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Wednesday, May 17, 2017

Farm Machinery Cost Estimates Publication Updated

by William F. Lazarus, Extension Economist

An updated version of this publication is available online at www.extension.umn.edu/agriculture/business/farm-financial-management/. The tables in this publication contain estimates of farm machinery operation costs calculated via an economic engineering approach. The data are intended to show a representative farming industry cost for specified machines and operations. The list of machines, the fuel price, and the labor rates are the same as last year.  Machinery prices continue to creep upward.

Have you tried the Microsoft Excel spreadsheet (MACHDATA.XLSM) that goes with this publication?  It is available for downloading at z.umn.edu/machdata. The “Calculate” and “Self-propelled” sheets in this spreadsheet can be used to calculate costs for your own situation.

The spreadsheet can also be used to answer a variety of specific questions, such as:
Should I keep the machine I have for another year, or should I replace it now?
Which is the best size machine for my operation?
How does inflation affect machinery ownership and operating costs over time?
How will the latest precision-ag features affect cost and performance? 

The “Sensitivity” sheet contains tables that show how annual use and years of ownership will affect costs per hour and per acre.

Tuesday, May 9, 2017

Outlook 2017 for Corn and Soybean Crops

by David Bau, Extension Educator

Farmers are just getting started planting their 2017 crops with hopes of good yields and good prices. There has been plenty of spring moisture and now the cropping season will take off in full swing when the soil dries out. Farmers have been blessed with two years in a row of record crops, will 2017 bring a third? The good yields have helped many farmers survive the low prices and small profits the past couple of years. In Southern Minnesota corn farmers in the Adult Farm Management programs have averaged losses on corn production since 2014, while they were able to generate small profits on soybean during this time.

Crop prices for 2017 corn are at $3.40 and soybean prices are $8.90 depending on your local basis. Farmers in my marketing groups have worked on their 2017 budgets and determined breakeven prices at $3.80 or above for corn and $10.10 or above for soybeans. The high futures price in December 2017 corn occurred on June 8, 2016 at $4.22 and for November 2017 soybean high was $10.42 on November 28, 2016. Using a 60 cent corn basis and a 70 cent soybean basis, which are wider than normal due to the large crop inventory, the high prices would have been $3.62 for corn and $9.72 for soybeans. With both current and the high prices offered for 2017 corn and soybeans below 2017 breakeven prices farmer will again be facing a small or no profit year.

Farmers will be examining their farm expenses to determine ways to lower costs. Rents are the largest expense accounting for 40% of soybean crop expenses and 33% of corn expenses. The next largest is fertilizer, followed by seed, chemicals and repairs and hired labor. The challenge is to lower input costs without sacrificing yield.

Farmers need to be alert for opportunities if the markets rally close to the prices necessary to lock in profits. Farmer need to develop a marketing plan with target prices beginning close to their individual breakeven prices and stair step their way up to higher price targets. Decision dates should be added to determine if prices are high enough to lock in prices available at the time. The high in corn prices usually occur in May, with historically higher than average prices for both corn and soybeans from April through June.  This time period would be a good time to set decision dates.

If the target prices are not met and on decision dates have passed with too low of price to market any grain, farmers need to add default dates to force sales, especially for those bushels that the farmer will not have on farm storage space for at harvest time. Hopefully 2017 will be another year with good yields which also help lower the breakeven prices. Without better yields or prices or both, 2017 will be another with little to no profits for Minnesota corn and soybean farmers.

Tuesday, May 2, 2017

Use Your Employee Handbook!

by Betty Berning
Extension Educator

Does your farm have an employee handbook?  I’ve talked to many dairy farmers about employee handbooks this winter.  Many farms have a handbook, which is great!  However, farmers tell me they are unsure of how to use the handbook once it’s written.  Too often, employees don’t look at the handbook or farms forget they have it and the handbook collects dust on a shelf. 

An employee handbook can be a very valuable communication and labor management tool.  I’d like to propose four reasons why your farm needs to not only have an employee handbook, but also needs to actively utilize it. 

