The Volatile Ag Economy
Management Matters
Kevin Bernhardt
UW-Extension and Center for Dairy Profitability
March 2009
2
Three Ways to Navigate 2009
1.
2.
3.
Manage Your Profit Margin
Develop Your Team
Think Counter Cyclically
© 2008
Farm & Risk Management Team
3
Agenda
•
•
•
A look backwards at 10 months of market
mayhem
A look forward
Management Implications
© 2008
Farm & Risk Management Team
4
March 2009 Pricing Opportunities
Date
Feb 1
March 19
May 1
Corn
5.26
5.49
6.41
SBM
327
293
298
Milk
16.05
17.05
18.36
July 2
Aug 8
Oct 10
7.97
5.38
4.25
431
320
263
19.46
17.72
15.60
Dec 5
Feb 3, 09
3.09
3.62
238
302
13.60
9.85
What price of
Milk would
you choose?
What price of
Milk would
you choose if
you secured
feed costs at
the same time?
© 2008
Farm & Risk Management Team
March 2009 Pricing Opportunities
Milk
Corn
SB Meal
5
6
March 2009 Futures Prices
© 2008
Farm & Risk Management Team
7
March 2009 Pricing Opportunities
Return to Management and Labor
Date
Corn
SBM
Milk
Ret/Cow
Feb 1
March 19
May 1
5.26
5.49
6.41
327
293
298
16.05
17.05
18.36
150
434
641
July 2
Aug 8
Oct 10
7.97
5.38
4.25
431
320
263
19.46
17.72
15.60
477
548
279
Dec 5
Feb 3, 09
3.09
3.62
238
302
13.60
9.85
-21
-1,072
100
Cows
15,009
43,417
64,107
47,695
54,794
27,916
-2,062
-107,218
© 2008
Farm & Risk Management Team
8
The Importance of Timing
•
It’s July and input prices are at record highs,
but they are just going to get higher. People
are talking
–
–
•
$10-12 corn, $600/ton SBM,
Nitrogen is already at $1,200/ton.
I’m locking in my Corn and SBM for first
quarter 2009.
– $8.00/bu
$430/ton
© 2008
Farm & Risk Management Team
9
The Importance of Timing
•
March Milk prices are great too, but
–
–
–
•
New Zealand is in a drought,
It’s hot in California, and
Europeans are buying.
People say milk will get to $25 before it is
over.
I’m waiting!
© 2008
Farm & Risk Management Team
10
The Importance of Timing
•
It’s September and prices have really slid.
But, it’s a correction and the market needed
a correction. I’m going to wait now until
prices come back.
© 2008
Farm & Risk Management Team
11
The Importance of Timing
•
It’s almost March. I’m feeding $8.00 corn
and $430/ton SBM. Milk prices are at
$10.00. I didn’t lock in my milk price.
•
Projected Profits: - $120,760 (Ret M&L)
© 2008
Farm & Risk Management Team
12
The Importance of Timing
•
•
I sold my March milk too quickly at $16.50.
At the same time I bought a $5.25 call
option for my corn for $.10/bu and 330/ton
SBM option for $8.50/ton. This gave me
the right to buy my feed at those prices, but
I did not have to. My feed price is now 3.85
(3.75+.10) and SBM is 320 (311.5+8.5).
Projected Profits: $74,925
© 2008
Farm & Risk Management Team
2008
A Year of Market Mayhem
14
Must be a New Era
(Nominal Corn Prices, 1866-2008
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
1865
1885
1905
1925
1945
1965
1985
2005
2025
© 2008
Farm & Risk Management Team
15
It’s July 2008
May Corn
@ $8+
March Milk
@ $20 +
May SB @
$16 +
April Live
Cattle @
1.17 +
How Did Prices Get to the July
Highs? – A Perfect Storm
© 2008
Farm & Risk Management Team
17
Economics of Supply & Demand
Price
D
S
P2
P1
P0
Supply and
Demand
changes can
be short-term
shocks or
long-term
trends
Quantity
© 2008
Farm & Risk Management Team
Supply
•
Growth Rate in Productivity slowed
–
–
–
–
Impact on
Price
R & D funding down
Non-farm uses for land
Constraints on factors of production (water)
Climate Change??
