At this point, it looks like it is going to take a very good manager to find a way to make a profit farming in 2017. Robert Craven, Professor of Applied economics at the University of Minnesota, says producers fall into two main groups: high cost producers and low cost producers. He said in 2017 it is going to be easier for the low cost producers to be profitable, “Between the high cost producer and the low cost producer, there is about a $189.00 per acre difference. When you divide that by the number of bushels, it gets to be a very significant number.” He said, while there are other factors that play a role, cost control is a major factor in determining profitability.
Craven said, given current price levels, it looks like soybean producers will stand a better chance of being profitable in 2017 than corn growers, “A little over $10.00 is a break even for low cost soybean producers while for corn in 2017 it is about $4.10 to $4.25 to cover expenses and family living costs.” Currently soybean prices are well over $10.00, while corn is only in the $3.50 range.
He stressed that marketing will play key role in determining profits at the end of the year. He urges producers to know their break even point and be ready to act quickly when the market gives a chance to lock in profit. “Many of us had the chance to come close to break even on our 2016 crop way back in the spring when corn got over the $4.00 mark,” he stated. “So there are some opportunities, you just have to know your numbers and be positions to take advantages of those things when the occur.” Craven made his presentation to the American Ag Bankers convention held in Indianapolis.
He added that reducing land costs will also be a key to putting black ink on the bottom line. When asked if the high cost producer can survive this extended period of low prices, he said it depends on what kind of financial shape they were in when the downturn started as well as how long it lasts.