We'd Like To Mention

The cyclical nature of the business of farming is a fact of life farmers and ranchers endure season after season. There are generally more downs than ups on profit/loss ratios, requiring prudent scrutiny of crop budget spreadsheets. This year is no exception.

Ag economists and farm-management specialists warn lower commodity price outlooks will mean belt-tightening in 2024. Other economic headwinds include continued concerns about inflation, a possible economic slowdown, the ongoing conflicts in the Middle East and Russia/Ukraine, and the November presidential election -- how the next administration will approach ag exports, farm legislation and trade policy.

University of Illinois recently revised its 2024 crop budgets, citing lower projected commodity prices averaging $4.50 corn and $11.50 soybeans. Its August budget release used significantly higher prices of $4.80 corn and $12.80 soybeans.

As a result, crop budgets for Illinois show negative average farmer returns to cash-rented farmland for corn and soybeans in all regions of the state. Breakevens range from $5.13 to $5.34 per bushel for corn and $11.79 to $13.34 per bushel for soybeans. Projections don't include commodity title payments, as price levels are above those that would trigger payments. Crop insurance payments are also not included, as guarantees had not been set at press time.

While these estimates only apply to Illinois, and costs can greatly vary across states and individual farming operations, they provide a snapshot of the tighter margin environment many face this year. Record returns and income levels many growers experienced during the 2021 and 2022 crop years seem like a distant memory.

Costs allocated to land, machinery, fuel, debt payments, maintenance and more add up quickly. In many instances, cost-cutting options are limited without the potential of harming your bottom-line prospects. No doubt many farmers are pausing or taking a second look at big-ticket purchases like equipment, buildings and grain storage.

That means you need to take an extrasharp pencil to crop inputs as you prepare for spring planting. Use your farm data to scrutinize the performance of hybrids/varieties, traits, seed treatments, soil additives, insecticides and fungicides. Buying a crop input because "it's good insurance" may not pay when margins are tight.

Farmers have seen some relief on fertilizer going into 2024. Ensuring crops have the proper amounts of nitrogen, phosphorus, potassium and micronutrients is critical to optimizing yields. Reevaluating your crops' nutrient needs could provide savings opportunities without jeopardizing yields. There are multiple calculators available to determine maximum returns on your fertilizer dollars. One for nitrogen -- https://www.cornnratecalc.org/… -- helps illustrate how lower corn prices might suggest reduced application rates to enhance profitability.

Land costs such as cash rents offer another potential target to reduce expenses. Deadlines in some states may have already passed for parties to agree on payments. Regardless, open communication with the landowner is the first step to negotiating lower rates. Sharing your production costs and projected profit margins provides a strong case that any landowner understands and appreciates. In some regions of the country, shifting to a variable cash lease is gaining in popularity, resulting in return and risk-sharing between the farmer and landowner, which adjusts to market conditions through time.

In seasons when margins are marginal, resetting costs will keep you on firm financial footing regardless of the economic cycle.

CORRECTION

In our "Blurred Biologicals" story that appeared in the January 2024 issue, a statement from Pivot Bio should have stated: Pivot Bio officials say yield is just one way to measure effectiveness. Reducing N rates while maintaining yield parity is another, which the studies did show, they say.

The company added: The trials highlighted in this Extension paper do support what Pivot Bio has told growers -- they can replace some of their synthetic nitrogen with Pivot Bio PROVEN(R) 40 and maintain yield.

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-- Corn Nitrogen Rate Calculator: https://www.cornnratecalc.org/…

-- Write Gregg Hillyer, 2204 Lakeshore Dr., Suite 415, Birmingham, AL 35209, email gregg.hillyer@dtn.com, or follow Gregg on X (formerly Twitter) @GreggHillyer

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