Rent tops list of cost-cutting measures
August 11, 2015
As corn and soybean prices dropped in 2014, there was more talk about cutting costs of production in 2015 for farmers to remain profitable.
Terry Neville, a farmer from Odebolt, says volume is how he stays profitable on his farm. As a result, he didn’t make many changes from previous years to this year.
But, he says some of the farmers in his area might have made some adjustments. Those changes included tweaking rent rates and looking at equipment and crop input costs.
Brian Frischmeyer, Monsanto technical agronomist in Southwest Iowa, says one of the largest changes from 2014 to 2015 is farmers renegotiated or dropped rented land.
“Rent was the No. 1 thing adjusted to make more money,” he says.
And in the end, rent will likely be the top reason farmers make or lose money in 2015, he says.
More farmers also looked at equipment costs.
Frischmeyer noticed more farmers made repairs and added precision planting equipment to existing planters this year.
However, the drop in used equipment prices meant some farmers have purchased larger planters to save labor costs. At the same time, some farmers who had excess planting capacity sold what they didn’t need.
On the crop input side, Neville says some of his neighbors might have cut back on fertilizer costs.
“There was a scrutiny of fertilizer,” Frischmeyer agrees.
He says more farmers applied nitrogen with the idea of coming back to side-dress as they determined the crop potential. He also noticed more starter fertilizer applied on rental ground.
Mark Johnson, Iowa State Extension field agronomist in Central Iowa, says he also noticed farmers cutting back on nitrogen rates and a later application of fertilizer.
For P and K, Johnson noticed farmers cutting back as well. Frischmeyer says farmers fine tuned their P and K applications and were not banking any in the soil.
Johnson says some farmers were also looking at lowering seed costs.
Frischmeyer notes farmers were looking at maximizing their return on investment on seed costs.
Some of the keys to get the best return on seed investment include precision planting equipment with row shutoffs to prevent overplanting and seed treatments to get a good stand without replanting.
The seed treatments allow farmers to reduce the amount of seeds to get the same stand count.
Frischmeyer says some farmers on marginal ground slightly reduced their corn seeding rate by about 2,000 seeds per acre. However, on highly productive ground, the seed rate remained steady.
Frischmeyer says there was not much of switch to less biotech traits in his area. However, Johnson notes this year is the first year the percent of biotech corn dropped from the previous year.
According to the USDA June Acreage report, U.S. farmers planted 92 percent of the corn in 2015 to biotech hybrids. That is down 1 percent compared to 2014.
In the report, the USDA noted nationally, the amount of just insect-resistant biotech hybrids planted remained steady at 4 percent, the amount of just herbicide-resistant hybrids dropped 1 percent, and amount of stacked hybrids increased 1 percent from 2014 levels.
In Iowa, farmers overall planted 2 percent less biotech corn hybrids compared to 2014.
They planted 1 percent more insect-resistant hybrids, held steady in herbicide-resistant hybrids and planted 3 percent less stacked biotech hybrids.
In Illinois, farmers increased the total amount of all biotech hybrids by 2 percent. Stacked biotech hybrids had a 5 percent increase, while insect-resistant hybrids were reduced by 2 percent and herbicide-resistant hybrids were cut by 1 percent.
In Missouri, farmers reduced all biotech hybrid plantings by 4 percent. Stacked biotech hybrids were reduced by 4 percent, insect-resistant hybrids increased 1 percent and herbicide-resistant hybrids were reduced by 1 percent.
Overall, Frischmeyer says the amount of conventional corn likely remained steady. However, he says farmers did look hard at their crop rotations. On more marginal ground that is tougher to raise corn-on-corn, some of the ground was switched to soybeans. On better ground, farmers stayed with corn.
Johnson says farmers looked at seed costs. While some switched away from traits, some farmers also negotiated with seed dealers.
Neville says he didn’t make any major changes to his seed and fertilizer program to help maximize his production.
He says while he didn’t change his herbicide program, he did look at different brands of the same active ingredient and saved some money.
While the decisions are made for the 2015 crop, Gary Schnitkey, University of Illinois agricultural economist, said the outlook for 2016 does indicate a rise in corn and soybean prices, and farmers will have to start making choices for the 2016 crop.
In a recent article on the farmdoc website, www.farmdoc.illinois.edu/, “Choices Given Low Projected Grain Farm Net Income in 2015,” he writes most decisions will revolve around 2016 production inputs and cash rents.
Candidates for cutting include:
- Reducing machinery purchases, something that most farms have already done,
- Reducing 2016 seed, fertilizer, and chemical costs,
- Reducing 2016 cash rents, and
- Reducing family living withdrawals.