© 2008
Farm & Risk Management Team
World Wheat and Course Grain
Ending Stocks
19
79
19 /80
81
19 /82
83
19 /84
85
19 /86
87
19 /88
89
19 /90
91
19 /92
93
19 /94
95
19 /96
97
19 /98
99
20 /00
01
20 /02
03
20 /04
05
20 /06
07
/0
8
500
450
400
350
300
250
200
150
100
50
0
Ending Stocks: Jul 08
Source: USDA: WASDE, June 10, 2008 Report
© 2008
Farm & Risk Management Team
Supply
•
Impact on
Price
Weather Shocks
–
–
2006
Historically, two
 Russia and Ukraine
successive years of
 Australia
lower global production
 South Africa
occurs about once per
2007
decade.
 SE Europe


Russia and Ukraine
Turkey, Australia, Argentina, etc.
© 2008
Farm & Risk Management Team
Supply
•
Change in stock holding policies
–
80’s and 90’s were an era of:



–
Impact on
Price
Surpluses
Why go through the
Stability expense of holding stocks?
Free Trade
Not a big impact, but it exacerbates impact of
any short falls
© 2008
Farm & Risk Management Team
Supply
•
Higher Oil Prices
–
Direct Affect: Higher energy costs
for transportation, drying, etc.
–
Indirect: Higher fertilizer costs and
fuel surcharges on other inputs
Impact on
Price
© 2008
Farm & Risk Management Team
Impact on
Price
© 2008
Farm & Risk Management Team
Demand
•
Population
–
Growth rate is slowing, but in absolute number
of mouths to feed the world is growing at about
75 million per year


That’s ¼ of US population per year
That’s almost 1 billion more people in next 12 years
© 2008
Farm & Risk Management Team
Where is Population Growth
7000
6000
5000
World
4000
Low & middle income
3000
East Asia & Pacific
2000
1000
0
2006
Source: World Bank Group:
© 2008
Farm & Risk Management Team
Where’s the Population
Pop. (bil)
% of World
Rank
1
2
6
9
11
World
China
6.667
1.330
India
1.148
Indonesia
.238
19.9
17.2
3.6
Bangladesh
Nigeria
.154
.138
2.3
2.1
45.1
EU
.491
U.S.
.303
Source: U.S. Bureau of Census
7.4
4.5
4
5
© 2008
Farm & Risk Management Team
Demand
•
Income
–
–
Growing at a faster rate
Growing especially in middle income countries
and in Asia
© 2008
Farm & Risk Management Team
Gross National Income per Capita
(through 2007, current US dollars)
40000
35000
30000
25000
High Income people don’t
eat more food when they get
more money – they buy
boats!
20000
High income
15000
10000
5000
0
1962 1968 1974 1980 1986 1992 1998 2004
Source: World Bank Group:
© 2008
Farm & Risk Management Team
Gross National Income per Capita
(through 2007, current US dollars)
2500
2000
With more income this
group buys food and often
more animal protein.
1500
1000
Low & middle income
500
0
1962 1969 1976 1983 1990 1997 2004
Source: World Bank Group:
© 2008
Farm & Risk Management Team
Gross National Income per Capita
(through 2007, current US dollars)
2500
2000
1500
1000
East Asia & Pacific
500
0
1962 1969 1976 1983 1990 1997 2004
Source: World Bank Group:
© 2008
Farm & Risk Management Team
31
Demand, U.S. $ Index
Impact on
Price
© 2008
Farm & Risk Management Team
U.S. Corn & SB Export Estimates
(1980-2008 MY (Sept-Aug) Thousand MT)
70,000
60,000
50,000
Corn
2008/09
Soybeans
2008/09
40,000
30,000
20,000
10,000
0
1980
1985
1990
1995
Source: USDA/FAS PS&D data
2000
2005
© 2008
Farm & Risk Management Team
U.S. Beef and Pork Exports
(1980-2008, Calendar Year, TMT)
1800
1600
1400
1200
1000
800
600
400
200
Beef
Pork
2008
2008
0
1980
1985
1990
1995
Source: USDA/FAS PS&D data
2000
2005
© 2008
Farm & Risk Management Team
Demand
•
Hedge and Index Funds
Impact on
Price
© 2008
Farm & Risk Management Team
Milk
Increased exports
Increased domestic demand
Increased input costs
35
© 2008
Farm & Risk Management Team
Impact on
Price
SUPPLY
• Productivity has slowed
• World stocks are tight: Policy
• World stocks are tight: Weather shocks
• Increasing Input Prices
• CRP and etc.
