The commodity price outlook for 2015 is lower than it has been in recent years and input prices have held firm for the most part, putting a tight squeeze on profit margins for farmers.
Knowing your numbers will be a key to making profitable decisions in 2015, according to Alex Johnson, an agronomist with Beck’s Hybrids. He has talked with farmers throughout Ohio over the last few weeks about sitting down and taking a look at their crop budgets.
“Crop budgeting is a pretty simple process, but an important one,” Johnson said. “It’s all about knowing your cost per acre and converting the cost per acre to cost per bushel, getting to precisely what it takes for you to produce a bushel of grain.”
Johnson says as farmers begin to work on their 2014 taxes, they will get an idea of what last year’s profitability was, but that retrospective look won’t be much help when planning the year ahead.
“The reason we need to calculate our numbers for the 2015 crop is so that we know our numbers before we make crop decisions and knowing how those decisions affect your future profitability,” Johnson said.
To help farmers begin to put together a 2015 profitability puzzle, Johnson has created a crop budgeting tool.
“With this spreadsheet, producers can enter their cost per ton of fertilizer and rate and it will calculate the cost per acre,” Johnson said. “That is really handy if you are comparing different herbicide programs or different tillage programs and you want to see how those choices can affect your bottom line.”
The online tool can then go one step further and determine a producer’s cost per bushel.
“Cost per bushel can help you market your grain,” Johnson said. “If you know what it costs you to produce that bushel, it gives you a base point for selling that grain.”
The other reason that cost per bushel is helpful is that it gauges not only the cost a farmer has for producing a crop, but also the yield.
“The reason to take a look at yield is because when things get tight we try to focus on cutting costs,” Johnson said. “Although that can be helpful, anything that produces enough yield to offset the costs and makes us money on top is still a good management practice. So, many times our highest yielding producers are our most profitable.”
Calculate your operation’s cost per bushel by using Johnson’s Crop Budgeting Tool.