NDSU Extension - Mercer County

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Swinging for the Fences

farm production planning, crop budgets, NDSU Farm Management Department

Submitted by Craig Askim, Extension Agent, Agriculture and Natural Resources    

Many producers in Mercer County and across the state are making hard decisions on what crops to plant in 2017. The price margins are slim in many cases. This article gives you a prospective of a crop that shows some possible profit potential. When looking at what crops to plant ask yourself, what is actually feasible? Making across the board changes in management and crop rotations may look like a good idea today, but could cause major problems down the road. It is not an easy question to answer. Attaining crop budgeting information and education before you start planting, should provide you with some type of an answer to this complex question.

Low commodity prices have many farmers sharpening their pencils as they make production plans for 2017. Economic theory helps us understand what to expect.

While there also are important agronomic and operational issues to consider, prices provide signals to farmers of what crops the market wants them to grow and how to grow them.

Looking at the NDSU Extension Service crop budgets prepared by Andy Swenson, NDSU Extension farm management specialist, one can quickly identify crops that are projected to be profitable in 2017.

A few caveats about crop budgets should be understood before using them. The most important is that crop budgets are a tool you can use to help make some financial decisions, but their usefulness is  based on how truthful the information is that the producer provides.

The NDSU Farm Management Department puts in a lot of time and effort to determine input rates, expected yields and prices. However, the perfect alignment of these numbers with your final numbers is unlikely. However, using the crop budgeting framework and adjusting or comparing regional numbers to your own make crop budgets practical farm management planning tools.

Depending on the region, NDSU Extension crop budgets show varying levels of profitability for corn in 2017. While 2017 production costs are only estimates as of today, yield and price are much more uncertain. Very few producers will price the 2017 crop before it is planted. Even if farmers could lock in profits, the risk is still too great for many to do.

The 2016 North Dakota corn crop makes a great case for the upside of corn, as record yields resulted in profits that allowed many farms to plant another day. Frayne Olson, NDSU Extension crops marketing specialist, has estimated the distribution of crop profitability for soybeans, wheat and corn based on yields and crop prices. Not surprisingly, soybeans have the highest expected profit, followed by corn, then wheat.

However, projected profits do not foretell the full profit story as a bumper crop or $7 prices give corn an upside no other crop can match. This ability to knock profits out of the park make corn production more appealing than would otherwise be the case.

Source:  David Ripplinger, Assistant Professor NDSU Agribusiness and Applied Economics Department

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