• Switch in production
Demand
• Population
• Per capita income
• US dollar decline
• Oil prices (ethanol demand)
• Hedge and Index Funds
• Price of other goods
In July Prices Were the Result of
A Perfect Storm
© 2008
Farm & Risk Management Team
38
It’s Not July
Anymore
World Wheat and Course Grain
Ending Stocks
19
79
19 /80
81
19 /82
83
19 /84
85
19 /86
87
19 /88
89
19 /90
91
19 /92
93
19 /94
95
19 /96
97
19 /98
99
20 /00
01
20 /02
03
20 /04
05
20 /06
07
/0
8
500
450
400
350
300
250
200
150
100
50
0
Ending Stocks: Jul 08
Source: USDA, WASDE, March 11, 2009
ES: Mar 09
© 2008
Farm & Risk Management Team
Demand, U.S. $ Index
© 2008
Farm & Risk Management Team
U.S. Corn and Soybean Exports
(1980-2008 MY (Sept-Aug) Thousand MT)
70,000
60,000
50,000
Corn
2008/09
Soybeans
2008/09
40,000
30,000
20,000
10,000
0
1980
1985
1990
1995
Source: USDA/FAS PS&D data
2000
2005
© 2008
Farm & Risk Management Team
© 2008
Farm & Risk Management Team
43
Anything Else Happen Since July?
•
•
•
•
•
•
•
A Dow that fell and rose by record levels
A potential world-wide financial collapse
A $700 billion dollar bailout – Twice
Similar actions by other countries
Favre played for the Jets and retired again
Cardinals played in the Super Bowl
Taxpayers paying bonuses to AIG Execs.
© 2008
Farm & Risk Management Team
It’s Not July Anymore
May Corn
@ $8+
Now $4.01
March Milk
@ $20 +
Now $10.49
45
Mar SB @
$16 +
Now $9.65
April Live Cattle
@ 1.17 +
Now $.86
46
Input Prices
Pre Meltdown
Before
Thanksgiving
Anhydrous
$1,000/ton
DAP
1,000/ton
Potash
$900/ton
Triple Stack
$275/bag
Crude Oil
$144/b
Post Meltdown
After
Thanksgiving
$600
$800
$600
$210
$44/b
Source: University of Illinois Extension
© 2008
Farm & Risk Management Team
47
We could assess the fundamentals of
S&D
•
•
•
•
•
•
•
•
•
•
•
•
Grain Production: world
World stocks: Policy
World stocks:
Input Prices
CRP release
Switch in production
U.S.
I Don’t Know
and I Don’t
Trust My
Guess
Population
Per capita income
China’s growth ???
US dollar ( US Exports)
Oil prices (ethanol demand) ????
