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Extension > Agricultural Business Management News > June 2015

Wednesday, June 24, 2015

Outlook for 2015 and Beyond

By David Bau, Extension Educator

Good early season planting enabled much of the crop to get in the ground early across Minnesota. The weather scare of a possible drought has been relieved by spring rains so at this point the yield potential is good for the 2015 crop.  Ending stocks for the 2014 crops are larger for both corn and soybeans than the previous year and the potential for these to grow at the end of 2015 is possible with the right growing conditions.

Iowa State publishes balance sheet projections for both corn and soybeans and will update these again after the June 30th crop report is released. Current projections for corn with national yield of 165 bushels would have ending carryover declining from 1,835 million bushels at end of 2014-15 crop year to 1,540 million bushels with 89.2 million acres of planted corn. This projects a $4.20 national weighted average price and $4.15 December futures price at harvest, with at 50 cents basis this would translate to $3.65 cash corn at harvest. If national yields are 159 bushels per acre, projections are for $4.85 December futures at harvest or $4.35 cash and if yields are 170 bushels, December Futures would average $3.85 or $3.35 cash. With a 165 bushel national yield ending carryover would be at 5.8 weeks compared to 7.0 weeks for 2014-15 crop year and at low of 3.8 weeks for the 2012-13 crop year.

For soybeans with an average national yield of 44 bushels per acre, on 84.6 million planted acres, the national weighted average price is projected at $8.50. With November futures at harvest of $8.50 with a local 60 cent basis this would be $7.90 cash price. With a national yield of 41 bushels per acre, November futures would be $10.70 or $10.10 cash and if yield is 46 bushels per acre November futures would be $8.25 or $7.65.  Carryover at 44 bushels is projected at 5.1 week supply, with 41 bushels 2.3 weeks and with 46 bushels 7.2 weeks.  These compare to a low of 1.4 weeks for the 2013-14 crop year.  These balance sheets can be found at:
http://www.extension.iastate.edu/agdm/crops/outlook/cornbalancesheet.pdf for corn and at http://www.extension.iastate.edu/agdm/crops/outlook/soybeanbalancesheet.pdf for soybeans.

With these projected prices, it is hard for farmers to put marketing plans together at target prices that will cover their cost of production, which range between $4.50 to $5.00 for corn and $11.00 to $12.00 for soybeans.  Forward contract bids for 2015 corn and soybeans are under $3.50 and $9.00 respectively.  If prices do not improve, many farmers will experience losses in 2015. The price outlook for 2016 is not much better.  October 2015 cash prices are $3.41 for corn and $8.60 for soybeans, while October 2016 cash prices are $3.55 for corn and $8.67 for soybeans.

Lower yields might raise national prices, but will also lower the gross income per acre.  The current lower prices could create stronger demand and if the dollar weakens, this could increase export demand, the other option is a weather scare and the drought area has shrunk.  With the current outlook farmers will need to look for ways to lower their cost of production for 2016 if current prices continue.

Tuesday, June 23, 2015

Update: Frequently Asked Questions about Avian Influenza

By: Pauline Van Nurden, Extension Educator                                               Updated:  6/22/2015
Avian Influenza is affecting poultry
producers and the rural economy of Minnesota.


Highly pathogenic avian influenza (HPAI) has devastated not only the Minnesota poultry industry, but also farms throughout the Midwest and across the country. The following are current answers to frequently asked questions regarding this disease and the impacts of it. Fortunately, there have been no new infections of HPAI in Minnesota since June 5, 2015. Therefore, the information included here is an update from the original May 2015 publication.

Wednesday, June 10, 2015

Managing Farm Profit Margins Small Improvements Add Up

By Don Nitchie, Extension Educator

At today’s much lower grain prices, some producers may rightly ask, “What Profit Margins”? Regardless, there are always opportunities to improve profit margins or in the worst case, minimize losses.  This is true for a given year or across several years. The record high prices of the past several years has probably masked some less than best management practices of the past becoming a habit in some cases.

The Southwest Minnesota Farm Business Management Association and the Center for Farm Financial Management, both University of Minnesota Extension programs have examined the difference that small margin management decisions can make.  Don Nitchie, UMN Extension Educator in Ag. & Business Management indicates that they looked at the impact on the average association farm, that a 5% increase in gross income or revenue, through improved selling prices, yields or both-combined with a 5% decrease in costs.  This decrease in costs could be from negotiating lower purchase prices for inputs, more effective use of inputs applied or a combination of both.

It was found that if the average association farm could improve gross revenues by 5% and lowers operating costs by 5% over 2014 for 2015, these small changes result in Net Farm Income almost doubling, Return on Assets more than doubles from 2% in 2014 to 5% in 2015 and Net Worth grows by 9%.  Debt Repayment Capacity also almost doubles.  This is a significant improvement across several key financial measures.  Small changes have a big impact on your bottom line.

Is it possible to achieve a 5% improvement in gross revenue?  Probably.  Doing a little better than average on selling prices, yields or a little of both.  Is it possible to lower costs by 5%?  Probably.  Here is where it is true that successful managers do a lot of little things just a little better rather than doing one thing really well.  Being more effective with expenditures on inputs is the key.  Get the most revenue possible for each dollar spent on herbicides, pesticides, seed, fertilizer, rent, equipment investments and feed etc.  Sharpen your production management skills.  Know where your costs are relative to competitors.  It pays off when profits are scarce!

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