Managing the Margins in Today’s Dynamic Environment

Bob Wells, Farm Management Field Specialist, Southeast Area

Problem Statement:

Todays rapid dynamic increase in grain prices has brought about an equally rapid increase in land and input cost. With grain prices rising 200% since 2006 and input cost estimated to double in 2008, todays Iowa producers risk management skills are being challenged like never before. Most of our producers are very good production risk managers, but in todays agriculture environment, they must make improvements in their marketing and financial risk management skills to remain a profitable farm business. Over the past twelve months, increasing numbers of SE Iowa producers have been in search of risk management education.

Programmatic Response:

During the winter of 2007-2008, I held twenty-three seminars focusing on developing producer awareness of the need to develop risk management skills. The seminars alerted producers to the need to manage the margin in their farm business. The four part discussion focused on (1) historical input and land cost and revenue margins Iowa producers have come to operationally expect and use to make business decisions, (2) a discussion on how fast rising grain prices and slower increases in input and land cost have temporarily widened the margin between cost and revenue, but consolidation in the farm input sector and rapidly increasing land cost, the time needed for cost to catch revenues has a shorter time frame. (3) A discussion focusing on strategies producers can use to manage todays risk including (a) implementing better grain marketing strategies, (b) improving grain management and storage systems, (c) managing rotations, inputs and tillage, (d) negotiate longer term leases, and (e) using crop revenue insurance to control production and marketing risk in the operation. And (4) introducing producers to risk management tools available from ISU Extension. I demonstrated tools on calculating an optimum nitrogen fertilizer rate, a spreadsheet on grain storage management and decision tool for calculating a fair rental arrangement.

Impact/Outcome:

The twenty-three workshops were attended by 493 individuals. Five of the workshops were focused on the unique learning needs of the female farm operator. Participants comments were mostly positive and included, I didnt realize how narrow the margin between cost and revenue have been. I am going to assess all my fertilizer needs using the tool. My grain handling system needs an overhaul, instead of just a new bin I am going to look at my whole system. I didnt know all these tools were available and so easy to use. This program has generated many follow up phone calls and e-mails asking farm specific questions. It also pointed out to producers that high grain prices and higher input cost increase the production, financial and market risk needing management strategies.

2008

POW 121a Risk Management Education Farm

POW 122 Women Decision Makers and Leaders

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