Despite low commodity prices, farmers can stay in the black in 2017 – but they will need to tighten their belts and slash expenses, said Barry Ward, agricultural economist at The Ohio State University.
“Farmers need to reevaluate all of their inputs in general, and focus on those things that give a clear ROI (return on investment) when corn is bringing $3.50 to $4 per bushel,” said Ward, who works for Ohio State University Extension, the outreach arm of the College of Food, Agricultural, and Environmental Sciences.
Ward’s nine strategies:
- Reevaluate crop production inputs such as prophylactic fungicide applications and specialty fertility products.
- Forgo phosphorus and potassium fertilizer, if soil tests show there’s enough in the ground for the coming crop.
- Review and adjust nitrogen rates and application timing.
- Re-evaluate seed technology. “Seeds with fewer GMO traits are usually less expensive,” Ward said. “But this will require more management time – you may have more weed pressure, more insect pressure. You need to weigh the pros and cons – and if you’ve done some on-farm evaluation, you will know what works and is worth the investment.”
- Eliminate excess equipment and re-evaluate equipment sizing. “The secondary markets are soft, so it’s not the best time to sell excess equipment. If there is a true need for equipment, this would be the time to buy,” he said.
- Renegotiate cash leases. “The economics of the past three years have cried for a lowering of cash leases, but they have held up because of equity positions on behalf of farmers and landowners’ property taxes,” Ward said. “Landowners need to understand that margins have declined and lease prices need to come down.”
- Consider more do-it-yourself repair and services, including spraying, soil sampling and equipment repair.
- Evaluate farm yield ratios with price ratios when determining crop mix.
- Re-examine family living expenses. “It’s not easy to do,” Ward said, “but family living expenses need to ratchet back to pre-2006 levels.” According to Illinois Farm Business Farm Management data, family expenses were $85 per acre in 2006, compared with $110 per acre in 2015.
9 Farm Strategies for a Profitable 2017