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Friday, August 18, 2017

Finding Common Ground with Consumers

by Betty Berning
Extension Educator

Local, non-GMO, organic, gluten-free.  These are some of the words you might see if you look at a package of food at the grocery store.  Some of it might make you chuckle.  What exactly is non-GMO soda, anyway?  And wasn’t oatmeal always gluten-free?!  Why are food companies using these words?

The answer is simple.  Consumers are asking for it.  According to the Center for Food Integrity (CFI), a non-profit organization whose members and partners range from farmers to food companies, today’s consumer is different from the consumer of the past.  Their research indicates that the consumer of the past valued price, taste, and convenience, while today’s consumer is looking for more.  Health and wellness, safety, social impact, experience, and the overarching theme of “transparency” are values of younger consumers.
This explains why there are more organic and natural offerings at the grocery store.  It also explains the to be a boom in agri-tourism (berry-picking, pumpkin patches, wine tasting, etc.).  Consumers want to feel connected to their food and feel like they are buying from a trusted friend.

For traditional/conventional farmers, these trends can be maddening.  Farmers work hard to provide a high-quality product.  They are very proud of their product (and rightly so!)  Farmers consume their product and are happy to serve it to friends and family.  One can understand why farmers might feel frustrated when consumers do not seem to trust the product they have worked so hard to create.

Like it or not, consumers buy your products.  They need you and you need them.  Before I worked in Extension, I worked for a food company.  The consumer’s voice is greatly valued at food companies.  Our goal was to sell a product that consumers wanted to buy.  We did not just make a product and expect consumers to buy it. 

Our products were created based on consumer research.  We listened to our consumer, asked questions, and then we responded.  Our response was to launch a product and market it.   Marketing did not mean telling consumers all the facts about why a product was good for them.  Marketing meant highlighting how the product met the needs and values that the consumer had previously expressed to us.  We related to our consumers through our advertisements, social media engagement, and customer service.  We wanted consumers to feel like they were buying a product from a trusted friend. 

I spoke with Natasha Mortenson, Public Relations Director at Riverview Farms, about the topic of consumer engagement.  She and I have engaged with consumers, but in very different ways!  As we talked, we quickly discovered that regardless of how you are engaging with consumers (as a farmer, processor, food company, etc.), the strategy is similar.    Natasha’s process was simple:  1. Listen, 2. Ask questions, 3. Relate and express where you have common ground, and 4. If you can, come up with an analogy to explain why you do what you do. 

Think about common values that you have with most people.  You are most likely a member of a local community and farm with your family.    Like most Americans, you are probably trying to provide for your family.  Your farm could be considered a “small business”, as opposed to a corporation.  You care about your cows’ health and well-being.  Consumers value these principles, just like you do! Sharing these common values help consumers feel connected to you and provide a sense of transparency.  

I would encourage each of you to connect with consumers, which is as easy as talking to your non-farming family and neighbors.  Understand their needs and preferences by LISTENING, even if you don’t agree.  Ask for clarification or more information if you don’t understand or disagree. Talk to them about your needs and share your farm’s story (not just facts).  Finally, try to identify common values. 


Facts are important, but people are more inclined to trust facts once they trust you.  Remember that quite often we have more in common with others than we might realize.  We often want the same things, whether it is safe food, clean water, or healthy animals.  Listen, ask questions, and then highlight your common values.  Be patient and good luck!

Wednesday, August 16, 2017

Marketing Grain in Low Price Market

By David Bau, Extension Educator

Current marketing opportunities for the 2017 crop have been below the average farmer’s breakeven prices. Each year farmers in my marketing groups determine breakeven prices needed to cover their crop input costs and living expenses. The average cash breakeven price is $4.26 for corn and $10.78 for soybeans for southern Minnesota farmers. The average cash corn and soybeans prices for Worthington in 2017 has been $3.23 for corn and $9.07 for soybeans, well below the prices needed to cover costs.

