The decision to let land go or hold off on a needed purchase is never easy, but a clear view of the bottom line and everything that gets you there can help. Given a busy family farm of 3,300 acres of crops, 800 acres of pasture and a cow-calf herd, Beth and Herb Schnitker's view can get muddled. In recent years, this Audrain County, Mo. operation has improved its overall business view by using a risk management and profitability planning software tool called GrainBridge.
Eliminate bad leases
"We haven't necessarily liked the information produced the past two years, but it has been important and valuable to have up front," says Beth. "In 2015 we had a three-year lease that had to be renegotiated. We realized we couldn't meet the owner's expectations on cash rent. We walked away. It was a hard decision, but this year it still looks like it was the right one."
It took awhile for the Schnitkers to fully utilize the tool that allows them to create detailed crop and livestock profiles for individual fields or livestock pens. Initially they built crop profiles for corn, soybeans and wheat. In 2014 they added more data, and in 2015 they completed detailed field profiles that include everything from cash rent or crop share, down to inputs included in variable-rate planting and fertilizer applications.
The in-depth profiles created benchmarks that allowed them to plan and evaluate the impact of every input. By simply changing one input, you can understand the cascade effect on yields and costs all the way to the bottom line, while historic yield averages and prices provide a dose of reality.
"With the three-year lease, we went into the negotiations showing projected expenses and revenues with the then current market environment," says Beth. "It would have been easy to say we could try and make it work, but looking at the numbers, it would not have been a good business decision."
The Schnitkers make use of what-if scenarios to evaluate price moves in the market and their impact on the bottom line. Having the information allows them to set profit or at least break-even goals. Beth says it also has been valuable when marketing two and three years out.
More confident marketers
"Seeing where we are and what average prices are have encouraged us to market when we are above our break-even price," she says. "That has given us some latitude, as those prices are higher than the current market, improving our average price."