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Showing posts from April, 2014

Returns to Corn Farming and Ethanol Processing

by Doug Tiffany, U of M Extension Educator, Agricultural Business Management

As corn farmers fine-tune their equipment and head to the fields, many have concerns about the costs of production and prospects for profitable price levels. Through the winter many have crunched the numbers to determine their corn production costs, including fuels, fertilizer, herbicides, seed, depreciation, anticipated repairs on equipment and land rent. The 2013 crop season was one fraught with production uncertainty in the form of meager soil moisture and continuation of adverse weather conditions; but in the end, a huge crop of corn with price-depressing effects was produced. Over the past long winter, there have been a series of demand-supply reports that have shown increasing levels of corn exports and greater use for ethanol production, offering some increases in prices. For tenants, corn prices still hover close to costs of production, depending on land rent.

Corn markets in the winter months are t…

Improve Your Farm Profitability in 2014 and Beyond

By Don Nitchie, U of M Extension Educator, Agricultural Business Management

The decline in median Minnesota Net Farm Incomes for 2013 from 2012 was 78% according to the Center for Farm Financial Management at the University of Minnesota. By enterprise, crop production enterprises decreased most significantly where earnings were 80% lower than in 2012. This was due to much lower inventory values of stored grain and costs that have steadily increased over the last several years. Livestock enterprises also declined significantly.

Crop prices that remained at record levels for several years while costs of production were lower but steadily increasing made for several years of record profits in crop production. Some experts would argue that a period such as we have just gone through can lead to some managers becoming too casual about managing profit margins and preparing for changing times. So, are there profits to be made when the average farm's breakeven costs are at the average ma…

Extension releases info series on 2014 farm bill

Kent Olson, Extension Economist

MINNEAPOLIS/ST. PAUL (April 14, 2014)--A series of fact sheets on the Agricultural Act of 2014 - the farm bill - is available to help the agricultural community prepare for changes introduced by the recently passed federal legislation.

University of Minnesota Extension economist Kent Olson prepared the six-part series, which emphasizes changes in programs and rules affecting crop commodities.

"Passage of the farm bill removes uncertainty about what farm programs will be for the next five years," Olson said. "Farmers will have to make choices, but the rules are different compared to the old farm bill."

Gone are the Average Crop Revenue (ACRE) and Counter-Cyclical Program (CCP). In their place, farmers must decide between new programs: the Price Loss Coverage (PLC) or the county- or individual-based Agriculture Revenue Coverage (ARC).

The fact sheets are on Extension's web site at www.extension.umn.edu/agriculture/business/farm-bil…

Hedging in Times of Production Uncertainty

Bret Oelke, Regional Extension Educator, Agricultural Business Management

With the recent concern in the swine industry about Porcine Epidemic Diarrhea Virus (PEDV) and record high futures prices for lean hogs at the Chicago Mercantile Exchange (CME), discussions have occurred about how farmers can take advantage of high prices while protecting themselves in case hogs are not be available to market. This issue is not unique to the swine industry; crop producers face the same type of scenario in a drought year. While revenue based crop insurance provides some protection in the case of crop production, livestock producers don't have the luxury of a product exactly like the crop insurance products. There are however, exchange based tools that can be used to provide price risk management without obligating delivery of live hogs as a packers' forward contract would require.

If a hog producer is interested in locking in a future price on a portion of his production he would traditio…