An employee handbook communicates what your farm is about- In other words, what is the culture of your farm?  Business culture can be defined as values, beliefs, and behaviors that are typical of your farm. For example, if being on time is an important behavior on your farm, your handbook should reflect that.  You might have a very firm policy on tardiness and missed work that is included in the handbook.  Perhaps the farm’s culture is to keep things simple.  Your handbook might be succinct with only a few critical policies included. 

Every farm has a culture.  The way in which you write and the topics you choose to include in the handbook will send a strong message about your farm’s culture.  This will provide clarity to your employees because they will understand what is important to you and how they can be successful.  Clarity is critical in labor management because it helps employees understand your expectations and, in turn, meet them.

A handbook highlights the most important policies on your farm- Are there certain behaviors that would cause immediate termination?  These unacceptable behaviors and their consequences must be listed in your employee handbook.  This provides clarity to your employees so that they understand what is important to you.  If they engage in one of these behaviors, and they’ve read and signed off on the handbook, there won’t be any question as to why they were terminated.  This protects your farm and you.

An employee handbook can be a powerful tool for human risk management- Are you concerned about an employee mishandling an animal?  Maybe you worry about an employee having an accident with equipment?  You need to create policies on farm safety, animal welfare, and any other risks associated with employees.  These policies need to be in your employee handbook.  Furthermore, these policies need to be reviewed with employees.  Provide training to your employees on these policies, so that the expectations are completely clear.  This is managing your risk.  All employees should sign off that they’ve read the policy and received training on the policy. 

If an unfortunate event happens on your farm, you will have documentation to show that you did your due diligence.  There still may be ramifications, but providing a written policy and training (and re-training) can lessen the blow of an event.  More importantly, a policy that has been explained well can prevent an event from occurring.

As you write, update, and utilize your handbook, you build your leadership and business skills- Writing your employee handbook is a strategic activity, as opposed to being a day-to-day activity like milking and feeding cows.  Every time you look at the handbook and review your policies, you are spending time on your business and setting its direction.  You are thinking about the type of farm you want to have and what its future might look like.  I encourage every farm owner to take an time each week (30-60 minutes once/week is a good place to start) to spend time on strategic activities like the employee handbook, business plan, goal setting, transition planning, etc.  Anything that will have a big impact on your future, but doesn’t feel as urgent as milking cows, is something that you can work on during this time.  Put the time on your calendar and hold it; don’t let other activities creep in.  Take the time to shape your farm’s culture and future.

If you’ve gotten off track, i.e. you have a handbook, but haven’t looked at it in a while, it’s okay.  Just pick up where you left off.  If it needs to be updated, do that first.  Then begin to ask your current employees to read it.  Implement the best practice of requiring new employees to read the handbook within a certain time period of their hiring.  Have employees sign off after they’ve read it and provide time for your employees to read it!  If you have staff meetings, review sections of it during your meetings.  Provide training and re-trainings on the most important policies.  It might seem redundant, but this will ensure that even your more seasoned employees are reminded of your farm’s culture and policies. 

Employee management is challenging right now.  The entire workforce in Minnesota (not just the ag workforce!) is facing a shortage.  There is no silver bullet to solve this.  You have a choice, though, in how you want to manage your employees and business.  Choose to be proactive and do the right things.  Over time, doing the right things, like utilizing an employee handbook, will provide great results back to your farm. 

Thursday, April 27, 2017

June Women in Ag Network Event Announced!

by Betty Berning
Extension Educator

Women in Agriculture Network (WAGN) will be hosting a farm transition and estate planning program, "Where Do I Begin?", as its next quarterly seminar.

The event takes place June 6, 2017 at the Halstad Legion Recreation Center (580 2nd Ave. West, Halstad, MN 56548).  Registration is at 9AM with the program running from 9:30AM-3:30PM.  The fee is $20, which covers the cost of lunch.  Payment can be made the day of event.

"Many farm families struggle with beginning the process of transitioning the family business to the next generation," shares Gary Hachfeld, Extension Educator. "The process takes communication, trust, and respect as a foundation to begin the task. The 'Farm Business Transition: Where Do I Begin' program addresses many of these items. Program participants will be introduced to ideas, concepts, and tools they can use to help them get started with the process."

