While high grain prices have been problematic for livestock farms for the past three years, there has been a silver lining for farms that controlled enough land resources to grow some grain in addition to the forage needs of their animals. Those clouds rained silver dollars if there were extra crops left to sell.
This has created an interesting shift in profit centers on some farms for a couple years, one that is likely to shift again in 2014.
For the better part of the last 20 years, the phrase “the cows carry the crops” was true of most Midwest dairy farms. However, the Ohio Farm Business Enterprise Analyses show that while some dairy farms have been very profitable, many have struggled under the burden of elevated feed prices for the past few years.
Not breaking even
Of equal concern, is the actual cost of production for many of the crops that is seen in this cross section of farms.
In 2012, (our most recent year of data collection), direct and total, and in some cases, simply the direct, costs of raising crops is near, or greater than the current cash market price for the crop.
For instance, the table (scroll down to bottom of this article) shows that the average direct costs of raising 133 bu/acre corn (remember there were some dry spots across Ohio that year,) was $4.09 per bushel. To cover all costs, $6.02 per bushel. Currently, cash prices will barely cover direct costs.
That represents more than 2,500 acres of corn on owned ground. We can add the nearly 3,700 acres of corn raised on rented ground, and the concern remains.
Total direct costs on average were $4.67 per bushel, with all costs totaling $6.17. Land rent averaged $93 per acre.
Now what?
What does this mean for 2014? While disappointing for grain farmers, declining cash grain prices have been a relief for dairy farms.
However, for dairy farms with excess grain to sell, those clouds that were raining silver dollars can quickly become black holes if the cost of producing that grain is considerably higher than the income it generates.
While lower-than-normal yields in 2012 contributed to some farms’ higher costs of production, that wasn’t the only factor. Each farm has the potential to improve their cost of production through cost control, increasing yields through improved cultural practices and/or a better growing season.
Know your costs?
While we do not have control over the growing season, we do have considerably more or total control over the other factors.
What did it cost you to grow corn in 2013? Corn silage? Soybeans? Milk? How did you compare to other growers? How will you fare in this year’s markets?
Consider joining the other Ohio farms that are completing an enterprise analysis of their farms now, so they know exactly what it cost them and where their farms were profitable — or not — in 2013.
Check out our website at http://farmprofitability.osu.edu/ for input forms, or give me a call at 330-533-5538 to talk more about how you can compare your farm to the best in Ohio.
