Managing Your Farm In An Economic Downturn Purdue Center ... ·...
Transcript of Managing Your Farm In An Economic Downturn Purdue Center ... ·...
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Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
Managing Your Farm In An Economic Downturn
Chris Hurt, Professor & Extension Economist
Michael Boehlje, DisAnguished Professor & Extension Economist
James Mintert, Professor & Director, Center for Commercial Agriculture
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Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
-$100
$100
$300
$500
$700
$900
$1,100
$1,300
Dol
lars
Per
Acr
e
Real U.S. Corn Revenue (+Insurance) Per Harvested Acre (2014 $’s)
1986 = $395 2005 = $373
1973 = $1,252 2012 = $1024
1946 = $697
2014-‐16= $631
1921 = $172 1931 = $113
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Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
$400 $450 $500 $550 $600 $650 $700 $750 $800 $850 $900 $950
$1,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Average Corn Revenue & Costs/Acre by Year in Indiana
Cost/Acre Revenue/Acre
Crop prices RISE faster than costs adjust upward: PosiPve Margins
Crop prices Fall faster than costs adjust downward: NegaPve Margins
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Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
Improving Your Farm’s Management 5 Management Strategy Categories to Consider
ü Financial
ü Input Purchasing
ü ExecuPon
ü MarkePng Strategies
ü Government Programs & Crop Insurance
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Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
Financial Strategies 1 Preserve Working Capital
Working capital = current assets – current liabiliPes What’s Your Burn Rate?
2 Reduce capital expenditures CauPon on 179 Exp. in 2014
3 If working capital is already low, rebuild it
4 Restructure debt with longer loan terms
5 Lock-‐in long term interest rates 6 Reduce family living expenses
7 Be prepared for your loan review!
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Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
Input Purchasing & Usage Strategies
• Why is this important?
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Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
Crop ProducAon Costs Increased Rapidly
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
05 06 07 08 09 10 11 12 13 14 15
$/bu
shel
Year
EsAmated Indiana Corn ProducAon Costs 2005-‐2015, Per Bushel
Var. Cost/bu. Total Cost/bu.
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Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
2015 EsAmated Indiana Corn ProducAon Costs By Category
FerAlizer
Seed
PesAcides
Fuel
Machinery Repairs
Hauling Interest
Insurance & Misc.
Machinery & Family Living
Cash Rent
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Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
100
125
150
175
200
225
250
05 06 07 08 09 10 11 12 13 14 15
$/Acre
Year
Indiana Average Farmland Cash Rental Rates 2000-‐2015
Cash Rent Was 28% of Total Cost in 2014
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Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
Rental Rates Will Start to Adjust
$0.70 $0.80 $0.90 $1.00 $1.10 $1.20 $1.30 $1.40 $1.50
05 06 07 08 09 10 11 12 13 14 15
$/bu
shel
Year
Indiana Average Farmland Cash Rental Rates Per Bushel of Corn, Trended Yields, 2000-‐2015
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Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
Seed Costs Share of Total Costs Increased
0% 2% 4% 6% 8%
10% 12% 14% 16%
05 06 07 08 09 10 11 12 13 14 15
% of Total Cost
Year
Seed as a % of Indiana Total Corn ProducAon Costs 2005-‐2015, Per Bushel, Trended Yields
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Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
Input Purchasing & Usage Strategies
• Cost per bushel is the key, not cost per acre! • “Buying Right” sets your cost structure • Check & NEGOTIATE prices • Crop ferPlizaPon strategies • Herbicide strategies • Cash rent and land purchases are very important
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Managing Your Farm In An Economic Downturn Webinar, December 18, 2014
MarkeAng Strategies
• Become more cauPous • Delay pricing inputs • Don’t lock-‐in inputs for mulPple years
• Forward price crops more aggressively
• Earn storage returns (especially for corn) • Focus on locking in margins