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Extension > Agricultural Business Management News > May 2017

Wednesday, May 17, 2017

Farm Machinery Cost Estimates Publication Updated

by William F. Lazarus, Extension Economist

An updated version of this publication is available online at www.extension.umn.edu/agriculture/business/farm-financial-management/. The tables in this publication contain estimates of farm machinery operation costs calculated via an economic engineering approach. The data are intended to show a representative farming industry cost for specified machines and operations. The list of machines, the fuel price, and the labor rates are the same as last year.  Machinery prices continue to creep upward.

Have you tried the Microsoft Excel spreadsheet (MACHDATA.XLSM) that goes with this publication?  It is available for downloading at z.umn.edu/machdata. The “Calculate” and “Self-propelled” sheets in this spreadsheet can be used to calculate costs for your own situation.

The spreadsheet can also be used to answer a variety of specific questions, such as:
Should I keep the machine I have for another year, or should I replace it now?
Which is the best size machine for my operation?
How does inflation affect machinery ownership and operating costs over time?
How will the latest precision-ag features affect cost and performance? 

The “Sensitivity” sheet contains tables that show how annual use and years of ownership will affect costs per hour and per acre.

Tuesday, May 9, 2017

Outlook 2017 for Corn and Soybean Crops

by David Bau, Extension Educator

Farmers are just getting started planting their 2017 crops with hopes of good yields and good prices. There has been plenty of spring moisture and now the cropping season will take off in full swing when the soil dries out. Farmers have been blessed with two years in a row of record crops, will 2017 bring a third? The good yields have helped many farmers survive the low prices and small profits the past couple of years. In Southern Minnesota corn farmers in the Adult Farm Management programs have averaged losses on corn production since 2014, while they were able to generate small profits on soybean during this time.

Crop prices for 2017 corn are at $3.40 and soybean prices are $8.90 depending on your local basis. Farmers in my marketing groups have worked on their 2017 budgets and determined breakeven prices at $3.80 or above for corn and $10.10 or above for soybeans. The high futures price in December 2017 corn occurred on June 8, 2016 at $4.22 and for November 2017 soybean high was $10.42 on November 28, 2016. Using a 60 cent corn basis and a 70 cent soybean basis, which are wider than normal due to the large crop inventory, the high prices would have been $3.62 for corn and $9.72 for soybeans. With both current and the high prices offered for 2017 corn and soybeans below 2017 breakeven prices farmer will again be facing a small or no profit year.

Farmers will be examining their farm expenses to determine ways to lower costs. Rents are the largest expense accounting for 40% of soybean crop expenses and 33% of corn expenses. The next largest is fertilizer, followed by seed, chemicals and repairs and hired labor. The challenge is to lower input costs without sacrificing yield.

Farmers need to be alert for opportunities if the markets rally close to the prices necessary to lock in profits. Farmer need to develop a marketing plan with target prices beginning close to their individual breakeven prices and stair step their way up to higher price targets. Decision dates should be added to determine if prices are high enough to lock in prices available at the time. The high in corn prices usually occur in May, with historically higher than average prices for both corn and soybeans from April through June.  This time period would be a good time to set decision dates.

If the target prices are not met and on decision dates have passed with too low of price to market any grain, farmers need to add default dates to force sales, especially for those bushels that the farmer will not have on farm storage space for at harvest time. Hopefully 2017 will be another year with good yields which also help lower the breakeven prices. Without better yields or prices or both, 2017 will be another with little to no profits for Minnesota corn and soybean farmers.

Tuesday, May 2, 2017

Use Your Employee Handbook!

by Betty Berning
Extension Educator

Does your farm have an employee handbook?  I’ve talked to many dairy farmers about employee handbooks this winter.  Many farms have a handbook, which is great!  However, farmers tell me they are unsure of how to use the handbook once it’s written.  Too often, employees don’t look at the handbook or farms forget they have it and the handbook collects dust on a shelf. 

An employee handbook can be a very valuable communication and labor management tool.  I’d like to propose four reasons why your farm needs to not only have an employee handbook, but also needs to actively utilize it. 

An employee handbook communicates what your farm is about- In other words, what is the culture of your farm?  Business culture can be defined as values, beliefs, and behaviors that are typical of your farm. For example, if being on time is an important behavior on your farm, your handbook should reflect that.  You might have a very firm policy on tardiness and missed work that is included in the handbook.  Perhaps the farm’s culture is to keep things simple.  Your handbook might be succinct with only a few critical policies included. 

Every farm has a culture.  The way in which you write and the topics you choose to include in the handbook will send a strong message about your farm’s culture.  This will provide clarity to your employees because they will understand what is important to you and how they can be successful.  Clarity is critical in labor management because it helps employees understand your expectations and, in turn, meet them.

A handbook highlights the most important policies on your farm- Are there certain behaviors that would cause immediate termination?  These unacceptable behaviors and their consequences must be listed in your employee handbook.  This provides clarity to your employees so that they understand what is important to you.  If they engage in one of these behaviors, and they’ve read and signed off on the handbook, there won’t be any question as to why they were terminated.  This protects your farm and you.

An employee handbook can be a powerful tool for human risk management- Are you concerned about an employee mishandling an animal?  Maybe you worry about an employee having an accident with equipment?  You need to create policies on farm safety, animal welfare, and any other risks associated with employees.  These policies need to be in your employee handbook.  Furthermore, these policies need to be reviewed with employees.  Provide training to your employees on these policies, so that the expectations are completely clear.  This is managing your risk.  All employees should sign off that they’ve read the policy and received training on the policy. 

If an unfortunate event happens on your farm, you will have documentation to show that you did your due diligence.  There still may be ramifications, but providing a written policy and training (and re-training) can lessen the blow of an event.  More importantly, a policy that has been explained well can prevent an event from occurring.

As you write, update, and utilize your handbook, you build your leadership and business skills- Writing your employee handbook is a strategic activity, as opposed to being a day-to-day activity like milking and feeding cows.  Every time you look at the handbook and review your policies, you are spending time on your business and setting its direction.  You are thinking about the type of farm you want to have and what its future might look like.  I encourage every farm owner to take an time each week (30-60 minutes once/week is a good place to start) to spend time on strategic activities like the employee handbook, business plan, goal setting, transition planning, etc.  Anything that will have a big impact on your future, but doesn’t feel as urgent as milking cows, is something that you can work on during this time.  Put the time on your calendar and hold it; don’t let other activities creep in.  Take the time to shape your farm’s culture and future.

If you’ve gotten off track, i.e. you have a handbook, but haven’t looked at it in a while, it’s okay.  Just pick up where you left off.  If it needs to be updated, do that first.  Then begin to ask your current employees to read it.  Implement the best practice of requiring new employees to read the handbook within a certain time period of their hiring.  Have employees sign off after they’ve read it and provide time for your employees to read it!  If you have staff meetings, review sections of it during your meetings.  Provide training and re-trainings on the most important policies.  It might seem redundant, but this will ensure that even your more seasoned employees are reminded of your farm’s culture and policies. 

Employee management is challenging right now.  The entire workforce in Minnesota (not just the ag workforce!) is facing a shortage.  There is no silver bullet to solve this.  You have a choice, though, in how you want to manage your employees and business.  Choose to be proactive and do the right things.  Over time, doing the right things, like utilizing an employee handbook, will provide great results back to your farm. 
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