Hedge and Index Funds
© 2008
Farm & Risk Management Team
49
Price Outlook
Corn
SB
Milk
Live
Cattle
Hogs
2008/09
2009/2010
3.90-4.30
USDA-WASDE, 3/11/09
4.15
3.85-4.70 AgMRC, US weight Avg
3.50
3.40-4.40 Central IA harvest price
8.85-9.85
USDA-WASDE, 3/11/09
9.35
7.50-9.40 AgMRC, US weight Avg
7.35
7.00-8.75
“ Central IA harvest price
11.25-11.85
USDA-WASDE
.84-.89
USDA-WASDE
.45-.48
USDA-WASDE
© 2008
Farm & Risk Management Team
Nominal Corn Prices
(Future Range Based on Average of Prior Periods)
6
5.24
5
4.13
4
3.14
3
2
1
0
1860
1880
1900
1920
1940
1960
1980
2000
2020
2040
© 2008
Farm & Risk Management Team
Nominal Corn Prices
Ranges based on all data recent and all periods and no outliers
all periods and recent
8
7
6.70
6.32
6
5
4
4.86
4.42
5.26
4.13
4.21
4.01
3.14
3
2
5.24
4.63
3.31
4.60
3.00
2.25
1
0
© 2008
Farm & Risk Management Team
Class III Prices – 1988-Jan 2009
Class III/BFP Prices
22
20
18
16
14
12
10
8
Jan-88
Jan-93
1988-Aug 98
Jan-98
Sep 98-Feb 04
Jan-03
Jan-08
Mar 04-Dec 08
© 2008
Farm & Risk Management Team
54
Futures Prices in Context
22
21
20
19
18
17
16
15
14
13
12
11
Ja
n
Fe
b
M
ar
Ap
r
M
ay
Ju
n
Ju
l
Au
g
Se
p
O
ct
No
v
De
c
C-III/BFP Price
(Comparison of Feb 7 to Sept. 14, 2007)
Average
1996-2006 data
75 %tile
(2/7) 2007
Futures
(9/14) 2007
Anncd &
Futures
© 2008
Farm & Risk Management Team
55
Source: Market Harmonics: http://www.marketharmonics.com/free-charts/sentiment/consumer_confidence.htm
© 2008
Farm & Risk Management Team
56
Quote by Lynn Franco, Director of the Conference Board’s
Consumer Research Center
•
“All in all, not only do consumers feel
overall economic conditions have grown
more dire, but just as disconcerting, they
anticipate no improvement in conditions for
the next six months”
Source of Quote: March 2009 Iowa Farm Outlook,
Iowa State University
© 2008
Farm & Risk Management Team
rd
23
Darrel Good, March
Weekly
Outlook, Univ. of Il Extension
•
57
Much of last week’s rally in prices was
associated with higher energy prices, a rally
in financial markets, and a weaker U.S.
dollar. These markets, in turn, were
influenced by U.S. monetary policy that
ignited expectations of an upcoming period
of rapid inflation in the U.S. economy.
© 2008
Farm & Risk Management Team
58
Think Counter Cyclically
•
When everything is going swell, what is
often the next thing that happens?
•
When everything is rotten, what is often the
next thing that happens?
© 2008
Farm & Risk Management Team
59
Greater Volatility of output prices
Greater Volatility of input prices
Greater Volatility of profit margins
Why?
60
Continued Globalization
We’ve Hitched Ourselves to the
Oil Train Oil’s Volatility As Well
61
62
Ethanol, A Fundamental Change
2008-09
14
11
44
Feed & Residual
Ethanol
Food, Industrial, and seed
Exports
30
© 2008
Farm & Risk Management Team
63
Implications?
Management
Matters
64
Return to Management and Labor
19,000
21,000
23,000
(123,977)
(103,977)
Production
Matters
25,000
10
(143,977)
11
(124,977)
12
(105,977)
13
(86,977)
(60,977)
(34,977)
(8,977)
14
(67,977)
(39,977)
(11,977)
16,023
15
(48,977)
(18,977)
11,023
41,023
16
(29,977)
2,023
34,023
66,023
17
(10,977)
23,023
57,023
91,023
18
8,023
44,023
80,023
116,023
(102,977)
(83,977)
(80,977)
(58,977)
(81,977)
(57,977)
Price
Matters
(33,977)
$137 hay, $4.00 corn, $300 SBM
Cost Increase For Inputs 2003 - 2007 (USDA-NASS)
65
% Increase % Increase % Increase % Increase
