SALEM, Ohio — Whether you raise crops, livestock or both, you’ll need a good marketing plan to be profitable in 2017. But you’ll also need to pay close attention to all of the factors that lead up to marketing, like inputs, variable costs and operating capital. All indications are that this will be another challenging year for most farmers, but there are some key things you can do to give yourself the best opportunity.
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Dairy
The milk market forecast looks better than it did in 2016, but the big question will be how much better, and will the improvement be enough.
According to the U.S. Department of Agriculture, the all-milk price for 2016 was about $16.10 per cwt, compared to $17.12 in 2015, and $23.97 in 2014. Projections for all-milk in 2017 are $16.85-$17.65. Total milk production continues to increase, with the domestic demand growing, but slowly.
Goal: Producers will need to evaluate their financial situation and how much money they need to earn to stay in business. This means looking at the farm itself, and things like operating capital, the debt-to-asset ratio and gross income, but also the family’s cost of living and retirement savings.
Some farms may need to exit the industry, and all struggling farms should work closely with their banker or financial adviser, to explore all viable options.
On the plus-side, some costs like new livestock, fertilizer, seed and rent are trending downward, but labor, property taxes and interest are all trending upward, putting more pressure on the profit margins.
Beef and other livestock
Feed prices look promising, with no indications of a major price increase. Beef cattle prices are expected to decrease in the new year, as production increases. Expansions are also expected in the poultry and swine sectors, which will create more demand for corn, but not enough to pressure the supply.
Swine producers were receiving about $35 per cwt. at the end of 2016, losing about $10 per head throughout the year. Swine producers are expected to lose about $16 per hog in 2017. On the poultry side, prices increased slightly for broilers, and decreased slightly for turkey and eggs.
Goal: Manage your inputs and consider the costs of each alternative. While good marketing can help, experts caution that farmers will also need to do a good job of managing input costs and feed costs, if they’re to realize a profit on livestock. For cattle producers in the Corn Belt, grazing corn residual may present a cheaper alternative to feeding hay over the winter. Some input costs, like pasture rent, should be trending down in the new year, and present new opportunity for pasture use and foraging.
Grain crops
Profit margin will again be tight and, depending on soil type and yield, many farmers could face some serious losses. The “returns to land” (gross revenue minus all costs except land cost) for Ohio corn is projected at -$37 to $116 per acre. And “returns to land” for Ohio soybeans are projected to range from $60 to $230 per acre. The bottom line is that yield (supply) is greater than demand, and it’s unclear what new demand 2017 may bring.
Related: Crop profitability budgets for 2017.
Goal: Evaluate all aspects of your operation, especially seed traits and genetics, and the cost-benefit of GMO seeds, as well as certain treatments like fungicide application. Determine whether the additional products are worth the investment, but don’t make so many cuts that you undercut yourself. Eliminate excess equipment and look for opportunities to combine and share services, like planting and harvesting. Pay close attention to your marketing strategy and work with a financial adviser if possible.
Produce and specialty crops
Larger producers will face labor uncertainty and the new presidential administration could have significant impact on the future of immigrant labor. Fruit crops in 2016 saw tighter than usual supplies, due to reduced production, which in turn caused fairly strong prices for growers and consumers.
But production is forecast to rebound in 2017, which will likely put some downward pressure on prices.
The 2016/17 marketing year is already underway for most fruit and tree nut crops. Several of these crops are forecast to see a reversal from last year’s production declines. U.S. grape production is forecast up slightly. The U.S. peach crop, on the other hand, is forecast to decline for the seventh consecutive year.
Goal: Work with your lawmakers and state and national marketing organizations to secure a workable deal for farm labor. Pay close attention to the crop protection products available for your industry, and do a cost analysis of which ones make sense.
Consider attending one or more of the educational programs put on by your industry. The Mid-Ohio Growers Meeting is Jan. 12-13 in Mount Hope; the Ohio Produce Growers and Marketers Association will hold its annual conference Jan. 16-18 in Sandusky; the Ohio Ecological Food and Farming Association will hold its annual conference Feb. 9-11 in Dayton; and the Pennsylvania Sustainable Agriculture conference is Feb. 1-4 in State College.
(Developed from OSU farm outlook conferences, USDA Economic Research Service Market Outlook, University of Illinois Farmdoc Daily, and OSU Beef Cattle Letter.)
Read more in our Stay Focused series:
- 5 tips for setting farm goals
- Make 2017 the safest year on your farm yet
- Sydney Snider, former national FFA officer, shares a 2017 challenge
- Five steps to stay focused on your 2017 goals
- Small changes can accomplish big goals
- We’re never promised a new year, so be ready for farm succession
- Planning practical goals in 2017
- 9 strategies for a profitable new year
- A dairyman’s journey to better health