Using 2016 farming results for corn and soybean producers from FINBIN database, the numbers are not good. The average of 1382 corn farmers in Minnesota lost $62.35 per acre for corn, while making $7.88 per acre on soybeans. This compares to a loss of $55.07 per acre for corn in 2015 and income of $8.34 for soybeans. A trend of larger losses was created from 2015 to 2016 even while input costs including rent rates declined and yields increased. The average price for corn sold in 2016 was $3.29 and for soybeans $9.35. This compares to $3.49 for corn and $8.55 for soybeans in 2015. These average prices are well below breakeven prices for the marketing groups.

Farmers should first start with determining their own breakeven price and use these prices to establish target prices. Target prices are sometimes set at levels below breakeven levels due the current market situation. Target prices are goals that when met will cause the sale of a predetermined portion of the crop in the marketing plan. A farmer can use the Acceptable Crop Price Worksheet to complete crop budgets for corn and soybeans. Available at: www.extension.umn.edu/agriculture/business/commodity-marketing-risk-management/ 

Decision dates should be a part of a marketing plan where a farmer is establishing a date for which to decide to establish a price for a portion of their crop. The real point here is to spread out the decisions in the March through May period which has now passed and now cash flow needs will take over. The marketing plan should incorporate a list of when cash needs to be generated.

Default dates need to be established to force action in a marketing plan so a farmer does not miss a historically good time to establish a price for their crop. Historic price information will help a farmer determine price objectives for marketing plan. Trying to determine where to start and end.

Crop Insurance can insure some revenue levels along with loan rates. In Minnesota the loan rates average $1.82 for corn and $4.84 for soybeans. These prices are well below breakeven prices.

If farmers sell crops below their breakeven price, they can reown the crop with call options, or hope that later sales will be at higher prices to bring their average above their breakeven before the last of the crop is sold.

For the last 5 years, high cash corn price $8.22 (2012) and $17.74 (2013) beans for Worthington and the lows were $2.65 (2016) for corn and $8.03 (2016) for soybeans. Today’s cash prices in Worthington were $3.16 and $9.16 for corn and soybeans.

The last USDA report was negative while the June USDA was positive, corn and soybean prices went up significantly after the June report and now after the August report have given all the increase and more in price back.

Farmers need a marketing plan with target prices and default dates to sell crop as needs and opportunities arise. Hopefully prices will rally before harvest, if not there will be losses.

Friday, July 28, 2017

Outlook for 2017 Corn and Soybeans

By David Bau, Extension Educator

I was asked to speak at FARMFEST on a panel discussing Strategies for Farming in Challenging Times.  I thought I would examine some of the reasons for the stress in farming.  If you look at 2016 farming result for corn and soybean producers, the numbers are better than they were in 2015 according to FINBIN figures, but on average 1382 corn farmers in Minnesota lost $62.35 per acre, while making $7.88 per acre on soybeans.  This compares to a loss of $55.07 per acre for corn in 2015 and income of $8.34 for soybeans.  A trend of larger losses was created from 2015 to 2016 even while input costs including rent rates declined and yields increased. Results in the marketing groups I work with, shows better income on 2016 crop sales than 2015 crop but did not cover their total costs in either year.

So what about 2017?  Each year farmers in my marketing groups determine breakeven prices needed to cover their crop input costs and living expenses.  The average breakeven price is $4.26 cash for corn and $10.78 for soybeans. These are based on historical average yields of 177 bushels per acre for corn and 50 bushels per acre for soybeans. The last two crop years experienced record yields. If I used 200 bushels of corn per acre and 55 bushels of soybeans per acre, the breakeven prices declined to $3.77 for corn and $9.80 for soybeans.

Yields could be good again this year, but probably not record levels and closer to historical yields.  So farmers will need $4.00 cash per bushel for corn and $10.50 for soybeans.  So what have the 2017 December corn and November soybean contract prices been?  The high in December 2017 corn futures since 2016 has been $4.23 and assuming a 50 cent basis would be $3.63 cash high, but basis has been wider than normal due to large crops the past couple of years, so using a 60 cent basis would make the high cash corn price $3.53.  For soybeans, the high in November soybeans since 2016 has been $10.47 and with a normal 60 cent basis the cash price would be $9.87 and with wider basis of 70 cents which is more common the cash price would be $9.77.

