, you need to be able to get better,” Johnson said.
Johnson listed five learning objectives for farmers to follow in today’s Ag market to be better crop managers. Farmers need to focus on controllable factors like managing production costs and family living expenses. Along with controlling costs, there needs to be cash flow management. He also reminded the producers there are risk management tools available — use them. Developing crop marketing plans help visualize the future needs and successes. Now, producers are ready to grow the farm operation.
A selection of farm case studies was reviewed which considered merchandising grain to maximize profit and increase cash flow, demonstrating how successful management can bring dividends.
“I know there are many farmers who do not understand basis and hedging,” Johnson said. “You need to sit down, face-to-face with a merchandiser, tell him you have farmed for 45 years and you do not understand how to do this. Have a little humility and quit being afraid of margin calls. Get over it.”
To be truly successful and show a profit, crop marketing is essential in today’s world market. Find a broker easy to work with in order to realize profit margins. Contracts and crop sales in late winter, early spring or summer rather than field delivery to market in the fall can often make or break a good crop year.
Johnson said on-the-farm storage lags behind the times. Limit bushels in commercial storage and consider options to build bins on site. Storing crops enables a producer to maximize the crop potential by making educated crop pricing decisions.
If a producer needs to use commercial storage, Johnson advises never to store beans. By the time a producer pays for storage and interest on his operating loan, he can potentially lose a dollar off the price of those beans he’s waiting to sell for top dollar price.
To improve crop marketing, Johnson said the first step is keeping good records for production costs. Itemize cash flow needs for the next twelve months. Good records include actual production history (APH) and break-evens. Set a goal for a reasonable profit margin and track basis patterns by studying multi-year data. This helps a producer when working with bankers.
Research crop insurance options like Revenue protection (RP) and use this tool for pre-harvest marketing. Start researching the variety of crop marketing tools available. Consider on-farm vs. commercial storage costs. Execute that written marketing plan.
“In real life, these are things I can do and add-ons I can use to be more profitable,” Johnson said. “Never ignore the importance of RP and its contribution to good farming practices. It is one of the most important proprieties.”
Johnson summarized the Livestock Outlook with a video from Jim Robb, Livestock Information Marketing Center. Meat proteins are enjoying strong demand thanks to the strong U.S. Economy. The beef industry is moving from expansion in numbers to more positive prices although swine production still relies on exports. There is still concern about what the future holds for the African swine flu.
“It’s the lowest unemployment rate in 45 years and consumers have money,” Johnson said. “They are buying meat protein and there are tremendous opportunities for the beef industry.”
The 2019 crop weather outlook was also presented with a video from Agrible, courtesy of Eric Snodgross with the University of Illinois. He is predicting a weak El Nino and a dryer crop year for 2019. But Johnson reminded producers there have been incredible yields five of the last six years, and subsoil moisture is at an all-tie high. Snodgross reviews the world-wide weather, targeting other farming regions. Farmers can sign up to receive these weather videos twice a week in their emails at www.agrible.com.
Johnson told farmers keeping track of what other world-wide farmers are going through helps build U.S. farming projections and export possibilities. He also reminded farmers Argentina is the largest buyer of the U.S. soybean crop and who do they sell the beans to? China, of course. It definitely is a world-wide market.
When looking to 2019, Johnson proposed the following crop year planting plan. A farmer needs to cut $50 an acre in production costs. Where does he start?
Soil tests to determine the nitrogen and other minerals needed in the soil is a good place to start. Maybe a farmer can cut back on fertilizer application needs. Maintaining existing equipment makes an operation more efficient. Farmers need to be minimal till or no till to keep moisture in the soil. Early purchase of seed with volume discounts is a good tool but try to use cash.
Finally, negotiate cash rents. If a farmer’s current landlord is not willing to assume some of the risk and reduce cash rent, dump him. Develop a good working relationship with the landlord and keep him in the loop, sharing crop yields.
Cost control is easier if there are good records which monitor farm and family expenses. Have a marketing plan which can meet pre-harvest fall/winter cash flow. Do soil testing, buy early in volume and have crop rotation plans in place. Always make improvements over time and controlling the controllables will be easier for any operation.
“I believe we are in the fifth year of a seven-year cycle for good crop yields and we need to make the most of it,” Johnson said.