With land prices as high as we have seen in our lifetime there are a few key factors that should be considered.
#1 Current financial position – Are you flush with cash or will you be taking out a loan?
#2 Land Valuations – Where do you think land values will go in the next 1-3-5 years?
#3 Interest Rates – Where are they headed and what is the prospect of borrowing today vs 2 years from now.
Read more on this subject in the April edition of Corn & Soybean Digest –
We have a new release out for you today. Here are some of the changes and new items.
This section at the top of the report combines all crop profiles to give you a whole farm summary comparing your target revenue to current revenue.
Summary of potential target revenue incorporating your profit goals, expenses and incomes
We’ve added several new commodities.
Instead of picking First Half/Last Half or All month for your delivery date on a cash sale, now you can pick a start date and an end date to reflect the exact delivery range of your sale.
if you use Microsoft Outlook or a more advanced system to manage your client base and contacts, now you can link it directly to load up the client profile in GrainBridge. Please drop us a note and we’ll help walk you through that process.
We have made many new improvements to the interface along with a few bug fixes based on feedback from the field. If you have any notes for us on how we can make this a better tool for you, please let us know.
The GrainBridge Team
You know that feeling of being thrown onto a piece of equipment that you haven’t operated for a year? It feels a bit awkward until you get reacquainted. Well, many farmers often feel that way every year when faced with crop insurance and risk management decisions. The strategies may have been familiar once, but now is a good time to review crop insurance values (especially as the March 15 deadline looms) and the wisdom of making pre-harvest sales against insured bushels.
Read more on this subject in the February 15th Corn & Soybean Digest
http://cornandsoybeandigest.com/marketing/real-crop-insurance-value
Managing risk on your operation is a full time job! Lean on your input supplier who watches major input costs on a monthly basis to help you make key decisions on when to book your fertilizer, price your seed corn and lock in fuel needs.
As commodity prices find their range so will key inputs like fertilizer. The expectation is that on average most of your input costs will be up by 10-15% this year, according to Iowa State economist, Mike Duffy – http://www.extension.iastate.edu/agdm/articles/others/JohSept11.html
Are you and your customer prepared for $4 corn and $10 beans? Take a look at the current statistics for production costs and potential risk exposure going into the 2012 growing season. These statistics were taken on 02/01/2012 for a grower in the western cornbelt.
It’s not unusual for a producer to pre-pay two-thirds of their fertilizer and fuel needs 6-8 months in advance of the spring growing season. As you make these purchases incorporate a forward sale to cover those costs and protect your investment. With key crop input costs making up over 60% of your variable costs of production, these decisions can make or break a good year!
To learn more on this topic see the article in Corn & Soybean Digest – http://cornandsoybeandigest.com/marketing/manage-input-costs-8020-rule
As my grandfather repeatedly reminded me in the 80’s – “The only way to make a good profit in the cattle business is by buying the calves right.” I believe his theory works here as well.
Until next time,
Pat Kroese
On November 10th, 2006 corn prices had just broke out of their 10 year trading range, and started a period of wild volatility. I was on my way to meet my friends and family for the annual deer hunt. Like many committed deer hunters, we spend as many hours setting around the fire pit as we do hunting the 30-point buck. This year, the fire pit topic was how to help farmers manage risk in a fast-paced and volatile market environment. I was in the consulting business, helping farmers create marketing plans and market their commodities. November had been stressful with corn markets marching higher and clients asking me “how much will it rise?” I had no inclination how high the prices were going, but I did know these were extremely profitable prices and my job was to help clients manage these profits.
The main tool I used to keep the focus on profitability was an excel spreadsheet. While the job got done, it had many limitations. First, I had to manually update the futures, options and value of unsold cash grain. Unfortunately, the prices were often outdated as soon as I clicked the save button. Another nuisance was many clients either had an out-dated version of Excel or did not have Excel on their computer. Finally, many clients struggled to navigate an Excel spread sheet due to the complexity of the sheets I had constructed.