The average cash corn and soybeans prices for Worthington in 2017 has been $3.23 for corn and $9.07 for soybeans. Well below the prices needed to cover costs.  Looking at 2016 figures from FINBIN 70 percent of Minnesota farmers had a breakeven higher than $3.23 and 30 percent of soybean farmers had costs higher than $9.07. Today’s cash prices in Worthington were $3.16 and $9.16 for corn and soybeans.

So the outlook is this:  If the average farmer could get the record yield experienced in 2016 and sell all of their crop at the contract high prices they would cover their costs. If they sold their crop at the average 2017 prices they would have a loss and if they get normal yields closer to their historic averages the losses will be larger.

So what are some strategies farmers are engaging in?  Farmers are examining all costs and looking for ways to lower cost of production without affecting yield, the largest input cost is land rent, followed by fertilizer, seed and chemicals. Farmers have given up some rented land that does not cover costs at current rental rates. Farmers are looking very carefully at every new purchase to determine if it will add or hurt the bottom line.  Farmers are looking for ways to adjust and finance a cash flow that will keep them farming in 2018.

Tuesday, July 25, 2017

Farm Transition and Estate Planning Workshop on August 3

by Betty Berning
Extension Educator

“Farm Business Transition: Where Do I Begin?"  is scheduled for August 3rd at Ridgewater Campus in Willmar,.  The workshop is $40 per family, $15 for Ag Professionals.  To pre-register for the workshop by July 31st contact Kami Schoenfeld at 320.212.5255.

In “Farm Business Transition: Where Do I Begin?,” participants get a greater understanding of establishing intergenerational communications, the process of transferring labor-income-management-assets, determining the financial viability of the farm business, retirement issues for the senior generation and establishing goals as the foundation for beginning the farm business transition process. As part of the workshop, participants will be given time to discuss issues and complete worksheets related to the application of the different sections of the workshop. The result is a process for farm families to begin transferring the farm business to the next generation.

 The workshop is jointly sponsored by Minnesota Dairy Initiative and the Ridgewater College Farm Business Management. The program will be presented by University of Minnesota Agricultural Business Management educators, Gary Hachfeld, Betty Berning, and Nathan Hulinsky. 

For more information, please click here.  

Monday, July 24, 2017

Summer fun with Women in Ag Network!

by Betty Berning
Extension Educator

Women in Agriculture Network (WAGN) is excited to announce a summer tour to Redhead Creamery in Brooten, MN.

The tour will take place on August 16, 2017 from approximately 10:30AM-5PM.  The afternoon features lunch at the creamery, tour of the farm, and a discussion on managing a family business.  Coach bus transportation will be provided and pick-ups will be late morning at University of Minnesota Mid-Central Research and Outreach Center in Willmar, MN; St. Cloud Regional Extension Office; and Sauk Centre Wal-Mart.    Registrants will receive more details about pick-up and drop-off details closer to the event date.

Betty Berning, Extension Educator, shares, “We asked women for feedback on a summer networking event and have created the tour to Redhead based on their responses.  Women were clear that they wanted time to network and relax, while learning about a farm to market business.  Participants will have the opportunity to socialize and learn more about what it takes to make a successful business!”

Registration deadline is August 9, 2017.  The fee is $30 and needs to be paid in advance.  For more information, please click here.    To register, follow this link.  

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


Tuesday, June 13, 2017

The Importance of Agriculture to Minnesota's Economy

By David Bau, Extension Educator

According to 2016 Summary from the Minnesota Agriculture Statistic Service there was 8.39 million acres or corn harvested in 2016 with a yield of 193 bushels per acre average for total revenue of $5,343,591,000 at $3.30 per bushel. There were 7.5 million harvested soybean acres at 52.5 bushels at $9.25 which totals $3,642,188,000. Combining for over 9 billion dollars in revenue generated.

