Increase profitability with better expense management

Mar 19, 2010
by WLJ

Based on USDA’s farm income and profitability projections for the year, Cornbelt farmers are going to need some help saving money so they can make ends meet. Yes, you can maximize your income with a marketing plan, but with the expected range in crop prices, it can only be maximized so far. Your thriftiness won’t make you wealthy, but working both sides of the dollar may get you through 2010. So don your Scrooge cap and let’s get to work.

Agricultural economist Carl Zulauf, best known for his farm policy and farm program work at Ohio State (OSU), says, “Those (farmers) who survive for the long term will be those with the lowest cost of production. In other words, a good marketing program starts with a good program for managing and controlling cost of production.”

With that thought in mind, another OSU ag economist, Barry Ward, assembled some ideas for reducing your corn production management expenses.

1) Evaluate your use of seed corn with enhanced traits and if you don’t need it to kill an insect that you don’t have, then don’t pay the extra cost for the seed. He suggests that corn following beans may not always need Bt rootworm genetics. ($15 savings) And he says glyphosate resistant corn may not need to be planted in fields without severe weed pressure. ($11.50 savings)

2) Taking advantage of rotational benefits will save on nitrogen (N) costs from your soybean N credit. ($10 savings)

3) Consider the use of generic herbicides to reduce costs. ($1.22 per acre with a conservation tillage system)

4) Consider bulk fuel purchases with a 5,000 gallon minimum. (Ward says that may save 20 cents per gallon or 97 cents per acre with a conservation tillage system)

5) Consider bulk fertilizer purchase. ($3.76 savings per acre)

6) Consider anhydrous ammonia as a nitrogen source compared to 28 percent urea (UAN). ($8.76 savings per acre if ammonia is priced at 33.5 cents and UAN is 39.5 cents on 146 pounds per acre)

7) Consider side-dressing nitrogen to eliminate cost of N-serv. ($7 savings per acre)

8) Consider a lightbar or guidance system investment. (Equipment can return $30 per acre above variable rate technology, increase speed, and reduce fatigue with up to 10 percent more acres covered. Potential income increase up to $15 per acre)

9) Use correct tire inflation on tractors and combines. (Fuel savings of up to 8 percent or 77 cents per acre in a conservation tillage system)

10) Decrease tillage where appropriate. (Savings of $7 per acre based on machinery investment, fuel, lube, repairs, and labor)

Ward also assembled some ideas for reducing soybean production costs.

1) Use lower seeding rates where conditions allow. (Savings of $3.69 per acre in a Roundup Ready system)

2) Consider a Roundup Ready system to decrease herbicide expense. (Savings of $11 per acre in a no-till system realized by offsetting a higher seed cost)

3) Consider generic crop chemicals. (Savings of $2.11 per acre compared to a Roundup system on notill)

4) Use inoculants wisely, since every dollar invested returns an average minimum of $2 per acre over time.

5) Use seed treatments wisely, since every dollar investment means an average minimum return of $1.50 per acre over time.

6) Consider bulk fertilizer purchase. ($1.41 savings per acre)

7) Decrease tillage where appropriate. (Net savings of $3.91 per acre on no-till versus conservation tillage)

8) Use correct tire inflation on tractors and combines. (Fuel savings of 56 cents per acre in a no-till system)

Summary: A good marketing plan can increase profitability by increasing income, and a good production management plan can also increase profitability by decreasing expenses. On some farms, certain methods of production management may not work, particularly if there is heavy insect or weed pressure, when trying to reduce crop protection expense. However, by utilizing bulk purchases, the per acre cost of production can be cut, just like using the correct tire inflation pressure or investing in a guidance control system to reduce overlaps and wastage.

Stu Ellis, University of Illinois Cooperative Extension