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Extension > Agricultural Business Management News > May 2016

Tuesday, May 17, 2016

FINBIN Database Useful Tool

By David Bau, Extension Educator

Farm production records for 2015 have been added to FINBIN website.  Farmers who participate in Adult Farm Management programs across Minnesota production records are combined online at the FINBIN website.  The FINBIN website found at: http://www.finbin.umn.edu is full of great reference information going back to 1993. At the FINBIN website, producers can examine what has been taking place with their peers or examine costs for different crops.

At the FINBIN website, you are able to generate summary reports, benchmark reports and compare your farm financial results to peer group farms. Under the summary section, you are able to generate reports summarizing whole farm results for financial standards, income statements, profitability measures, liquidity measures, balance sheets, statement of cash flow, crop production and marketing summary, household and personal expenses operator and labor information, nonfarm summary and detailed income statement. There are also statewide reports on several different crops and livestock enterprises. You can also generate any of these reports by county or regions if there are enough farmers to produce report where the individual farmer’s data can remain anonymous. You can examine the data even further selecting tillage systems, irrigated land and organic production, sometimes on a larger region or for whole state to generate a report.

There is significant information for farmers and landlords to examine at this website. You can examine farmland rental rates by county and looking at fourteen counties in SW Minnesota there was a 5.9 percent decrease from 2014 to 2015 from an average cash rent on corn of $250.89 in 2014 to an average rent of $236.08 per acre in 2015. The FINBIN data allows the public to examine the various inputs costs like seed, fertilizer, chemical, etc. for various crops including corn, soybeans, hay, wheat, oats, sweet corn, peas, sunflowers, sugar beets and many more. You can also examine cost of production for many livestock operations.

Benchmark reports are the next section on FINBIN website.  You can look at whole farm, crop or livestock enterprise by whole state, region or county.  You can select a crop and region and generate a report listing the expenses for 2015 or prior years.  If you select corn for all of Minnesota, you will see a benchmark report that lists all expenses and incomes for corn on cash rented land across the state broken down into every 10 percent groups.  The benchmark report allows farmers to examine individual input cost like fertilizer and list all the costs for 2218 farms across Minnesota from the highest to lowest for expense or lowest to highest for income items.

For fertilizer the median cost is $137.07 per acre for all Minnesota corn farms on cash rented land in 2015 down from $151.36 in 2014.  The report then groups all the fertilizer cost per acre listing the average for the highest 10% of the fertilizer costs per acre of $215.17 and then the next 10% in the 20% column at $187.59 all the way up to the lowest fertilizer cost of $54.86 per acre in the 100% column.  These farms are all across the state and the fertilizer recommendations vary by expected yield per acre, but this line indicates a wide range in costs from the most expensive at $215 to the lowest at $55.  Farmers can benchmark their own fertilizer costs per acre to see how they compare.  They can choose a county and closer region to see how their input costs compare to other farmers in the local area.

The third section allows for farmers to enter their own financial standard ratios and once again compare their figures to farmers across Minnesota or select a smaller closer region or county.  Once again a farmer would be able to determine their own farm’s financial health compared to peers.

The FINBIN website is a great resource where farmers and landlords can look at production cost for previous years and compare how their own operation compare to county, regional and statewide data.

Thursday, May 12, 2016

Women in Agriculture Quarterly Seminar

By: Pauline Van Nurden, Extension Educator

University of Minnesota Extension and USDA Farm Service Agency are hosting a Women in Agriculture Seminar on June 1, 2016 at the Willmar Regional Extension Office (located on the MinnWest Technology Campus, 1802 18th St NE, Willmar, MN 56201).  The focus of this quarter’s seminar is farm transfer and estate planning.  The day will give attendees the opportunity to learn and network with other women in agriculture in the region.  Registration begins at 9:30 am, with the seminar convening from 10:00 am to 3:00 pm.

Monday, May 9, 2016

2015 FINBIN Report on Minnesota Farm Finances



Despite record crop yields, the incomes for Minnesota farms continued to decline in 2015, reaching their lowest point in inflation-adjusted dollars in the twenty year history of the FINBIN database. 


The 2015 FINBIN Report on Minnesota Farm Finances provides a quick look at the financial situation for the 2200 Minnesota farms included in the FINBIN database.

Thursday, May 5, 2016

Managing for a Reasonable Profit Margin

By Don Nitchie, Extension Educator

Psychologically adjusting their expectations to the more typical long-term profit and loss environment we seem to have returned to—remains a big challenge for many farm managers.  We know from actual on-farm data, that prior to 2006, a profit margin of $50 or more per acre for cash rented corn production was a rare situation for the average farm.  It was not uncommon to experience a $20-30 per acre loss for the average farm.  If you go back beyond 1996, except for occasional supply shocks such as drought, profit margins such as occurred during the demand expansion years of 2006-12 were never experienced for such an extended period of time. Additionally, we know from actual on-farm data that there is a wide variation in a given year from farm to farm. The High 20% of SW Minnesota Farm Business Management Association Farms averaged a net return of $77.44/acre while the low 20% averaged a loss of $145.80/acre in 2015.  This variability represents opportunities for some and challenges for others.  Since 2012 it appears we may have returned to a world where, once again, sharp management will payoff.

What is “Margin management?”  It is focusing on a “margin” not just on a selling price.  Margin is the difference between your cost to produce per bushel or unit and your selling price. A favorable selling price is only a means to an end but, it is only one part of the equation.  Cost control—or reduction—while maintaining productivity is the other side of the equation. Really all you should care about is what your profit margin is and how frequently you are attaining it.

Margin Management and Price Probabilities.  A key reality that margin management is based upon is that in competitive markets like agricultural commodities, market prices spend the majority of their time in close proximity to the average breakeven cost of the market or industry. Therefore, over the long-term it is more likely that you will have numerous opportunities to select a selling price at modest profit margins than at high profit margins.  Many experts say that 2006-2012 grain prices are a historical aberration caused by record demand expansion triggering unsustainable profits.  Costs did eventually catch-up to price levels. Making it a practice to hold out for less frequent but, very high profit-margin prices can lead to realizing lower long-term profits.

To illustrate this, consider producer A whose 5 year goal is to realize $35.00/acre per year or $.20/bu. profit after all costs and labor and management at a 175 bu. yield. Let’s say Producer A achieves this goal 4 years out of the 5 but, 1 year out of the 5 he loses $.20/bu. Now, Producer B has the 5 year goal of making $70 per acre profit per year which would be $.40/bu. at 175 bu./acre yields.  He achieves this 2 years out of the 5 but, as is highly likely because waiting too long for high prices historically increases the risk of achieving lower prices--he loses $.20/bu or $35/ac. 3 years out of the 5.

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