Other crop sales generated over 1.5 billion in revenue on 73,300 farms on 25.9 million acres. Dairy farmers produced 9.67 billion pounds of milk valued at $1.624 billion. There is also a large swine, cattle turkey, chicken, and sheep industries in Minnesota with a total revenue generated in 2016 of $7.4 billion.

All this added together totals $17.9 billion in farm sales which trickles throughout the Minnesota economy. With an estimated population at end of 2016, of 5.4 million, this translates to $3,315 of ag sales for every citizen in Minnesota. This does not include the many industries in Minnesota that also rely on the agricultural industry.

Grain farmers just experienced record high corn and soybean prices followed the last couple of years by much lower prices. If you added $3.00 to the corn price and $6.00 to the soybean price this would have added $4.858 billion in more agricultural sales for corn and $2.363 billion more soybean revenue. Added together for a total of $7.22 billion in more revenue, divide this by the total number of farms and the average loss of income by each farm of $98,499. This change in revenue is what the Minnesota corn and soybean farmer has been experiencing for the last few years. Table 1 below shows the average cash corn and soybean prices for Worthington from 2007 through 2016.


The impact from changing hay and livestock prices has a similar effect on the Minnesota economy. Corn and soybean farmers have a significant impact on the Minnesota economy and as their revenue goes up and down this trickles down and is felt across rural Minnesota and the whole state with many industries in Minnesota dependent on the prosperity of Minnesota farmers. The change in revenue in just 10 years translates into $1.337 average in lost revenue for every Minnesotan.

Wednesday, May 31, 2017

Managing Farm Profit Margins - Join "The 5% Club"

By Don Nitchie, Extension Educator

A single 5% improvement may be easy to overlook, but you should not take this small improvement for granted. Increasing revenue 5% while also decreasing costs 5% can have a big impact on your bottom line.

The table below compares actual outcomes for the average Southwest Minnesota Farm Business Management Association farm in 2016, to the projected 2017 results for the average association farm if it joins “The 5% Club”. Our analysis of “The 5% Club” compares farm performance if the average association farm improves gross revenues by 5% and lowers operating costs by 5% over 2016 for 2017.

It is impressive how just these small changes result in Net Farm Income of an average farm more than doubling to $170,000 and Term Debt Repayment Capacity improves from 1.4 in 2016 to 2.4 in 2017. In 2016, the same 5% changes would have almost tripled Net Farm Income for the average farm. Therefore, small changes have a BIG impact on your bottom line. Attention to the correct details can make a real difference.

Projected Impact of Improved Margin Management; 5% Increase in Revenue & 5% decrease in Costs on the average SWMFBMA Farm

Is it possible to achieve a 5% improvement in gross revenue? Probably. Do a little better than average on selling prices, yields or a little of both. Be willing to sell portions of your production when profitable pricing opportunities are available. Do not hold out for the highest price and avoid selling all your production in a few large portions. Make the basic math work in your favor. Try to sell increasing quantities if a market is moving higher and a greater quantity first as a market moves lower. Any price should always be evaluated relative to YOUR projected cost of production instead of on the latest price forecast.

Is it possible to lower costs by 5%? Probably. Being more effective with expenditures on inputs is one of the real keys. Getting the most revenue possible for each dollar spent on herbicides, pesticides, seed, fertilizer, and feed is very important. You do not necessarily want to try to cut expenses 5% across the board. Be strategic and critically examine which of those expenditures may not be adding to production efficiency at current expenditure levels.

Sharpen your production management and marketing skills. Be a student of current production technology research and methods. Discard products and methods that seem to only have great advertising and cost money with little proof of effectiveness. Know where your costs are relative to competitors using your benchmarking reports. Zero in on costs that seem out of line, and seriously examine the products or practices behind those costs. Also, celebrate the things you have done well.

Successful managers do more little things just a little better rather than doing one thing really well. It pays off when profits are scarce! Strive to join “The 5% Club” in 2017.
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