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Advisor

Making money in 2020

Fertilizer $112.25 per acre, including soybean off year credit. 

Seed corn $52 per acre, I could do it for less but do have some triple stuff for the corn on corn acres.

Equipment costs $125 per acre.

Chemical costs..$20 per acre estimate...probably less....been using a one pass Surpass Triple Flex/atrazine/dicamba mixture and limited cultivation.

Crop insurance $25 per acre.

Overhead $50 per acre.

Yield goal 175 bushels per acre. 

Margin for land costs and profits with $4 corn:

$700 less $384 = $316

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16 Replies
Veteran Advisor

Re: Making money in 2020

Looks like you better go rent some land for $350.  Then sit around whining while you wait for the next round of trump $$$.  (Is there a font for sarcasm?)

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Advisor

Re: Making money in 2020

Sarcasm never translates very well on the internet.

Yes, if you factor in MFP ($70 per acre here), ARC payments ($70 per corn acre last year....not sure how much this year), Syngenta payments (ten cents a bushel on one years production?) etc, the $350 per acre does look obtainable, but you do need to maintain a cushion.

You can see how the operations with thousands of acres either paid off or written down to $800 per acre in the 80's are prospering and buying farms , though, right?

Targeted subsidies are the fair way to go, but lack political support.

Honored Advisor

Re: Making money in 2020

One can certainly sympathize if not only understand the "greedy landlords"...they about have to demand any Uncle Sugar money goes into their rent or they`d just be the mark in the poker game.  Headlines in farm publications "crop prices down, but rents hold steady".  Used to be the BTO went around getting his rent lowered with tears in his eyes, then it was sending his wife with the new boob job around to the old bachelor landlords...now the gig is up   Smiley Happy

In about 2014 I started to realize that the "canary in my mine" was beginning to get the sniffles, I was tempted to buy a "new" combine but my gut told me "no, wait" and I`m glad I did or I`d be in a world of hurt right now.  I just don`t have the volume. 

After 4 years of not going to many sales, my depreciation schedule is looking pretty thin.  I don`t know if it`s getting rid of "departments" within my farm that weren`t carrying their weight or off farm income.  Or not being "rich" enough to gamble storing grain and taking the low prices early as the prices seem to go lower the longer you hold.  

As "bad" as things are I`ve went to farm sales and I`ve bought things...it`s not like the good old days of 2012 where I spent like a drunken sailor, but slowly I`m finding my groove again and if my little slice of Heaven has found a way, imagine what the Bigshots that have 30 times my size have.  

I heard on the radio that "for the first time, the average farm size has went down" I think by 20 acres.   It would be interesting about the details on that.  My guess is more 10 acre farms that bring the average down and since there`s less farmers and they farm thousands of acres each, just a few new small farmers skew the average?

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Advisor

Re: Making money in 2020

BA, the niche of off farm income, paying down debt, and not having the latest greatest, or most expensive seed, etc. is what keeps the balance sheets in the black.

 

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Honored Advisor

Re: Making money in 2020

The shall we say "miscalculation" that I made in the early 2010s was believing that "$7 corn corn will drop to....oh maybe 4 bucks and I live with that!" Weeeeeeell, it blew down through $4 like hot butter and a guy had to scramble and adjust to actual low $3s  occasionally a a high $2 bid on a Northern Country Co-op chalkboard.  It`s been like piloting your first solo flight in a F-18.  

And I don`t know anymore, new genetics that make soil more or less something to hold up the plant and farmers having a potential to plant 100 million acres of corn.  Perhaps we are one "good year" away from having to adjust to <$2 corn.  

The problem was taking on debt when corn was $7, believing you`d be safe if it dropped to a conservative $4.  In reality making AFTER TAX payments on that debt with $3 corn.   Uuuuuuff-Dah!!!

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Honored Advisor

Re: Making money in 2020

Always buy ground when prices are low.......... 

great stuff 

I would say that there is 315 left to be split by land ownership and Management as evenly as possible.  If you intend to survive in the game.  A good land owner knows that and will agree.

So 150/ acre cash rent is what is reasonable.  But most we talk about here are owners wanting $300 and expecting to hire management for $15

Out here where the water is pumped 80-100 is the range for good water.  just a pumping cost adjustment.

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Frequent Contributor

Re: Making money in 2020

Nice job figuring but: What about this nice year?

First it rained for forty days and forty nights. Planting was late and you didn't have the nerve to forward contract corn that was not up yet. Then the waco USDA crop reports put the market in a tail spin and you missed the $4.00 window now its $3.40 cash fall delivery or $3.68 if you hold till August. 

Second late planted corn is most likely going to miss your 175 bushel goal.  So what maybe your 20 bushels short?

Third its late and the corn is wet. You had $0 in for drying. High 20's corn is going to cost what? Give or take 50 cents?

Lets see $3.40 less $.50 drying and 150 yield after shrink. That's only $435.  Less $384 costs doesn't leave much for anybody to fight over. $50 an acre before anything expensive breaks down. 

 

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Advisor

Re: Making money in 2020

good points, especially about the drying. I haven't spent very much on drying for the last decade as the newer hybrids seem to dry down to 18 percent pretty fast once ripe and if you are patient. I have full floors and good air and usually just bin my corn, but did run a lot of it through an old dryer last fall and will probably have to do the same this fall. That takes about a gallon of $1LP for every ten bushels and maybe a nickel of electricity, so you are out fifteen cents. 

Here in southern MN we had contracting opportunities for a couple of weeks for $4.50 July 2020 corn. I didn't price enough, but did enough that I should be able to average $4 easily, and maybe $4.15 to cover drying.

I planted everything late, but the fabulous end to the growing season probably is going to give me the 175 bpa yield, and if not, the crop insurance will pick up most of the difference.

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Honored Advisor

Re: Making money in 2020

We live in a totally monopolistic environment.....  40 years of  regulating everything down to a bolt on a car seat favors the big and kills small business.  We are so adjusted to it that we just think its OK to ask and expect Usda to control markets......... we are far more socialist than we think because we still keep striving for "security" in all things.  We have substituted one G for a different G to provide our security.

Markets are unresponsive to our crops because they too are praying to DC every day.  We have favored the big international corporations at every election.  Now we have only a few participants in agriculture to do business with.  We squeeze each other out by asking for more pork every election year.

Markets being unresponsive to the production and sales patterns of producers is not the first sign of an economy in trouble,  it is probably one of the last.