What’s in your toolkit?
Once again, the January USDA crop report contained a few surprises which is typically the case as it attempts to finalize the size of crops which were just harvested plus provide an estimate of overall supply and demand for the upcoming year. Keep in mind, all of the numbers are based on projections and estimates but they are usually traded as factual numbers which can sometimes lead to volatile market moves. By the time you read this, much of the data has been already been thoroughly discussed and digested by the grain markets.
Although the January crop report is a “best guess” as to the supply and demand projections for the upcoming year, it does provide some baseline numbers to use in putting together your cropping plans. These projections are one of the “tools” needed to develop a budget for the next production cycle. Another critical step involves gathering input prices for seed, fertilizer, and chemical. Once these main ingredients have been collected, it’s time to start building a few projections. This can be done with paper and pencil but I would highly recommend visiting our web-site, www.SDCFRM.com, and checking out the FBM Toolkits.
Once you reach the web-site, please scroll down to the bottom of the page where you will find three areas of “Tools”: Crops, Livestock, and Financial. I think one of the best features of the crop worksheets is the ability to compare four different scenarios and see the results on one page. For instance, you can input your APH yield and run projections with three or four different price projections. I also find it interesting to keep the crop price the same and run three different yield projections such as low, average, and high. The crop toolkit includes worksheets for alfalfa, corn, oats, soybeans, spring wheat, and winter wheat.
The crop toolkit worksheet also provides actual data from our most recent Annual Report. This information is especially useful in estimating overhead costs in case you are not tracking those numbers on your own operation. In addition, these projections also provide good information when deciding the best level of crop insurance. I would also like to mention that similar worksheets are available for a variety of livestock enterprises as well as overall income/expense budgets and cash flows. Once you become more experienced with using these tools, I think you will have a better handle on your overall operation and find it much easier to visit with your lender about your financing needs as well.
Given the recent volatility in livestock prices, a base-line budget to determine break-even levels is the most important step in managing the risk associated with feeding animals. There are a variety of toolkits available which allow for viewing the results of three different scenario’s on one page. Although no one can predict future prices, it is relatively easy to project possible outcomes.
If you would like more information on this topic or need help navigating our web-site, please contact me at either 1-605-299-6760 or Kathy.Meland@mitchell tech.edu.