Agri-Brief: Management Decisions during Low Crop Prices

AGRI-BRIEFS
AGRONOMIC NEWS ITEMS

From Agronomists of the
Potash & Phosphate Institute
655 Engineering Drive, Suite 110
Norcross, Georgia 30092-2837
Phone (770) 447-0335

Winter 1998, No. 3

MANAGEMENT DECISIONS DURING LOW CROP PRICES

Winter is a time when many producers make decisions for the next season. This year, low crop prices will be causing many to take a hard look at their operations. What can a producer do to make his or her operation more profitable?

Profitability surveys have identified factors that lead to increased profitability. Surveys from Iowa, Kansas, and Minnesota have shown that increased profitability comes from:

· Reducing costs

Assessment of a farm operation should not only be based upon total production, but also upon other factors, such as production efficiency. Spreading fixed costs over more bushels and more acres can improve efficiency. Cost cutting should be done wisely. Too much cost cutting reduces profits. The goal is to increase efficiency without endangering proven income-earning practices, such as higher yields. Assets such as land, machinery, etc., should be evaluated to determine if they add to the value of production. Land value should be carefully assessed, to ensure that prices paid reflect the land’s productivity.

· Increasing yields Higher yields lead to increased production. This translates to increased income and greater profitability. In addition, increased yields can lower the unit costs of production.

· Focusing on management Higher profit farmers spend more time gathering information, analyzing choices, planning activities, and evaluating results. Formal education or continuing education develops mental tools that help these processes. Consider adopting new technology before it becomes standard practice. To find more time to conduct these activities, a farmer may find it wise to spend less time driving a tractor. Someone else can drive the tractor, but someone else can’t make the farmer’s own decisions. Try to adopt an optimistic view of the future. Optimism renews interest in learning more about the farming operation and how to improve it.

Potash and phosphate are essential for higher yields. Higher yields have been shown to lead to greater profitability. But how can you know if potash or phosphate applications will be profitable? The answer is to test your soil. Soil tests are inexpensive but provide very valuable information. Knowing your soil test level allows you to follow well-researched recommendations. Consult university fertilizer recommendations in your area, but be prepared to make refinements for your own agronomic and economic circumstances. Local crop advisers can assist with that process. Many areas see added benefits of starter fertilizer applications, sometimes even at high or very high soil test levels.

In times of low crop prices, smart management decisions are critical to the sustainability of a farming operation. Lower costs, higher yields, and attention to soil test levels and a sound fertility program are essential components of a successful operation. A fertility program is not fat to be cut in lean times, but rather a guidepost that leads to survival.

—TSM—

For more information, contact Dr. T. Scott Murrell, Northcentral Director, PPI, 14030 Norway Street, NW, Andover, MN 55304. Phone: (612) 755-3444. E-mail: smurrell@ppi-far.org.
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