A large crowd of enthusiastic farmers from 23 states made the journey to St. Louis last week to hear great sessions and network with other farmers at the Farm Futures Business Summit. Hot topics of the day: crop budgets, land prices, succession planning, belt-tightening and the outlook for corn and soybean plantings.
Mostly, we talked, listened… and learned – the key to success in business today. If there is one thing I've learned about farmers who attend the summit each year, it is that they want to improve the way they make decisions. They want to push their businesses to new levels. And they know they can't do any of that by simply farming 'the way dad did.'
So what did we learn? That it is possible to put together a farm transition plan and make it work for the younger generation…but you really need to start planning now. We learned how to strengthen landlord relationships - very important if you rely on cash rent. According to University of Minnesota economist Bob Craven, you'll need a sale price of $4.75 per bu. and yields at 200 bu. per acre to make money on $300 per acre cash rent this year. We learned why it's good to be good: the top third of farmers in the Illinois Farm Business Farm Management association are spending $47 per acre less than the bottom third on inputs. And, they spend $15 per acre less on machinery.
It was no surprise that belt-tightening was a common theme. But we also heard economic forecasts that could bring some strength back to grain prices. Deere & Co. Chief Economist J.B. Penn noted that the world now consumes 550 million more tons of grain than it did in 2000.
Corn and soybean farmers lived well these past few years, and family living, equipment and land costs all grew at alarming levels. Some folks were paying $500 an acre to grow corn and soybeans in Iowa last year. Uh, they paid that much just for one year. Mind-blowing.
Those fat years did give us time to develop farm strategies, as Purdue economist Mike Boehlje noted at the summit. Now, it's time to execute those strategies and become not just a low cost producer but someone who is best-in-class at whatever strategy you focus on.
"Over the next two to three years you need to get down in the weeds and make darn sure you are doing everything the right way," he adds.
How do you execute a lower cost structure in your business? You need to know your cost components per unit sold. Given expected yields, do you know what that number is?
"I don't know any other business that does not know the cost of unit sold," says Boehlje. "Grain farmers tend to think in costs per acre. But you don't sell acres, you sell bushels." Find out the important costs in your operation and, if possible, shed the others.
We want to thank all the speakers and attendees who made the summit, and Ag Financial Boot Camp, a success.
As the summit proved once again, those who succeed in this game are lifelong learners. They refuse to follow the coffee shop crowd. They think for themselves. They analyze their options and get feedback from several corners before making a decision.
It's the right way to do business.