INPUT TYPE
for Period
per Year 2/07 to 2/08 9/07 to 9/08
Fertilizer
67%
13.40%
39%
131%
Chemicals
8%
1.60%
8%
19%
Fuels
99%
19.80%
35%
37%
Seed
33%
6.62%
13%
30%
Supplies and Repairs
15%
3.08%
Autos and Trucks
0%
0.00%
Farm Machinery
25%
5.03%
Building Materials
25%
5.00%
Farm Services
17%
3.36%
Rent
23%
4.55%
Wage Rates
20%
4.00%
Family Living
13%
2.65%
66
Increase in Feed Costs
Decrease in Feed Costs
-15%
10
11
12
13
14
15
16
17
18
-10%
-5%
23,000
Avg
5%
10%
15%
Input Costs Matter
(85,938) (93,206) (101,166) (109,923) (119,117) (128,311) (137,505)
(62,938) (70,206) (78,166)
(86,923)
(96,117)
(105,311) (114,505)
(39,938) (47,206) (55,166)
(63,923)
(73,117)
(82,311)
(91,505)
(16,938) (24,206) (32,166)
(40,923)
(50,117)
(59,311)
(68,505)
6,062
(1,206)
(9,166)
(17,923)
(27,117)
(36,311)
(45,505)
29,062
21,794
13,834
5,077
(4,117)
(13,311)
(22,505)
52,062
44,794
36,834
28,077
18,883
9,689
495
75,062
67,794
59,834
51,077
41,883
32,689
23,495
98,062
90,794
82,834
74,077
64,883
55,689
46,495
67
Corn Enterprise Budget
160 bu/ac yield
400 acres
$162/ac fertilizer
$205 cash rent
$4.32/bu cost
$691/ac cost
2.50
3.00
3.25
3.50
3.75
4.00
4.25
4.50
4.75
5.00
5.50
6.00
-15%
At Budget
160
160
-91,991 -116,645
-59,991
-84,645
-43,991
-68,645
-27,991
-52,645
-11,991
-36,645
4,009
-20,645
20,009
-4,645
36,009
11,355
52,009
27,355
68,009
43,355
100,009
75,355
132,009
107,355
15%
160
-141,300
-109,300
-93,300
-77,300
-61,300
-45,300
-29,300
-13,300
2,700
18,700
50,700
82,700
68
Management Matters
•
•
110 MN and WI farms, 500-1,500 acres
Average of 2006 and 2007
Net Ret.
Bottom
20%
20-40% 40-60% 60-80% Top 20%
7,737
22,232 52,427 39,856 110,988
Acres
340
308
407
237
416
Yield
164
165
178
174
183
Direct
Exp.
385
387
392
376
372
© 2008
Farm & Risk Management Team
Dairy Enterprise ($/cow) 1996-2007
(101-200 cows, no org. or RG, MN&WI)
180000
160000
140000
120000
20 %-tile
50 %-tile
80 %-tile
100000
80000
60000
40000
20000
0
Net Return to Mgt/Labor
Source: Center For Farm Financial Mgt.
© 2008
Farm & Risk Management Team
70
•
Swings between high, low, and zero profit
margins will be
–
–
–
•
•
Greater
More often
More dependent on timing
Need for greater cash management
Changing/tighter purchase policies
71
•
•
•
•
Increased lender requirements,
documentation, and verification
Heterogeneity
Opportunities!!!
Marketing Psychiatrist
Which Type of Marketer
Are You?
Cool!
I’m getting a
great return
on my
investment
#@%$^&
I lost
$3.25!!!
Both
Forward
Contracted
for $18.00
Top Price
Was $21.25
72
73
No Silver Bullet
© 2008
Farm & Risk Management Team
74
•
Look Backwards - Meticulous Attention to
Financials
–
–
Have a farm records system
Use the farm records system!

–
–
–
Know your costs of production, Know your margin
Know “at risk” versus “secured” costs
Sensitivity analysis
Prepare accurate financial statements
AND
Use them to evaluate your profit blueprint.
75
•
Look Forwards:
–
–
Business Planning: Plan, Execute, Set Metrics, and
Control
Cash Flow/Enterprise Budgets


Plan your production, plan your cash flow, communicate
your plan, work your plan
Evaluate sensitivity
76
•
Develop Your Team
–
Kitchen Cabinet of advisors

–
Be Interdependent vs Independent


–
–
Lender, Extension agent, broker, agronomist, nutritionist
Aligned/Cooperative Business Structures
Value-added vertical businesses
Good and well trained employees are an investment
not a cost.