Participants will learn about different communications styles; transferring labor, income, management, and assets; retirement considerations for the senior generation; assessing an operation’s financial viability; and goal-setting.  Through fun, hands on exercises, families will learn how to apply these concepts to their farm and begin their own transition and succession plan. 

To register, please visit:  http://z.umn.edu/junewagn.


To learn more about Women in Ag Network or this event, please visit:  http://www.extension.umn.edu/agriculture/business/women-in-ag/.  

Tuesday, April 11, 2017

2016 Southern Minnesota Corn and Soybean Results

By David Bau, Extension Educator

The 2016 FINBIN data base was recently updated with 2016 figures from farmers in Adult Farm Management programs across Minnesota. There were 974 corn farmers in the data base in 2016 in southern Minnesota and 868 soybean farmers. Average gross revenue for Southern Minnesota corn farmers declined from $731.20 in 2015 to $699.91 in 2016 while input costs averaged $753.76 in 2016 compared to $788.59 in 2015. Indicating the net return per acre improved from a loss of $57.39 in 2015 to a loss of $53.76 per acre. The average southern Minnesota corn farmer has lost money since 2014.

Average gross revenue for Southern Minnesota soybean farmers increased to $587.12 in 2016 from $522.28 in 2015 while input costs averaged $503.03 in 2016 compared to $519.07 in 2015. Indicating the net return per acre improved from $3.21 in 2015 to $84.09 per acre in 2016. These average net incomes were negative for 2014 and 2015.

There were records yields in 2015 and again in 2016 for Minnesota and soybeans yields increase in 2016 by 1.4 to an average of 61.25 bushels per acres, while corn yields were down slightly by .7 bushels to an average yield of 204.78 bushels per acre.

Some corn input costs declined, corn seed costs declined by $1.50 per acre to $120.26, and fertilizer declined by $13.50 per acre to $134.14.  Rents declined from an average of $232 in 2015 to $227, a decline of 2.2 percent. Crop insurance, fuel and oil, repairs, hire labor and depreciation were down slightly while crop chemicals, and operating interest increased slightly.

For soybeans, seed, crop chemicals, fuel and oil, and depreciation were down from 2015 to 2016, while fertilizer, repairs, and operating interest increased. Rents declined from an average of $229 in 2015 to $221 in 2016.

Average government payments declined from $49.65 per acre for corn in 2015 to $28.91 in 2016 and beans declined from $46.38 in 2015 to $22.68 in 2016.

Cost of production, on a per bushel basis, declined from $3.85 in 2015 to $3.78 in 2016 for corn and from $8.47 in 2015 to $7.84 for soybeans in 2016.

Unfortunately current price for cash corn is $3.15 and soybeans $8.60 so farmers have to market their crops wisely to achieve these prices. Looking forward to 2017 taking 2016 actual expenses divided by yields of 190 bushels per acre for corn and 52 bushels per acre for soybeans with no government payments expected.  The price needed to cover the input costs with no income for farmer would be $3.97 per bushel and for soybeans $9.67 and 2017 forward contract bids are well below these prices.

Wednesday, March 22, 2017

Finding and Keeping Good Employees- It Can Be Done!

by Betty Berning
Extension Educator


One of the top issues I hear about from farmers is labor management.  Most people aren’t farmers because they wanted to manage employees.  Most farmers want to FARM.  As farms grow, though, more help (and management!) is required.  Enter employees.  For an operation to be successful as it grows, owners must accept that they will need to spend more time on management activities, like human resources. 

I hear about human resource struggles- even from farmers that have embraced their role as “farm manager”.  It is hard to find good employees and it is hard to retain them.  The agricultural industry pays less than other comparable industries.  Minnesota mean hourly wage data from May 2015 indicates farmworkers on farms with animals were paid $12.58/hour.  Compare that to a construction laborers’ mean hourly wage of $17.57/hour during that same time.  That’s a difference of almost $5/hour.  In addition, farm work is physically demanding and can be dirty.  Not everyone is cut out to work on a farm!  These factors can make it difficult to find good employees.

