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Honored Advisor

CAN'T POST ANYTHING ----- I WILL TAKE THE HINT

I CANT POST ANYTHING BUT I CAN EDIT A POST,  JUST LETTING YOU KNOW IN CASE IT IS A GLITCH.......

IF NOT I WILL STOP READING HERE....

 

SW

 

 

 

 

Dennymal is the latest to point out that the corn market doesn't care what my cop is. And he is right markets don't think, let alone care. They just offer a price today.
That's where cop becomes important to me. First it helps me judge price --last year, going up or down, etc are just distractions, ,, minor details.
From here COP guides. Is our current path viable, do we adjust crops, inputs, products, etc.
after all we have choices to make, change crops, change production(meat instead of crops) , lower input costs, add other income sources. Etc
2015 has been a year of price reductions and possibly below COP.
What adjustments have you made ?
What inputs have been reduced? (For Ours fuel, water pumping , labor, personal living, crop insurance--are a few costs that got lowered....)
What adjustments to plan will you make?

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7 Replies
Honored Advisor

Re: Cost of production

If you can buy a commodity below the cop, its a good deal but you only know that it's truly below their cost of production after they have ran in the red for 3 years....unfortunately.

With a farmer's set fixed costs, they can't just mothball their operation, sometimes they "lose less" by running it into the ground waiting for a miracle. Ol "farmers will drive Lamborghini's" Jim Rogers is still on that same kick. All I can say is okay Jim anytime now this can turn around.
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Senior Contributor

Re: Cost of production

Our economics 101 graduates swear that cost of production determines price. I suppose economics 101 is nigh unto gospel to the real believers. I think differently. I think competition determines price. If you want $4 for your corn and there are ample people that will sell it for $3.50, guess who gets the sale?

 

If it cost you $3 a bushel to produce you're gonna have slim pickings for a while, but nothingis forever even though it might seem like it. It reminds me of the new plateau when we got $3 plus for our corn but then prices waned after the cash rent went from $46 per acre to $70 and then $105. Mid 1970's

 

 

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Veteran Advisor

Re: Cost of production

SW  - Labor costs lowered ?

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Honored Advisor

Re: Cost of production

Yes labor,,,   289.  We had two employees resign and for a while will not replace.....  

Have added a trainee that may cover both workloads,,,, especially if one certain office manager helps a little.... Smiley Happy

 

When margins are tight ineffeciencies are a little more noticable....

 

Often when there is a staff of 8 or more working together, there are some "unnessecary observers"..... 

We will also change some crop rotational practices that created some workload for short times......

 

Once effeciency points are crossed...... say for example you have a need for 6 on harvest crew, so you carry 8 employees... the acres per hour go down...

Like the old adage "It takes one mans energy keeping two other men busy".....

 

We were ineffecient in a couple of areas.... 

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There are practices that are just labor eaters.......... cover crops,,,, double cropping,  residue harvesting,,,, multiple applications,,, etc etc etc.   And many of those return a little, or improve the next crop, but often don't return enough income to cover the additional costs and workload.... We have been labor long for a while...

 

hope that answers the question.

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Senior Advisor

Re: Cost of production

I try to keep costs down, so it's hard to see where I can easily make big cuts.  

This year, I'll probably buy seed earlier to get bigger discounts.  My money doesn't earn any interest in the bank, anyway.  

I'm going to try to do an even better job of increasing production by timing and careful selection of seeds and herbicides.  I always scout before putting on any of the extras and will continue to do so.

Marketing is still a good place to try to cover COP.  If it looks like we'll have a few bad years, it may be I'll settle for a bad "pretty good price" rather than shoot for the moon and maybe lose out.

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Honored Advisor

Re: Cost of production

Don I know it is too simple but I did not ever say that cop determines price........ It just tells us if we are on a survivable track...

And I see no evidence competition determines price....  Grain purchasers have fallen in numbers almost as fast as producers.

 

Supply and demand determines price 

 

The producer only affects the Supply side.  And excessive Cost of Production is the factor that forces the producer to stop investing in  that crop.  