Good teams have Excellent and Transparent
Communications
77
•
Diversification & Specialization
–
–
•
Diversify: Inputs, enterprises, market and risk
management
Specialize: Be the best, most profitable
Know what makes you money
–
Partial budgeting: production practices and inputs
78
Partial Budgeting
Additional Costs
Additional Revenues
Reduced or Lost
Revenues
Reduced or Eliminated
Costs
Dollars Lost =________ Dollars Gained = _____
© 2008
Farm & Risk Management Team
79
•
Know and use marketing tools and
strategies

Remember, It’s the Margin That Counts
•
Farm Programs
•
Insurance Instruments
–
–
LGM-Dairy, Crop insurance
Levels of coverage
80
•
Strategies for Down Times
–
–
–
–
–
–
Flexible Lease Arrangements
Defer Capital Expenditures
Defer Income Taxes
Refinance long-term obligations
Borrowing against Equity capital, but with planned
repayment
Compare financing rates

Careful: one needs committed friends in down times
Source: Edwards, William. “Managing through a recession: options for
farm operators. Ag Decision Maker, Iowa State Extension
81
Three Ways to Navigate 2009
1.
Manage Your Profit Margin



2.
Develop Your Team

3.
Know your costs of production
Know your marketing
Know your financial metrics
Be interdependent not independent
Think Counter Cyclically

Discipline yourself to business decisions
© 2008
Farm & Risk Management Team
82
Said Another Way
•
Each morning you wake up, think what you
can do that day to be a good steward of:
People
Budget
Vision
© 2008
Farm & Risk Management Team
83
The
End
Sources: Websites
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•
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The Oil Drum: http://www.theoildrum.com/story/2006/10/5/215316/408
Association for the Study of Peak Oil: http://aspo-usa.com/
Oil Market Report: http://omrpublic.iea.org/
Now and Future: http://www.nowandfutures.com/index.html
WTRG Economics: http://www.wtrg.com/
World Bank Group: http://ddp-ext.worldbank.org/ext/DDPQQ/member.do?method=getMembers
Farm Foundation: http://www.farmfoundation.org/
USDA Economic Research Service: http://www.ers.usda.gov/
Trading Charts, Inc: http://futures.tradingcharts.com/
CHOICES: http://www.choicesmagazine.org/magazine/issue.php
Foreign Agricultural Service: http://www.fas.usda.gov/default.asp
University of Illinois Farmdoc website: http://www.farmdoc.uiuc.edu//
Iowa State University Ag Decision Maker: http://www.extension.iastate.edu/agdm/
Iowa State Farm Outlook: http://www.econ.iastate.edu/outreach/agriculture/periodicals/ifo/
Iowa State Univ. Current Outlook Info.: http://www.extension.iastate.edu/agdm/info/outlook.html
University of Wisconsin, Center for Dairy Profitability: http://cdp.wisc.edu/
University of Minnesota Center for Farm Financial Management: http://www.finbin.umn.edu/
© 2008
Farm & Risk Management Team
Sources: Written Articles
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Global Agricultural Supply and Demand: Factors Contributing to the Recent Increase in Food
Commodity Prices. USDA/ERS, July 2008. http://www.ers.usda.gov/Publications/WRS0801/
Bahn, Henry. “Commodity Prices Rock World Markets: Structural Shift or Short Term
Adjustments?” Choices, AAEA, 2nd qrt 2008 23(2).
http://www.choicesmagazine.org/magazine/issue.php
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Westhoff, Pat. “Farm Commodity Prices: Why the Boom and What Happens Now?” Choices, AAEA, 2nd qrt
2008 23(2).
Lawrence, John D., James Mintert, John D. Anderson, and David P. Anderson. “Feed Grains and Livestock:
Impacts on Meat Supplies and Prices.” Choices, AAEA, 2nd qrt 2008 23(2).
Irwin, Scott H., Philip Garcia, Darrel L. Good and Eugene L. Kunda. “Recent Convergence Performance of
CBOT Corn, Soybean, and Wheat Futures Contracts.” Choices, AAEA, 2nd qrt 2008 23(2).
