Working With Low Commodity Prices Will Be a Challenge
I am writing off a series of articles from Purdue University in relation to farming in tough times. These articles. The current climate of low commodity prices is squeezing margins. Some margins might even be negative if crop producers continue with current costs. As a result crop producers will focus hard on on managing costs. Many farmers focus on costs by looking at cost per acre. This is good but looking at cost per acre might cause producers to over look important trade offs in respect to productivity. Budgeting on a cost per bushel of grain or cost per unit is another approach to look at. Budgeting by per bushels is budgeting on out puts per acre is budgeting by inputs. Recognition that per unit fixed costs can decline dramatically with increased out put, and recognizing the trade off between productivity and costs. Lets look at one of the trade offs in seed population. For high productive soils a seeding rate of 33,000 seeds per acre and yields of 186 bushels per acre. Lets reduce the seeing rate to 27,000 seeds per acre. The initial cost per acre of seed was $124 dollars. Reducing the seed rate lowers the cost to $102 dollars per acre. This represents a $22 dollar savings per acre but when you look at costs per bushel your cost is 0.13 cents per bushels which is great but the main issue you have to look out for is any reduction in yield greater than 3.33%. It is unrealistic that changing the seeding rate would not impact yield. Lower yields from 186 to 180 bu the cost per bushel reduced is not 0.13 but 0.2 cents per bushel and you would be better off staying at the 33,000 population. So comparing cost on per acre vs per bushel look at your data to make the best decision on your farm.