Farm Progress

Manage crop costs with in-season decisions

Crop decisions you make during the growing season can help manage production costs.

Steve Johnson

June 21, 2017

3 Min Read
INPUT DECISIONS: How are you going to make money in 2017? Managing yield and managing costs are where most farmers are at this point of the year, especially if they don’t have corn and soybeans forward-priced to lock in a profit.

So how will you make a profit in 2017? Profit margins will be tight with the likelihood of burdensome supplies of corn and soybeans. Producers will need to stay focused on new-crop marketing plans and take advantage of futures price rallies due to weather related uncertainties.

What about managing crop costs? Being meticulous with data entries and tracking specific crop-related costs in-season (while the crop is growing) will likely prove invaluable. A good recordkeeping system with timely entries will allow you to keep track of costs by crop, farm field and rotation. Knowing these numbers on a year-to-year basis is key to knowing when, where and how best to make crop-related management decisions in-season.

ISU crop cost estimates
Each January, Iowa State University Extension economists release their crop cost estimates for a variety of row crop rotations. These numbers reflect the best guess of average cost of purchased inputs and a return to land and labor resources (production), but do not provide a margin for profit, a return to management or costs of grain storage. The ISU crop cost estimates reflect production costs only.

Let’s take a look at two different crop rotations that consider conventional tillage practices. On the first chart below, corn production following soybeans will yield approximately 180 bushels with a total cost of $631 per acre.

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The second chart below features soybean production following corn, which will yield approximately 50 bushels with total costs of $483 per acre. In both of these crop rotations, land costs are expressed as cash rent equivalent and reflects roughly 35% and 48% of the total crop costs for corn and soybean production, respectively.

0619W4-1688C.jpg

Now add another fixed cost: machinery. While this cost can vary greatly by farming operation, it typically represents between 9% and 12% of the total costs for corn and soybean production in Iowa. So, two fixed costs — cash-rent equivalent (land) and machinery — account for roughly 45% to 50% of the total typical crop production costs. Managing these two costs by farm, field and even crop rotation are critical to determine your actual cost of production. When you divide these total crop costs by your final yields, you can determine your breakeven costs.

In-season crop input decisions
During the summer months, row crops are growing rapidly, but the final yield hasn’t yet been determined. Timely producer decisions around the many variable costs (fertilizer and crop protection), along with the impact of weather, will ultimately determine the final breakeven costs. Add in your cash marketing decisions, and this will impact whether you can make a profit on this year’s crops.

You will still have to make input-related decisions often with short notice. The key is to manage these decisions without negatively impacting your final yield. The goal is not just cutting costs, but making input decisions that can still lead to profitable yields. Here are five timely in-season management tips to consider:

• Scout fields regularly to detect nutrient, weed, insect and pest concerns to potentially minimize losses early.

• Reduce field passes of machinery and equipment to the areas of the field where the problem occurs.

• Use in-season digital field maps to later compare yield and fertility data.

• Use variable-rate technology to help reduce field overlaps, products applied, fuel and labor.

• Assess crop yield potential before making rescue operations (nitrogen, herbicides, insecticides, fungicides, etc.) and use good farming practices as required for crop insurance coverage.

The timeliness of data collection and recordkeeping entries in-season will have a large impact on 2017 costs and yields. Longer-term, these decisions, along with a good recordkeeping system, timely entries and digital maps by farm, field and crop rotation, can prove invaluable.

Johnson is an ISU Extension farm management specialist. Contact him at [email protected].

 

About the Author

Steve Johnson

Steve Johnson is an Iowa State University Extension farm management specialist. Visit his website at extension.iastate.edu/polk/farm-management.

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