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Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
Managing Your Farm In An Economic Downturn
Chris Hurt, Professor & Extension Economist
Michael Boehlje, DisAnguished Professor & Extension Economist
James Mintert, Professor & Director, Center for Commercial Agriculture
Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
-$100
$100
$300
$500
$700
$900
$1,100
$1,300
Dol
lars
Per
Acr
e
Real U.S. Corn Revenue (+Insurance) Per Harvested Acre (2014 $’s)
1986 = $395 2005 = $373
1973 = $1,252 2012 = $1024
1946 = $697
2014-‐16= $631
1921 = $172 1931 = $113
Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
$400 $450 $500 $550 $600 $650 $700 $750 $800 $850 $900 $950
$1,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Average Corn Revenue & Costs/Acre by Year in Indiana
Cost/Acre Revenue/Acre
Crop prices RISE faster than costs adjust upward: PosiPve Margins
Crop prices Fall faster than costs adjust downward: NegaPve Margins
Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
Improving Your Farm’s Management 5 Management Strategy Categories to Consider
ü Financial
ü Input Purchasing
ü ExecuPon
ü MarkePng Strategies
ü Government Programs & Crop Insurance
Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
Financial Strategies 1 Preserve Working Capital
Working capital = current assets – current liabiliPes What’s Your Burn Rate?
2 Reduce capital expenditures CauPon on 179 Exp. in 2014
3 If working capital is already low, rebuild it
4 Restructure debt with longer loan terms
5 Lock-‐in long term interest rates 6 Reduce family living expenses
7 Be prepared for your loan review!
Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
Input Purchasing & Usage Strategies
• Why is this important?
Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
Crop ProducAon Costs Increased Rapidly
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
05 06 07 08 09 10 11 12 13 14 15
$/bu
shel
Year
EsAmated Indiana Corn ProducAon Costs 2005-‐2015, Per Bushel
Var. Cost/bu. Total Cost/bu.
Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
2015 EsAmated Indiana Corn ProducAon Costs By Category
FerAlizer
Seed
PesAcides
Fuel
Machinery Repairs
Hauling Interest
Insurance & Misc.
Machinery & Family Living
Cash Rent
Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
100
125
150
175
200
225
250
05 06 07 08 09 10 11 12 13 14 15
$/Acre
Year
Indiana Average Farmland Cash Rental Rates 2000-‐2015
Cash Rent Was 28% of Total Cost in 2014
Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
Rental Rates Will Start to Adjust
$0.70 $0.80 $0.90 $1.00 $1.10 $1.20 $1.30 $1.40 $1.50
05 06 07 08 09 10 11 12 13 14 15
$/bu
shel
Year
Indiana Average Farmland Cash Rental Rates Per Bushel of Corn, Trended Yields, 2000-‐2015
Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
Seed Costs Share of Total Costs Increased
0% 2% 4% 6% 8%
10% 12% 14% 16%
05 06 07 08 09 10 11 12 13 14 15
% of Total Cost
Year
Seed as a % of Indiana Total Corn ProducAon Costs 2005-‐2015, Per Bushel, Trended Yields
Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
Input Purchasing & Usage Strategies
• Cost per bushel is the key, not cost per acre! • “Buying Right” sets your cost structure • Check & NEGOTIATE prices • Crop ferPlizaPon strategies • Herbicide strategies • Cash rent and land purchases are very important
Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
MarkeAng Strategies
• Become more cauPous • Delay pricing inputs • Don’t lock-‐in inputs for mulPple years
• Forward price crops more aggressively
• Earn storage returns (especially for corn) • Focus on locking in margins