Minding Ag's Business
What are you doing to manage risk this year? The most common answer I got to that question this winter: Grow more corn.
It's not hard to see why. There's red ink everywhere, but at least with corn, the insurance backstop is reasonable. The likelihood of bleeding out on soybeans is much higher in 2025, and after two years of losses, that's a risk with considerable complications.
The spring crop insurance projected price is $4.70 per bushel for corn and $10.54 per bushel for soybeans. Under an 80% revenue protection plan, it would take corn prices falling to $3.76 per bushel or soybeans to $8.44 per bushel to trigger a payment without a yield loss.
University of Illinois crop budget estimates show it will cost an average of $4.60 to raise an acre of corn on highly productive, central-Illinois farmland, $11.05 for soybeans.
Soybeans are way out of the money, and almost all of the financial risk falls to farmers.
Nick Paulson, agriculture economist at the University of Illinois, said farmers are generally in good financial shape following big incomes from 2020-2022, but, it's not just the three consecutive years of negative returns that concern him.
"It's the size of those negative returns. They can eat up a lot of liquidity, a lot of working capital, and change that strong financial position pretty quickly," Paulson said.
In low-margin years, University of Illinois ag economist Gary Schnitkey said there are four main areas farmers should consider carefully.
-- Be the low-cost producer. High yields often come with high costs, and Schnitkey suggested running the numbers on things like tillage passages and nitrogen application rates to find cuts.
-- Reassess land rental strategies. For some, that means assessing how much you can afford to pay in rent, while for others it means building a strategy to establish more relationships with potential landowners.
-- Consider your machinery. Is it the right size for your acreage? Could you benefit from sharing with another operation? Or is there a way it could earn additional income?
-- Don't sleep on government programs. The choice between Agricultural Risk Coverage and Price Loss Coverage appears to heavily favor ARC-County. The deadline to enroll at your local Farm Service Agency office is April 15.
Katie Dehlinger can be reached at katie.dehlinger@dtn.com
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