Farm Management Minute: Controlling Costs-Where Do You Start
March 21, 2016
Grain prices and cattle prices are stagnant and every producer is starting to think about how to trim expenses. Implement dealers are feeling the pinch of producers who have decided there will be no machinery purchases this year. Land rent negotiations are daily talk at the coffee shop or the elevator. These are obvious expenses that a producer sees as an area for reduction, but where else can a person trim input costs? I do not have any cut and dried answers for you; I only have suggestions of where to look to see if you are as efficient as you can be.
Seed cost is one of the highest costs of production, especially in corn. Jerry Harrington, DuPont Pioneer spokesman, suggests "focus on what seed better fits the acre the seed is going on." Many producers already look at drought tolerant seed, but also consider other traits that may be beneficial. One farmer on a blog I read suggested not just considering bushels per acre, but studying other benefits the seed may have for your operation.
A producer also needs to consider seeding rates. There comes a point (in all soil types) where increasing seeding rates does not increase yields, or not enough to offset the input price at current grain prices. That is the importance of keeping field records, including moisture and temperature, to track what the increased seeding rates have done on your fields. The other benefit of field records is to assess what crops have shown the best profits over time. Sometimes a crop has lower inputs and, no matter the commodity prices, always shows a good return for the operation. Corn and beans have become big players in South Dakota agriculture, but maybe there is another crop that turns a larger profit on your operation.
One last area that is harder to talk about for most producers-do you really use all your equipment efficiently? When there was increased farm income, more iron was purchased. Now that crop income levels have declined, it is time to look at whether that machinery is being used efficiently. Combine costs are the lowest/acre if the machine is running over 3,000-4,000 acres. All equipment on the farm should be used fully; usually differences in equipment costs between farms are related to the number of tractors that exist on a farm. In the early 2000s, machinery costs per acre were in the $40/acre range and today they are in the $70-$100/acre range, depending on the type of crop.
Again, I have no cut and dried answers, just some areas a farmer may want to evaluate as we continue the struggle with low commodity prices. If any producer would like more information on how the SD Center of Farm and Ranch Management can help your operation, contact the SDCFRM office or any of our instructors, call 1-800-684-1969 or email us at email@example.com.