Mid-year financial health check-up…How healthy is your farm?
Now is a good time to start checking the pulse of your farm’s financial health.
With rising market prices, increasing input costs, and volatile weather conditions, farm managers have had many reasons to feel enthusiastic and concerned about profitability for this year. As we reach the mid-point of the production season, now is a good time to start checking the pulse of your farm’s financial health.
Have you reviewed your farm budget or estimate for this year’s cost of production?
The rise of market prices often brings with it the increase in input costs needed for production. The 2021 season has been no exception to this trend. As reported by the Illinois University Farmdoc team, since the fall of 2020, fertilizer prices have increased significantly. Nitrogen products are up as high as 60%, phosphorus products are up 54%, and potash products are up 31%. To read the full report, visit the Farmdoc article on Fertilizer Price Increases for 2021 Production.
Fertilizer has not been the only farm input to see price increases this year. A chemical production shortage has made several herbicide products difficult to find and often at inflated prices when available. Those that pre-paid for their chemical needs may have had an early advantage in this area. In addition, numerous areas of the state failed to receive the 0.5 inches of water needed to activate pre-emergent herbicides during the early growing season.
If your farm has experienced the impact of these higher costs, how does this affect your projected budget? Do the break-even prices you estimated still apply? Have break-evens increased? Remember, the farm budget isn’t just something you put together for your lender. Knowing your budget is especially important in uncertain times and revisiting your financial plan can set you up for success for the rest of the year. For more information on developing your farm’s cost of production, there are resources available from the MSU Extension farm business team:
- MSU Extension farm business team website - Budgets & Cost of Production page
- MSU Extension Bulletin E-3411 – Introduction to Cost of Production and Its Uses
- Video Presentation: Farm Budgets: Planning Now For Profits
Have you secured any revenues above those costs?
Since the beginning of the year, market prices have increased to well above $5 per bushel for new crop corn and almost $13 per bushel for new crop soybeans. This is a dramatic increase from the market year average prices of $3.56 and $8.57 seen respectively from the 2019/2020 marketing year, according to the USDA World Agricultural Supply and Demand Estimates (WASDE) report.
Opportunities for cash prices above current market offerings may have been possible during the past six months. However, several price increases have been connected to weather concerns. Many parts of the state began the growing period in a drought situation. Despite significant rainfall in recent weeks, many areas remain in that same position or now have damage from excess water. What area is your farm located in and how have you estimated for yield changes because of weather conditions? Have those changes impacted your marketing plans? If you have crop insurance with revenue protection, remember to utilize your coverage guarantee to help you in your marketing decisions. For more information, review the article: High grain prices – how many bushels should I market?
Have you secured any of your feed needs?
For livestock producers, do you have an adequate supply, or have you secured feed needs going into the fall? High market prices for commodities have meant a higher cost for purchase feeds such as grain and forages. Forage is especially important as first cutting of hay yields are low for those located in drought areas. There may also be concerns about the quality of the forages later into the season if weather continues to be volatile. We experienced a similar situation in 2019 and resources created then may be applicable to 2021 as well:
- Article on Pricing Corn Silage
- Article on Pricing Standing Forages
- Guidelines for pricing silage, earlage or snaplage from immature corn
The combination of high input costs, volatile weather, and unclear production have made for a very uncertain and stressful growing season. Taking care of crops and animals is hard and it’s easy to overlook your own health. Recognizing and monitoring the status of you and your family’s physical and mental health is an important part of the farm’s overall health situation. Being mindful of your mental and physical health needs can increase productivity, support safer farm practices reducing the likelihood of farm accidents, and improve your quality of life.
If you or someone you know is struggling, resources are available to help you navigate stress and challenges to make sound decisions for your farm. For more information, visit Managing Farm Stress. You might also be interested in participating in some of the many resources in the MDARD Legacy of the Land grant.