Since each of us has a different COP, supply drops in degrees.... But it will drop in time as price drops.

 

If the objective is to "get the sale" then we should always offer our grain at a discount to the market.... But that is not the objective ......... being the low bidder for a sale makes no sense.

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Your point about rents......... I was just reading Al K's comments and he noted in an up market to be ready to price some two years out....------------ That reminds me of just five or six years ago, in the spring the market gave us a chance to price corn at $3.20.  It was the first time I had seen corn over $3....   I was smart and priced some corn for the next two production years...  10% of production as I remember....  We all know what happened, by fall corn was over $4 and by the next summer my COP was approaching $4 a bushel... and with basis locally corn price hasn't been below $4 yet....

We don't have any idea what it will cost to produce corn next year... or what will be a good price....  Or even if we will want to plant it.

We have options in our area.....  and always need to keep them in mind..... I have taken this farm from corn for grain to meat once in the 80's, Out of livestock rapidly in 1990, and from corn for grain to alfalfa in just 18 months a few years later...

Knowing my COP determined those choices....

 

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Senior Contributor

Re: Cost of production

Last year, after prices fell, I decided I'd plant some personal 'test plots'.  Now, I don't have a yield monitor in the combine, but I can get a pretty good guess at what yielded better or worse.  For the first time in several years, I planted some plain-Jane corn, non GMO, not even RR corn.  Guess, what, that penciled out to be my most profitable corn.  Of course, my situation is unique, and may not hold true for everyone else, but with all the GMO corn, pest levels have dropped dramatically, and my fields are pretty clean, so I'm going to try going all non GMO corn for this year.   Cost savings is a little over $100 a bag, heck, dropping the RR gene, and just spraying a full dose of PrePlant herbicide pencils out to less cost per acre (especially since I don't have my own sprayer and have to hire it done.  In the past, I had to have 2 passes with herbicide, in addition to the fert. application.  Now, I'll be down to one total trip, saving cost, as well as compaction problems, if the ground is wet.  For the last 2 years in a row, my non GMO corn, has been my top yielder, and when you combine improved yields, with reduced cost, how can you go wrong?
One thing I don't think I will drop, will be some form of nitrogen stabilizer.  I have experimented with it for several years now, and my side by side yield comparisons have shown equal or better yields using stabilizer, compared to split application.  This year, I went all stabilized N, instead of monkeying with the split application, and with the very wet spring, I didn't have the yellow spots show up in my field, that many of the neighbors did, who did not use stabilizer, and had N loss.  I use the stuff to prevent both leaching, and volitation, and have been very happy with the results.   The only people who's corn kept the nice even color all season as well as mine, were the ones who applied N through the pivot, and they had to put on more than I did, to achieve it.   Not only that, but they were irrigating in the rain, because that was the only way to add the extra N that their crops needed.   The rains shut off in late July, so we all had to water, but I think it would be safe to say that the extra fuel they burned chemigating when their corn didn't need the water, cost more than the stabilizer would have.

Other ways to save:  Pre-ordering seed for the biggest discount.  Even if you don't have the money to pre-pay, there are companies out there that will let you put so much down, to lock in the best price, and then pay the balance at the end of the year (get the Sept discount, but the bulk of the money is due until after harvest).  All seed corn varieties have that little ID number on the tag now, so if you saved that little tag from last year's seed, you can take it to various companies, and get price quotes for the exact same seed.  In my case, one company was $20 a bag higher than another, for the exact same variety, but they would give me a flashlight for an early order.  I don't farm a lot, so I don't buy near the seed some do, but it still would have added up to the most expensive flashlight I ever owned. 

Otherwise, it is basic belt tightening.  Running the same old antique machinery I have been, for another year (or ten).  I joke that I can run GasAhol in everything, because all my stuff is older than the legal drinking age, LOL.  Funny thing, though.   The elevator pays the same price per bushel for corn, picked with a 1460 and hauled in a 1977 C60, as they do if the corn was picked with a brand new combine, and delivered with a brand new semi.  And I'm not so sure that a decently maintained 1460, will do as good a job in corn, as anything else out there (not counting capacity).