Monday, January 2, 2012
Wisdom is a rare gift and it seems to usually only come with years of experience. There have been some words of wisdom for crop farmers on the Crop Talk forum.
This thread on Profit per acre is one of them.
Here is what came to mind and how I responded:
"That varies greatly from farm to farm as I know families that make a good living on a few hundred acres and others that farm thousands of acres to make a living, all with with none to various enterprises of off farm income.
This gets at the crux of entrepreneurship and Return On Investment of figuring out how to make more on less and how to expand a profitable enterprise with profits and borrowed money. Borrowed money is the trick to make your labor more profitable per hour and per acre to pay off the loan with interest.
Corn ran away with profit per acre in my neighborhood this year as the farmers who gambled on planting it the first week of June, the first week we could plant in Ohio past the insurance planting date of June 5. Much of the corn around here made over 200 bushels per acre and some sold part of it for $7.00. I know one young farmer who sold 140 bu per acre at $7.11 and I encouraged him to go for it to build his profits from his first big year in farming. Now he has money to pay the bills and expand even more this year.
That's an exception to the rule this year but it did happen. Other sage old farmers planted soybeans and didn't control their resistant weeds and got 40 bushel soybeans and didn't sell them the day they were $14.22 a bushel, about the time that corn was worth $7.11. This is where knowledge and network ruled King and doing what worked in the past did not work well this year. I sold beans for $12 this week because I didn't sell enough at higher prices earlier so I was somewhere in the middle.
Cost of production varies greatly from ownerships, rents, and price shopping. You read tons of threads about that on here. It's easy to bend over and lose a dollar out of your pocket trying to pick up a hundred dollar bill, kinda like what grandpa taught dad and I.
Some pretty well healed farmers here had high dollar crop insurance and took PP on their corn and planted them to radishes and or peas. They are set to grow a profitable crop next year which starts tomorrow!
You ask a deep, thought provoking question that has taken me a life time to learn much about."
One has to be smart enough to recognize these gold nuggets when they appear. The message is that profit varies greatly from farmer to farmer and field to field. Farmers are lumped together as a group but how they farm and what they make varies so much it is really difficult to compare apples to apples.
Final corn yields here varied 100 bushels per acre. Soybean production varied at least 30 bushels per acre. Corn was sold at up to $3 per bushel difference and the same for soybeans. Multiply those out and you get huge swings in income per acre. All that matters to the farmer is the total gross income minus the total gross expense to calculate profit per acre.
As we close the books on 2011 and plan for 2012, we take the last few years trends to plan a program that will be profitable this year.
There are many little details in the plan but this is the wisest thing I can do today. My goal is to have a lot of fields looking like the picture about the end of June.