It sounds like a lot of doom and gloom, right?  It doesn’t have to be.  With the right tools and approach to employee management, it is possible to both find and keep good employees.  I will offer the disclaimer that there is no silver bullet to solve all problems.  There are some things, though, that a farm can implement that will help improve its chances of recruiting and retaining the right people for the job. 

Let’s start with your image.  What is your public image as a farm?  What do people think about when your farm’s name comes up in conversation?  For example, maybe you lease animals to the local 4-H Club.  People might think of you as service-oriented or good advocates for agriculture.  What do your employees say about working for you?  Your employees can be great advocates for your farm’s image, if they are satisfied and feel valued!  (I’ll provide some tips later in this article on how to value employees, so they feel valued.)  The important thing is that when people hear about or think of your farm, they have a positive image.

If your farm doesn’t have an image or it’s negative, think about what you can do.  Start by being a good neighbor!  This could mean communicating with your neighbors about manure spreading or avoiding fieldwork near neighbors’ homes late in the evening.  I’d also encourage you to think about your farm’s positive attributes- every farm has a few!  Your next step is to determine how to share this positive image.  Social media can be a good way to do this. Traditional activities, like volunteering at church, making school visits, or serving on a community board, are also great ways to build your farm’s image.  Your image lets potential employees know what it might be like to work for you.  Building a positive image will attract people to your farm.

The next thing to think about is recruitment.  How do you recruit?   Do you simply place an ad that says, “Looking for a tractor driver,” in the local paper, or do you write a compelling ad that provides a little bit of information about the job and your farm?  How do you share this message- only in the paper?  Consider new places and ways to recruit, like job fairs, internships through local colleges or FFA programs, referrals from other employees, or handing out your ad to agribusiness professionals.  Be sure to communicate responsibilities and competencies needed for the job, along with a little bit about your farm’s values.

Finally, you have to value your employees.  Treat them like you would want to be treated.  How often do you show them that they are valued?  Simple things often tell people how much we value them.  A “thank you” or “good job” goes a long way!  Some farms have a birthday board or bring in treats to celebrate employees’ birthdays.  Offering a hot meal once a day during busy times like planting or harvest can also be a great way to let your employees know they are appreciated.  Hold regular meetings with your employees to talk about the farm and listen to their feedback.  Listen well.  Try to understand any concerns your employees may have and determine ways to address them.


Tuesday, March 7, 2017

Long Term Health Care Planning Crucial Part of Business Transition & Estate Planning

by Gary Hachfeld, Extension Educator

Not planning for long term health care, when doing farm business transition and estate planning, can financially cripple the farm business.

There are three reasons why many farm families overlook planning for long term health care when doing business transition and estate planning. They do not realize the probability of needing long term care, they do not realize long term care costs have skyrocketed in the last 5 years and there are lots of misconceptions about what people think they can do with their assets to shelter them from long term care costs, said Gary A. Hachfeld, University of Minnesota Extension educator in agricultural business management.

"Long term health care costs are potentially more financially devastating to a farm business than any tax issue,” Hachfeld said. "Long term care costs can undo any amount of transition and estate planning if not addressed."

Currently, one in every two Americans over the age of 65 will have some type of stay in a nursing home. One in ten Americans over the age of 65 will have a nursing home stay greater than five years. Of those individuals currently receiving nursing home level care, 40 percent are under the age of 65. Long term care costs, based upon a recent survey by Genworth Financial, shows median costs for home care of $65,000 and a private nursing home room at $97,000.

Medicare will pay for a maximum of a 100 day stay in a nursing home if certain criteria are met. Medicaid has asset limit rules which state a Medicaid applicant cannot own more than $3,000 worth of assets and a prepaid burial to qualify. In addition, life estate and most trusts will not shelter assets from long term care costs. If assets are gifted away, 60 months has to pass before the donor can qualify for Medicaid. In Minnesota, the only way to protect farm business assets from long term health care costs is to purchase long term care insurance. Seek the help of an elder law attorney when doing any long term health care planning to avoid making any mistakes.

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