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Ag speakers talk about farm costs

By Staff | Dec 10, 2015

Kelvin Leibold, foreground, an Iowa State University Extension farm management specialist, refers to a Powerpoint slide Wednesday while addressing farmers about the current farm cash flow crisis during the 14th annual Farm News Ag Show at the East Campus of Iowa Central Community College.



FORT?DODGE – No one greeted Kelvin Leibold’s message with smiles.

Leibold, an Iowa State University Extension farm management specialist, outlined for a Dec. 2 audience of 50 farmers what has caused the current cash flow crisis, what cures are needed and offered a few tips in how they can maneuver through low commodity margins.

In the end, he recommended cutting away unaffordable rented acres, reducing a farm’s size if necessary, reworking family living expenses and getting or keeping off-farm incomes.

In the long term, he said, the expanding world’s population will require the excessive grain crops farmers have, and prices will rebound.

But, until then, farmers need to hang on, know how much each part of the farm is costing and control those expenses.

Ron Egertsen, a Laurens-area farmer, said he hoped Leibold was correct that, in time, the issue will be resolved.

“But it better be soon,” he said.

Leibold and Dr. Mark Hanna, an ISU Extension ag engineer, were the first two speakers of the two-day 14th annual Farm News Ag Show.

Easily managed

Hanna said energy costs is fourth down the list of a farm’s expenses, but added it’s the most responsive and easily managed than other expenses.

He identified, from studies of diesel usage on ISU’s research farms, that strip-tilling, followed by chisel plowing and planting were the three major fuel usage functions in farm fields.

He suggested, among other things, to shift tractors into higher gears at lower throttle rates to save fuel consumption.

Reducing tillage when possible is one big savings.

“Your no-till neighbors already have a 2- to 2.5-gallon head start on you,” Hanna said.

Hanna offered five fuel usage changes and showed the average anticipated savings on row-cropping 1,000 acres based on $2.50 per gallon diesel to cut costs by $4,600 to $8,000 annually. These are:

  • Limited tillage ($1,900 to $3,800).
  • Use proper transmission gear ($750 to $1,800).
  • Use front-wheel drive ($900 to $1,300).
  • Tractor selection ($700).
  • Keeping engine maintenance updated ($350).

“It’s money out there to be picked up,” Hanna said.

Cash flowing

Leibold said what’s draining farmers’ cash is a number of pressures including flat-lined government payments, low commodity prices, production costs and rental rates that are now following the income drop, a strong dollar that has whittled export volumes.

For ag commodities, Leibold said, “The U.S. is the most expensive place to go shopping.”

Leibold said landlords have told him they see no reason to drop their rates by 25 percent, if the ag companies that supply seed, fertilizer and chemicals don’t drop their prices as well.

“When you go in to negotiate,” he told farmers, “have a price in mind that will work.” If what’s offered is not workable, “walk away from it.”

In the long-term, Leibold said he thinks as a new fertilizer plant in Lee County comes online within the next few years, and microbial crop advances will equate to higher yields, and the world chews through the vast supply of commodity grains, profitability will return in corn and soybeans.

“A third golden era of farming is looming,” Leibold said. “People are living longer and there will be more people to feed.

“Until then, you need to hunker down and work expenses.”

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