That weekend at deer camp, I discussed my ideas with my deer hunting pals and there was a clear agreement that a better way to manage risk was needed. It was those conversations that drove me to the drawing board when I returned home.
Until next time…
-Mark
Here is a great article on Risk Management by Pat Kroese of GrainBridge in the latest edition of the Corn and Soybean Digest.
Corn and Soybean Digest
As the cold weather sets in it’s a good time to review your potential income tax implications and prepare your income and expense statements for review with your tax accountant. I’m sure you’ve been thinking about this very topic and excited to schedule that meeting or maybe not?
I don’t blame you, with the tax code for an average business so complicated it takes a tax engineer to wade through the pages of tax regulations. With average incomes per farm rising by over 15% this past year its inevitable you’ll be subject to potential income tax liabilities which isn’t necessarily a bad thing. However there are a couple of tips you should consider in this year’s tax season.
Lean on your tax expert to help you manage through all the tax regulations over a warm cup of coffee this winter. Additional news on this topic can be found at – Tax Ideas from Iowa State;
Until next time,
Pat Kroese, GrainBridge LLC
Do you ever get that feeling that no matter how hard you try to figure out the markets you just never know what “unknown” is going to pop up next and ruin your strategy? So often it’s the unknowns that seem to put a wrinkle in your plan or make you stop and think, “Why didn’t I see that coming!” No matter how hard you try to understand every segment, every facet of the markets and what causes market volatility, there are always the unknowns that will upset the apple cart.
In today’s global market, commodity prices can fluctuate from more than just your basic fundamentals. For example, if China decides to devalue their currency vs. the US Dollar, it can drastically reduce exports of grain into China. If the US government decides to ink legislature to halt all exports due to tightened supply and worry of major price hikes in the food sector, we could see a significant price decline in commodities. Or Russia, Australia ban all exports of wheat because of major supply issues from a major drought, you again can see potential for swings in commodity prices. These unknowns cannot be identified in advance and make planning difficult. However, if you stick to what you know and manage accordingly, you can manage through the unexpected.
So what do you know? You can prepare each year with a written marketing plan of what crops you will raise, your primary input costs, including per acre costs and gross farm costs to operate, as well as any incomes that may help subsidize the business. This will give you enough information to determine your cost of production or break-even values by crop. I understand when a producer tells me, “Well I don’t have any clue what fuel costs will be or my fertilizer costs so how can I really figure my cost of production today?” You know what? Today you can gather just about every major input cost 18 to 24 months in advance. And if it’s an item you truly are unsure about, estimate on the high-end. Remember your input expenses don’t need to be etched in stone either, be flexible and know that you can update expenses on the go if you have to. Oh and what about this comment, “You know I was going to sit down this winter and build a plan, just ran out of time!” Many of us tend to avoid that planning session because for most of us it’s worse than having dental work performed. If you think about it, there are all types of planning guides or Excel spread sheets that have been around for decades. Why don’t we use them? Because they are cumbersome, hard to read & understand and sometimes too detailed that we just end up saying, “the heck with it”. Well, with today’s advancements in technology, there are simple, easy-to-use tools for the agribusiness and their producer client’s to manage their business like a business. If you’ve been searching for that one key solution to help your producer clients get better organized and manage risk on their operation, take a serious look at the innovative software from GrainBridge. Go to www.grainbridge.com and learn for yourself.
Several studies by leading research firms have proven that most successful farm businesses produce a written marketing plan each year. In agriculture with so many unknowns you have to start somewhere and in today’s environment you can easily see a $350 swing in per acre costs in a matter of weeks! A great example of why you should consider building a marketing plan is in the past September publication of Successful Farming Magazine.
Until next time, have a safe and successful harvest season.
Pat Kroese, GrainBridge LLC
Every two years the USDA publishes data on farm computer usage, including computer access, farm business use, and internet access. It’s interesting to see how the U.S. Farmer has become dependent on the computer and internet access.
Internet changes way farms do business – Omaha.com.
http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1062
Omaha World Herald
