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6 ideas for uncovering hidden profit

On-farm grain bin storage
A South Dakota farmer says he found ways to make more and save more money by looking for "nuggets of profit" hidden in his operation.

There are nuggets of profit hidden all over your operation right now, says Scott Anderson, an Andover, S.D., farmer, blogger and founder of CashCow Farmer.

"A few tweaks here and there can be the difference of tens of thousands of dollars for you annually," he says.

Her are his top six ideas for uncovering hidden profits:

1. Interest rate flip. "This one involves a little paperwork, but the money earned is worth it," he says. Take out commodity loan on the grain you haven't sold and are storing. The interest rates for commodity loans are at about 1.375%. Pay off your operating line of credit, which is probably 4-5% interest rate, and save 3% or more every month. If you have a xxxx operating, the flip would save you $20,000 annually.

2. Field-by-field economics. "This is why Cash Cow Farmer comes into play," he says. "The [computer] program takes all operating expenses and divides them into categories by field, so you can see the profitability of each field. It reveals those fields that are consistently losing. The good news is that you can make almost any field profitable. But first, you have to know each field's profit and loss."

3. Plan when you plant. "Your harvest plan is based on the various maturity dates of the seeds you plant. If you plant and think about harvest at the same time, you can open your harvest window. That way, you won't have soybeans that are too dry because you had planted all the same variety without regard for timing. "I plant shorter-day varieties right away and get into longer-day varieties as I get further on in the planting season. The shorter-days will be ready a week or two before the others, so my moisture stays where I want it. If I were to take soybeans out at 8% moisture instead of 12%, I'd be losing a couple of bushels just in the water weight. Work with your seed advisor, because bad timing can be the difference in another $10,000. Make sure you're planning while you're planting."

4. Water under the bridge. "I know it's hard, but try to let logistical decisions win out over emotional grudges. Every farmer knows a neighbor who has a grudge against a local co-op. They were cheated, or felt they were, and the co-op never made it right. Maybe you are that neighbor. I know plenty of farmers who will pass one or two buyers and drive up to 70 miles away in a semi-truck to sell grain. That's tremendously expensive. Their pride keeps them from burying the hatchet, at their own expense.  I don't know about you, but there aren't a lot of buyers in my area. By refusing to use even one, I may double my transportation costs. So yes, I may have had a spat where I thought something unfair happened, but we talk it out and then—water under the bridge."

5. Work with your neighbors. "Every farmer has a different setup. Some have a lot of machinery; some have a lot of storage. You can work with your neighbors, possibly renting grain storage for half or two thirds what it would cost at the elevator. As an example, I marketed a lot of my crop this year and I've got about 300,000 bushels worth of storage. I'm going to use about 100,000, but I've got plenty of extra storage left. So I called my neighbors and said, "The elevator's charging five cents a bushel. I've got storage I'm not going to use; what do you think is a reasonable charge?" We came up with three cents, giving them a 40% discount. I also offered to let them use my air fans that can dry their grain down. At the elevator, the process would cost 5 cents on every bushel for each percentage point of drying. I offered to do it for 4 cents.

6. Negotiate, negotiate, negotiate. "This is extremely important. If you can save $10 a ton on fertilizer and a couple of dollars on chemical costs per gallon, that's going to add up. There's always more competition when it comes to buying inputs, so talk to everybody and give them all a chance at your business. Find the lowest price, go back to your favorite input suppliers, and ask if they can match or beat that price. I save at least $50,000 a year by doing this. For more on negotiating, I highly recommend reading Stuart Diamond's, 'Getting More.'

To learn more, see CashCowFarmer.com

Source: CashCow Farmer

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