News

3 Questions

3 Questions

Pete Collins, Agronomy Manager, Stewartville

collins@allamericancoop.com (507) 259-7469

Over the past 2 months there have been 3 questions that I get asked on a daily basis:

1. What are my production costs going to be for next year

2. What’s my break-even costs

3. What should I be paying for rent!!!!

The first two I can help with, the third question is a little harder to answer.

 

Obviously production costs vary from year to year. Fertilizer prices have varied wildly in the past 7 to 8 years. Labor, insurance and crop protection costs have been on the rise. Herbicide programs for controlling some resistant weeds are getting costlier.

 

To keep all of this in perspective, I have been using a Crop Break-Even Worksheet that has been passed around amongst our staff for a couple of years now. This particular worksheet gives me an easy-to-use spreadsheet to help customers make decisions about their operations. It also gives some average equipment costs and costs that we may overlook like interest on operating loans, crop insurance, soil testing, lime, etc. It’s not meant to include every single thing, I feel that it gives us a good overall view of what our break-even costs are.

 

I have included copy of the spreadsheet with this article or you can download an interactive copy of the worksheet at www.allamericancoop.com/break-even-calculator. By downloading this worksheet you will be able to save your work and print the worksheet for your own use.  

 

There are several other crop production cost calculators out there. One of the more popular is from the University of Iowa Extension, “Estimated Costs of production in Iowa-2015”. It can be found at: https://www.extension.iastate.edu/agdm/crops/html/a1-20.html. Iowa State offers a very extensive list of different calculators for different cropping situations including pasture. If you are looking for a more in depth view, the Iowa State site has a lot to offer.

 

Using a calculator like one of these mentioned is a great tool for growers to use to help get a picture of where their production costs are going to be and what they need to do to meet break evens. These tools are helpful when sitting down with lenders, partners, and landlords as we begin to plan for the 2016 crop season.

 

That helps answer the first two questions that are being asked this fall. Answering the land rent question is a little bit harder for me. Land rents have been all over the place and everyone has their opinion about where land rental rates should be. With individual variation in operating expenses it’s hard to give advice on what customers should be paying/asking for land rent. It usually comes down to the farmers thinking it’s too high and the land lords thinking it not enough. The best advice I can offer is to take the time to sit down and go thru a break-even worksheet for each farm you operate. This is the best tool and to have in your back pocket when you begin discussions about rental contracts with your land lord.  Understanding where your dollar is being spent and planning for future investments is the most sensible way to plan for long-term agreements that make sense.

 

I hope these calculators can give you a tool to use to figure this question out.

 

The holiday season is upon us. I hope you take the time to reflect on how blessed we are to have the people we care about in our lives and spend time with family and friends. As always, I want to thank you for your business and hope to meet and exceed your expectations in the year to come.

Happy Holidays, Pete

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