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Agronomy Update

Know Your Numbers: Making Profitable Decisions in 2015

Published on Thursday, January 22, 2015

What does it cost to put out an acre of corn in 2015? How does soybean profitability compare to corn? What are some easy ways to increase my profit?

I had fun this winter discussing these topics with our customers at some small post-harvest customer meetings we did in areas of Ohio. This week’s newsletter will be the first of a short series discussing: Making Profitable Decisions in 2015.

My simple goal with this short series is to provide you with some simple, helpful tools.

Why? Commodity price outlook for 2015 is lower than it has been and input prices have still held firm for the most part - this puts a tight squeeze on profit margins for us as farmers.

There are three “know your numbers” topics we will discuss over the next few weeks.
- Crop Budget (per acre and per bushel cost)
- Fertility
- Seed Selection

Today’s Topic: Crop Budget
I encourage you to use these winter months to sit down and figure what it will cost you to put out your crop per acre in 2015 and what potential NET revenue is available at current fall delivery prices.

We all prepare our books for tax time and get a feel for profitability, but that is retrospective. Crop budgeting is knowing your numbers before you make the decision, that way we can anticipate how our decisions may affect profitability in 2015. "Profitable decisions are based on quality information and an understanding of that information."

             

 

             

                                  Download the crop budgeting tool.

If you use Microsoft Excel and are computer savvy, this tool is very helpful for calculating your cost per acre and cost per bushel. It is also helpful for comparing the cost of different products and scenarios. If you put in your cost of herbicide is $39/gal and you apply 3.25 qt/acre it will calculate your cost per acre. This makes it very easy to compare different herbicide, fertilizer or tillage programs.

If you aren’t computer savvy, a pencil paper and calculator are still the best tool for knowing your numbers. Everyone’s cost of production, yield level, and basis is different so it is important for you to input your numbers. Don’t just look at what I have pre-populated in the spreadsheet.

Cost Per Bushel: Calculating your cost per bushel is taking your way of thinking to the next level because there are two ways that can affect cost per bushel:
- Cost
- Yield

Any decision you make that affects your yield or your input cost affects your cost per bushel. The lower your cost per bushel, the higher your profit. The higher your yield, the lower your cost per bushel. This isn’t ground breaking, but worth reminding ourselves, when margins get tight we often get tempted to focus on cost cutting.

"Anything that pays us back more than what it cost us does put money in our pocket and makes our cost per bushel go down."

Often the highest yields are still the most profitable even at lower grain prices.
Knowing your cost per bushel can aid in your grain marketing decisions.

As a side note: I was thinking about grain marketing the other day. I have two children and another on the way. To me grain marketing is like parenting. Here is how they are similar: Different folks have different approaches, there is no shortage of advice out there, and no one knows for sure what may happen next!

I hope you find this crop budgeting spreadsheet helpful. Next week we will discuss fertility and some easy ways to farm more profitably.

Have a great week,
Alex

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