Mark, Darrell R., B. Wade Brorsen, Kim B. Anderson, and Rebecca M. Small. “Price Risk Management
Alternatives for Farmers in the Absence of Forward Contracts with Grain Merchants.” Choices, AAEA, 2nd
qrt 2008 23(2).
Abbott, Philip C., Christopher Hurt, and Wallace E. Tyner. “What’s Driving Food Prices?” Issue
Report from the Farm Foundation, July 2008.
http://www.farmfoundation.org/news/templates/template.aspx?articleid=404&zoneid=26
Fortenbery, T. Randall and Hwanil Park. “The Effect of Ethanol Production on the U.S. National
Corn Price.” Univ. of WI-Madison Dept. of Ag and Applied Econ: Staff Paper no. 523, April 2008.
© 2008
Farm & Risk Management Team
Sources: Written Articles
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Irwin, Scott. “Crop value and volatility in a new era” 2008 Illinois Farm Economics Summit,
http://www.farmdoc.uiuc.edu//presentations/index.asp .
Schnitkey, Gary. “Prospects for Crop Production Costs” 2008 Illinois Farm Economics Summit,
http://www.farmdoc.uiuc.edu//presentations/index.asp .
Schnitkey, Gary. “Farm Economics Facts & Opinions”, Department of Agricultural and Consumer
Economics, College of Agricultural, Consumer, and Environmental Sciencds, university of Illinois at
Urbana-Shampaign, FEFO 08-13, July 11, 2008.
Duffy, Michael, and Darnell Smith. “Estimated Costs of Crop Production in Iowa- 2009,” Ag
Decision Maker, Iowa State University, University Extension, FM-1712 Revised, December 2008.
Duffy, Mike. “Estimating costs of crop production for 2009,” Ag Decision Maker Newsletter, Iowa
State University, University Extension, January 2009
© 2008
Farm & Risk Management Team
Sources: Other
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Extension Outlook Conference, Kansas
City, Aug 18-19, 2008.
Fortenbery, Randy. Presentation to WI Ag
Consultants, March 2008.
© 2008
Farm & Risk Management Team
Corn Enterprise ($/acre) 1996-2007
(cash rent,1,001-1,500 ac, MN&WI)
700
600
500
Gross Revenue
Direct Exp
Overhead
Govt Pmt
Unpaid Labor & Mgt
400
300
200
100
20
08
20
06
20
04
20
02
20
00
19
96
0
Source: Center For Farm Financial Mgt.
© 2008
Farm & Risk Management Team
Standard Deviation, 1996-2007
140
120
100
80
60
40
20
0
Govt.
Pmts
Overhead
Labor & Direct Exp
Gross
Mgt
Revenue
Source: Center For Farm Financial Mgt.
© 2008
Farm & Risk Management Team
Direct Corn Expenses, 2007
14.5
27.1
5.1
5.6
5.6
5.6
Seed
Chemical
Crop Ins
Repairs
Op. Interest
All Else
Land Rent
Fert + Fuel/Oil
3.9
32.9
Source: Center For Farm Financial Mgt.
© 2008
Farm & Risk Management Team
Standard Deviation, 1996-2007
25
20
15
10
5
Se
ed
C
he
m
ic
al
C
ro
p
In
s.
R
ep
ai
rs
O
p.
In
La
nd t.
R
en
A
t
ll
O
Fe
th
rt,
er
Fu
el
/O
il
0
Source: Center For Farm Financial Mgt.
© 2008
Farm & Risk Management Team
Direct Expenses, % by Type, 2007
5.2
5.2
6.5
4
2
2.3
0.9
7.8
66.1
Source: Center For Farm Financial Mgt.
Vet
Supplies
Repairs
Fuel/Oil
Breeding
Bedding
Op. Interest
All Else
Feed Costs
© 2008
Farm & Risk Management Team
Standard Deviation, 1996-2007
25
20
15
10
5
0
Vet
Repair
Breeding
Op. Int.
Source: Center For Farm Financial Mgt.
Marketing
© 2008
Farm & Risk Management Team