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Extension > Agricultural Business Management News > September 2014

Wednesday, September 10, 2014

Extension launches 2014 Farm Bill dairy education seminars

09-2014-dairy.jpgUniversity of Minnesota Extension and the Farm Service Agency of the U.S. Department of Agriculture begin a series of free dairy education seminars this month to help farmers make decisions brought about by the 2014 Farm Bill.

Dairy producers have until Nov. 28 to enroll in the Dairy Margin Protection Program. Newly created by the farm bill, the program aims to reduce producers' exposure to catastrophic losses through risk management. The program is voluntary and pays producers when the difference between the national price of milk and the average cost of feed falls below a level selected by the producers.

"The farm bill creates a new opportunity for dairy producers to manage risk. These training sessions will go through various scenarios to help dairy producers make the most appropriate decisions for their operations," said Kevin Klair, University of Minnesota Extension economist and program leader at the university's Center for Farm Financial Management. "This is a new program in which we think most dairy producers should at least enroll at the minimum level and then thoroughly analyze the program and higher coverage options for their operation."

The seminars are offered at 18 locations through early November and will be led by Extension educators and FSA staff; no registration is required. Details are available here (181 K PDF).

The farm bill designates the Extension arm of land-grant universities nationwide as the education provider for producers.

Monday, September 8, 2014

Farm Bill base acre correction deadline fast approaching

In July, farm landowners received a base acre and yield commodity crop history summary letter from their Farm Service Agency (FSA) office. The summary letter lists the landowner's FSA farm planted acres for 2008 through 2012. Landowners have 60 days from the time they received the summary letter to contact the FSA office if there are any discrepancies in the data listed. This information is essential to being able to sign up for the new 2014 Farm Bill programs.

There have been instances in which the summary lists no data or the data is incorrect. If the data is missing or the data listed in the summary letter is incorrect, the landowner should contact the FSA office in the county where the land is located. If the landowner rents the land to a tenant, the tenant can contact the FSA office on the landowner's behalf. Once contacted, the FSA office staff can research and correct the base acre information for the specific FSA farm.

The 60-day deadline is required only if there are errors in the base acres listed in the summary letter. If the data listed is correct, the landowner does not have to do anything. The deadline has nothing to do with the Farm Bill provision for reallocation of base acres and updating FSA yields. Those decision deadlines have not yet been announced.

"Producers and landowners will need to make a series of decisions related to Farm Bill enrollment over the next few months. This is a first step," said Gary Hachfeld, regional Extension educator.

If landowners have questions about the base acre summary letter they received, they should contact the FSA office in the county where land is located. Staff will answer questions and assist with correcting any discrepancies that may exist in the base acre data. For additional information on the 2014 Farm Bill go to www.extension.umn.edu/agriculture/business/farm-bill/.

Friday, September 5, 2014

Limiting Losses can be an Important Grain Marketing Decision

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

We have probably all listened to stories from a neighbor who laments about having sold grain or livestock at a modest profit when a more profitable market price was available earlier or later than their selling date. We probably put on our understanding face and consoled them with some comment like; "we have all been there", "hind-sight is always 20/20" or "at least it was profitable".

Too many folks may have forgotten over the last 7-8 years of strong grain prices especially, that limiting losses in more lean times can prove to be a sound part of your marketing plans. One of the most important lessons learned from experienced, long-time professional commodity traders is that eliminating losing positions before they get worse can be as important as when to price in a increasingly profitable market. If you can do this with good self discipline you may help sustain your capital base and be there for the next opportunity. Limiting losses can prove to have contributed substantially to the long term survival of many farming operations and businesses. Nonetheless, it is very hard to do and not always fun to discuss or admit.

We know in commodity markets like corn and soybeans that market prices are always trying to get back to the industry average break-even cost of production. Sellers sell when prices are above their breakeven costs at desirable profit levels. If those profitable price levels persist, they also bid-up the cost of inputs and expand. Few people, including economists, thought grain prices would remain at the level they have, for the length of time they have, for the last several years. Despite six years of record profitability from 2006-2012 for corn on cash rented land, according to Southwest Minnesota Farm Management Association records back to 1993, there were seven years of losses and fifteen total years where profits were significantly less than $100/acre. Soybeans on cash rented land produced profits above $100/acre in six years going back to 2007, negative returns in only two years back to 1993 and profits of less than $50/acre in twelve of those years.

So for 2014, with grain prices hopefully building a bottom or floor the last several weeks, where should a producer start to take advantage of any price increases and at least limit losses on a portion of their sales? From a management standpoint, some good guidance for setting loss-limiting pricing goals is that if you can cover your variable costs and fixed payments in the short-term, (all direct costs & loan payments), you can get by for a short period of time without covering the economic costs, (non-cash), such as depreciation and unpaid labor and management. Re-check your data and costs to estimate what this number is for your operation. Living expense expectations may have to be adjusted. You may have to evaluate eliminating some capital assets that were acquired in recent years that were nice to have but, are not a necessity or did not add to efficiency and liquidate them for cash.

Above all keep communicating, stay involved socially in your community and in organizations. There is always something to learn from others even if it just perspective on life and fellowship. Things will adjust and probably improve.


Thursday, September 4, 2014

CFFM releases a new, improved web version of FairRent

Land rent negotiations are going to be very challenging this year. At current commodity prices it is going to be very important for producers to know their costs and look at options to limit downside risk. The Center for Farm Financial Management, University of Minnesota has just released a tool to help producers and landlords evaluate alternative land rental arrangements. FairRent for the Web is a new and improved web version of the FairRent desktop software that CFFM has distributed for over 20 years.

The new web version of FairRent includes the option to evaluate seven different flex lease options as well as traditional cash rent and share rental returns. Another improvement is the inclusion of crop insurance in the analysis to show how insurance limits downside risk.

FairRent is free to use. Just sign up at https://fairrent.umn.edu/ and begin creating rental plans. Also, check out FINBIN, a great source of information of crop production costs for your rental plans.


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