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Managing Crop Margins

Managing Crop Margins. Craig A. Chase Farm Management Field Specialist. Presentation Objectives. Review of 2009 – Costs and Marketing Preview of 2010 – Costs and Marketing Review of various decision tools. U.S. Corn Supply & Demand. Source: WASDE, Updated Oct. 9 th , 2009.

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Managing Crop Margins

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  1. Managing Crop Margins Craig A. Chase Farm Management Field Specialist

  2. Presentation Objectives • Review of 2009 – Costs and Marketing • Preview of 2010 – Costs and Marketing • Review of various decision tools

  3. U.S. Corn Supply & Demand Source: WASDE, Updated Oct. 9th, 2009

  4. Corn Cash Price & Probability Forecast ’09-’10 Marketing Year Based on 86.4 M planted acres and 166 bu/A avg. yield $3.25/bu 60% $3.75/bu 15% $3.10/bu 25% Source: Wisner, ISU Biofuels Economist, Oct. 9th, 2009

  5. Corn Basis

  6. U.S. Soybean Supply & Demand Source: WASDE, Updated Oct. 9th, 2009

  7. Soybean Cash Price & Probability Forecast ’09-’10 Marketing Year Based on 77.5 M planted acres and 43.3 bu/A avg. yield $8.95/bu 50% $10.50/bu 30% $8.50/bu 20% Source: Wisner, ISU Biofuels Economist, Oct.9th, 2009

  8. Soybean Basis

  9. Storage Opportunities

  10. Corn Storage Costs .89 .69 .49 .56 .30 .44 .32 .20 Assumption: Corn is Valued at $3.50/bu - Financed @ 7% APR

  11. Corn Futures Carry Dec. 2009 $3.66 Oct. 30th, 2009 Carry through July: is it large enough? Source: www.cbot.com November 2009.

  12. Soybean Storage Costs 1.00 .70 .69 .40 .49 .29 .10 Assumption: Soybeans are Valued at $9.50/bu - Financed @ 7% APR

  13. Soybean Futures Carry Nov. 2009 $9.78 Oct 30, 2009 No carry, difficult to justify storage Source: www.cbot.com November 2009.

  14. 2010 Opportunities

  15. Corn Cash Price & Probability Forecast ’10-’11 Marketing Year Based on 88 M planted acres and 159 bu/A avg. yield $3.75/bu 65% $4.40/bu 18% $3.55/bu 17% Source: Wisner, ISU Biofuels Economist, Oct. 9th, 2009

  16. December 2010 Corn Futures

  17. Soybean Cash Price & Probability Forecast ’010-’11 Marketing Year Based on 76.2 M planted acres and 43.1 bu/A avg. yield $8.25/bu 65% $10.30/bu 18% $7.50/bu 17% Source: Wisner, ISU Biofuels Economist, Oct. 9th, 2009

  18. November 2010 Soybean Futures

  19. Tools for Evaluation Crop Rotation Calculator http://www.extension.iastate.edu/agdm/crops/xls/a1-80rotationprofitabilitycalculator.xls • Corn Nitrogen Rate Calculator • http://extension.agron.iastate.edu/soilfertility/nrate.aspx Machinery Economics http://www.farmdoc.uiuc.edu/pubs/FASTtool.asp?section=FAST Flexible Rent Calculator http://www.extension.iastate.edu/agdm/wholefarm/xls/c2-21flexiblerentanalysis.xls

  20. Crop Rotation Calculator With and without Nitrogen Optimizer http://www.extension.iastate.edu/agdm/crops/xls/a1-80rotationprofitabilitycalculator.xls

  21. Decision #1 • What should the crop rotation be? • What are the choices? • Are there alternative or specialty crops that are more profitable and that would fit into a rotation?

  22. http://extension.agron.iastate.edu/soilfertility/nrate.aspx

  23. Corn after SB $3.75 price $.40 N 123 pounds

  24. Corn on Corn $3.75 price $.40 N 175 pounds

  25. Decision #2 • What should the fertility program look like? • Can fertility costs be lowered without affecting yields? (over 1/3 of non-land production cost is from fertility).

  26. Machinery costs Fixed costs Variable costs Depreciation Interest Storage Insurance Repairs Labor Fuel

  27. http://www.farmdoc.uiuc.edu/pubs/FASTtool.asp?section=FAST

  28. Decision #3 • Does the machinery “fit” the operation ? (not too big or too little) • Do the custom rate charges reflect the costs of the machinery? • Are there some machinery costs that can be re-evaluated (field operations)?

  29. Tenants’ Residual Computing a Cropland Cash Rental Rate http://www.extension.iastate.edu/agdm/wholefarm/xls/c2-20croplandcashrent.xls

  30. Flexible Cash Lease

  31. Decision #4 • Does the lease terms provide for some profitability? • Can I re-negotiate the lease or move it toward a flexible terms lease?

  32. Crop Insurance http://www.farmdoc.uiuc.edu/cropins/index.asp

  33. Decision #5 • Determine the right insurance product to meet your risk management needs. • Make sure you have enough insurance, but are not “over-insured”. • Look at what the insurance product does compared to the farm marketing plan.

  34. Risk Management Web Sites Ag Decision Maker – ISU Extension Economics www.extension.iastate.edu/agdm Farm Doc – U of IL Extension Economics www.farmdoc.uiuc.edu Center for Farm Financial Management – U of MN www.cffm.umn.edu

  35. ISU Crop Marketing Web Sites Corn and Soybean Basis (State and County) www.card.iastate.edu/ag_risk_tools Ag Econ Periodicals, Publications and Programs www.econ.iastate.edu/outreach/agriculture/ Ag Decision Maker (Crop Updates/ Publications Decision Tools) http://www.extension.iastate.edu/agdm

  36. Questions….. Any questions or comments? Thank You for This Opportunity! Craig A. Chase Farm Management Field Specialist 115 9th Street NE Oelwein, IA 50662 (319) 238-2997 cchase@iastate.edu

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