Managing Your Farm In An Economic Downturn Purdue Center ... · Managing&Your&Farm&In&An&Economic&Downturn&Webinar,&December&18,&2014&-$100 $100 $300 $500 $700 $900 $1,100 $1,300

Managing  Your  Farm  In  An  Economic  Downturn  Webinar,  December  18,  2014  

Managing  Your  Farm    In  An  Economic  Downturn  

Chris  Hurt,  Professor  &  Extension  Economist  

Michael  Boehlje,  DisAnguished  Professor  &  Extension  Economist  

James  Mintert,  Professor  &  Director,  Center  for  Commercial  Agriculture  

Managing  Your  Farm  In  An  Economic  Downturn  Webinar,  December  18,  2014  

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Dol

lars

Per

Acr

e

Real U.S. Corn Revenue (+Insurance) Per Harvested Acre (2014 $’s)

1986  =  $395   2005  =  $373  

1973  =  $1,252  2012  =  $1024  

1946  =  $697  

2014-­‐16=    $631  

1921  =  $172  1931  =  $113  

Managing  Your  Farm  In  An  Economic  Downturn  Webinar,  December  18,  2014  

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$1,000

2005   2006   2007   2008   2009   2010   2011   2012   2013   2014   2015   2016   2017  

Average Corn Revenue & Costs/Acre by Year in Indiana

Cost/Acre   Revenue/Acre  

Crop  prices  RISE  faster  than  costs  adjust  upward:  PosiPve  Margins  

Crop  prices  Fall  faster  than  costs  adjust  downward:  NegaPve  Margins  

Managing  Your  Farm  In  An  Economic  Downturn  Webinar,  December  18,  2014  

Improving  Your  Farm’s  Management  5  Management  Strategy  Categories  to  Consider  

ü Financial  

ü Input  Purchasing  

ü ExecuPon  

ü MarkePng  Strategies  

ü Government  Programs  &  Crop  Insurance  

Managing  Your  Farm  In  An  Economic  Downturn  Webinar,  December  18,  2014  

Financial  Strategies  1  Preserve  Working  Capital  

 Working  capital  =  current  assets  –  current  liabiliPes      What’s  Your  Burn  Rate?  

2  Reduce  capital  expenditures    CauPon  on  179  Exp.  in  2014  

3  If  working  capital  is  already  low,  rebuild  it  

4  Restructure  debt  with  longer  loan  terms  

5  Lock-­‐in  long  term  interest  rates  6  Reduce  family  living  expenses  

7  Be  prepared  for  your  loan  review!  

Managing  Your  Farm  In  An  Economic  Downturn  Webinar,  December  18,  2014  

Input  Purchasing  &  Usage  Strategies  

•  Why  is  this  important?  

Managing  Your  Farm  In  An  Economic  Downturn  Webinar,  December  18,  2014  

Crop  ProducAon  Costs  Increased  Rapidly  

$0.00  

$1.00  

$2.00  

$3.00  

$4.00  

$5.00  

$6.00  

05   06   07   08   09   10   11   12   13   14   15  

$/bu

shel  

Year  

EsAmated  Indiana  Corn  ProducAon  Costs  2005-­‐2015,  Per  Bushel  

Var.  Cost/bu.  Total  Cost/bu.  

Managing  Your  Farm  In  An  Economic  Downturn  Webinar,  December  18,  2014  

2015  EsAmated  Indiana  Corn  ProducAon  Costs    By  Category  

FerAlizer  

Seed  

PesAcides  

Fuel  

Machinery  Repairs  

Hauling  Interest  

Insurance  &  Misc.  

Machinery  &  Family  Living  

Cash  Rent  

Managing  Your  Farm  In  An  Economic  Downturn  Webinar,  December  18,  2014  

100  

125  

150  

175  

200  

225  

250  

05   06   07   08   09   10   11   12   13   14   15  

$/Acre  

Year  

Indiana  Average  Farmland  Cash  Rental  Rates  2000-­‐2015  

Cash    Rent  Was  28%  of  Total  Cost  in  2014    

Managing  Your  Farm  In  An  Economic  Downturn  Webinar,  December  18,  2014  

Rental  Rates  Will  Start  to  Adjust  

$0.70  $0.80  $0.90  $1.00  $1.10  $1.20  $1.30  $1.40  $1.50  

05   06   07   08   09   10   11   12   13   14   15  

$/bu

shel  

Year  

Indiana  Average  Farmland  Cash  Rental  Rates  Per  Bushel  of  Corn,  Trended  Yields,  2000-­‐2015  

Managing  Your  Farm  In  An  Economic  Downturn  Webinar,  December  18,  2014  

Seed  Costs  Share  of  Total  Costs  Increased  

0%  2%  4%  6%  8%  

10%  12%  14%  16%  

05   06   07   08   09   10   11   12   13   14   15  

%  of  Total  Cost  

Year  

Seed  as  a  %  of  Indiana  Total  Corn  ProducAon  Costs  2005-­‐2015,  Per  Bushel,  Trended  Yields  

Managing  Your  Farm  In  An  Economic  Downturn  Webinar,  December  18,  2014  

Input  Purchasing  &  Usage  Strategies  

•  Cost  per  bushel  is  the  key,  not  cost  per  acre!  •  “Buying  Right”  sets  your  cost  structure  •  Check  &  NEGOTIATE  prices  •  Crop  ferPlizaPon  strategies  •  Herbicide  strategies  •  Cash  rent  and  land  purchases  are  very  important  

Managing  Your  Farm  In  An  Economic  Downturn  Webinar,  December  18,  2014  

MarkeAng  Strategies  

•  Become  more  cauPous  •  Delay  pricing  inputs  •  Don’t  lock-­‐in  inputs  for  mulPple  years  

•  Forward  price  crops  more  aggressively  

•  Earn  storage  returns  (especially  for  corn)  •  Focus  on  locking  in  margins