Grain Margins

Craig Chase, Tim Eggers, Ron Hook, Jim Jensen, Kelvin Leibold, Tom Olsen, Robert Tigner, and Bob Wells Farm Management Field Specialists, Statewide

Problem:

The agricultural industry in Iowa has gone through dramatic changes recently fueled by the grain ethanol boom.  Prices are at historic levels and profit margins are much above average.  However crop inputs including cash rents, fertilizers, pesticides, crop insurance, and seed are all increasing dramatically.  Additionally, the number of dollars producers need to invest prior to the first seed being planted is growing rapidly.  For 2008, many producers could spend $500 - $600 per acre for inputs before planting.  Producers are handling a lot more dollars and with the current volatility they are exposed to greater risks.

Response:  

Iowa State University Extension responded to the information needs of producers interested in managing profit margins by providing twenty-eight seminars throughout Iowa (1,734 participants).  In addition to an overview on costs for the major crop inputs (fertilizer, seed, crop insurance, and land rent), time was spent discussing economic levels of nitrogen application, grain marketing alternatives, how crop insurance products should match grain marketing tools, flexible leasing practices, and how to generally manage risks in todays environment.  Several interactive worksheets from the ISU Ag Decision Maker website were presented. 

Impact:

Initial comments from producers following the series of presentations have been extremely positive.  Many participants were not aware of the Ag Decision Maker website and those that were, did not know the breadth of worksheets that were available.  They were surprised to know that information on leasing, machinery, crop insurance, and marketing were included.  Several questions on integrating crop insurance and grain marketing indicated a base knowledge of how the two strategies could be combined.  Several questions on flexible leases indicated producers are looking at ways of acquiring land while reducing price and yield risks.  Other producers interested in custom hiring out specific field operations were interested in the University of Illinois worksheet allowing them to determine their costs of conducting the field operation prior to setting a rate. 

With added information, existing corn and soybean producers can make informed decisions regarding leasing practices, nitrogen application levels, custom hire rates, and insurance products to manage risks within their farming operation.  If interested in learning more about grain margins and risk management, locate your farm management field specialist at http://www.extension.iastate.edu/ag/fsfm/fsfarmmg.html.

April 18, 2008

121 Risk management education
 

Page last updated: June 13, 2008
Page maintained by Linda Schultz, lschultz@iastate.edu