Spend Smart: 7 Key Inputs & How You Can Maximize Them
When Michael Boehlje was 8 years old, he accompanied his dad to the local sale barn to buy feeder cattle.
“He had a little black book that he’d look at when he was bidding on cattle,” says the Purdue University agricultural economist. “Sometimes he would buy cattle, and sometimes he would not. As an 8-year-old kid, that didn’t seem very successful to me. So on the way home, I asked him what was in his little black book. He told me that every day before he went to the cattle auction, he calculated what it would cost him to feed the cattle and how much he could pay for them.”
If the bid price didn’t cross that line, he bought feeder cattle. If it did, he passed.
Boehlje thinks this strategy has merit for grain farmers.
“People who make money in the cattle industry buy cattle right,” says Boehlje. “If you pay too much for cattle, it’s rare to offset that high price at selling time. The most important decision is not at what price you sell your product. It is what you pay for inputs.”
That’s not an easy task, considering the current environment. Although corn and soybean prices are about one half of 2012 levels, input prices are budging little.
At least they’re staying stable. Over the last decade, the average annual increase in agricultural inputs has been over 6% annually, says Michael Langmeier, Purdue University Extension agricultural economist. Compounded annually, that’s a 79% increase over 10 years. That’s higher than the normal 3% annual uptick in input prices over the last 40 years.
“We won’t see an increase in input prices like there has been in the last 10 years,” says Langmeier.
Unlike trying to outguess grain markets, you do have some control over inputs.
“At least you can compare prices,” says Boehlje. “When you pay too much for cash rent, fertilizer, and equipment, you automatically set up a cost structure where you are in an uncompetitive position."
Farmers can also match grain sales with input buys.
“When you buy $20,000 worth of inputs, sell $20,000 worth of grain,” says Boehlje. “Make a cash match. A lot of people don’t want to think about the cost side of business, but it’s key.”
You’re likely hitting stiff headwinds in land-rental negotiations this winter. When margins tighten, land rents are often the last input to fall.
“The philosophy of the landowner is, ‘Why should we drop prices when seed and fertilizer companies have not? They have made substantial profits, so why shouldn’t the landowner?’” says Neil Mason, who farms with family members, including his grandson, Steve, near Early, Iowa.
Cash rent is king when it comes to rental agreements. Still, some farmers like Mason continue to farm a share of their land under crop-share agreements. “It brings stability to both the renter and the landowner,” he says. He says these agreements allow both parties to share in good times and jointly endure tighter times.
Buying land is another land-procurement option. Average land values in Iowa declined 8.9% from 2013 to 2014. Still, the 2014 average land value in Iowa is the third-highest level in history.
“Land values go down, but it takes adverse economic conditions to force a strong downward correction,” says Craig Dobbins, a Purdue University agricultural economist. “It doesn’t look like we are going to have a real strong crash.”
In the meantime, be careful. Michael Boehlje, Purdue University agricultural economist, points to a $20,000-plus per-acre 2014 land sale in Iowa in the face of $4-per-bushel (or less) corn. “With $4 corn and 200-bushel-per-acre yields, you have nothing left for anything else,” says Boehlje. "You have locked yourself into being a high-cost producer. Forever.”
Gatherings of deer hunters following the hunting season are filled with wide-extended arms mimicking bucks with racks “this big.”
Some tales are true; some are not so true.
It’s akin to farmers telling about gleaning equal or better yields from conventional hybrids compared with traited ones. Some testimonies are true, particularly in the absence of pest pressure; others are not.
“You often hear about conventional corn yielding as well as traited corn,” says Jeff Anderson, a Webster City, Iowa, farmer and seed dealer who farms with his son, Jesse. “I guarantee that you never hear stories about how farmers lost 15 to 20 bushels per acre or more in fields with heavy corn rootworm pressure because they didn’t have the rootworm trait.”
Remember that as you finalize your seed lineup for 2015 and beyond. The harsh winter of 2013-2014 and soggy spring of 2014 blitzed corn rootworm populations last year. Don’t count on a repeat.
Balmy temperatures through parts of this winter will aid corn rootworm egg survival into spring. If favorable growing conditions result, corn rootworm could return with a vengeance. In most areas, a properly stewarded rootworm-resistant trait is still an attractive rootworm-management option.
“Traits are there to protect your investment,” says Anderson.
Granted, you pay more for protection with traits. Remember, though, that price is just one part of the equation. Performance is the other.
“When it comes to seed, I don’t look at price much, to be honest,” says Dan Arkels, a Peru, Illinois, farmer. “The most expensive genetics are usually the latest numbers they just come out with. If they yield more, that is worth the extra dollars per unit of seed.”
Arkels examines yield data that his seed companies supply him with, and he also researches hybrids and varieties on his own. Still, he puts a lot of trust in his seed dealers.
“I rely heavily on dealers for my recommendations,” he says. “I have been working with the same seed dealers for 25 to 30 years, so I have lots of trust in them.”
It’s important to weigh product performance across different environments, too, to assess performance on your farm. “Look at multiple years and multiple locations,” says Scott Erickson, Syngenta soybean genetics portfolio manager.
For the most part, seed prices haven’t declined from previous years for 2015. Still, they haven’t risen, either. You can glean some deals by shopping around and buying in bulk. Be careful, though, not to wait too long.
“I tell growers to shop around and research options,” says Eric Boersma, Syngenta corn product manager. “They need to realize if they wait too long, though, they may not be able to select the top hybrids for their fields.”
Fungicide applications paid in high-disease areas last year.
“We saw a 20- to 40-bushel-per-acre difference due to fungicides,” says Chris Clark, a Syngenta seed adviser in Ida Grove, Iowa. “We had high levels of northern corn leaf blight due to higher-than-normal rainfall patterns. We also had a new disease called physoderma brown spot pop up. The high humidity levels were like an incubator for disease pressure.”
In these cases, fungicide applications more than covered the application expense.
“Those who didn’t spray last summer at the onset of leaf diseases paid the price of 35 to 40 bushels per acre,” says Iowa farmer and seed dealer Jeff Anderson. A fungicide application costing farmers around $28 per acre would have nixed this loss, he adds.
Fungicide response can be hybrid-specific,” says Clark. “There seem to be certain hybrids or genetic families that are more responsive to fungicides.”
Physiological responses – trademarked by BASF as Plant Health and termed as Plant Performance by Syngenta – also occur.
Illinois farmer Dan Arkels credits a 2013 trial he conducted in which he sprayed three times (at V10, at tasseling, and at brown silk), and it yielded 319 bushels per acre.
“It would have stayed green all winter if I had left it there,” he says. “It was the healthiest field of corn I have had in 35 years of farming.”
Responses also occurred in soybeans. “I’ve found that soybeans respond better to fungicides than corn,” says Iowa farmer Neil Mason. “For some reason, they just react better to the fungicide and response is more predictable.”
Still, fungal disease matters most when it comes to application success, says Daren Mueller, Iowa State University Extension plant pathologist. “There is a greater yield response when disease severity in plants is greater than 5% than when disease is under that level,” he says.
Mueller says plant physiological reactions can tilt the odds in favor of a favorable fungicide application response.
“We certainly see it,” he says. “It is difficult to identify conditions under which this phenomenon occurs, however. Response is less consistent than when there is disease in the field.”
Repeated applications can also set the stage for resistant fungi down the road. The factors that drive fungicide resistance are the same that build up resistance to other pest-control measures; specifically, the repeated use of the same control measure time after time, he says. Soybean frogeye leafspot fungi that resist strobilurin fungicides have surfaced in 10 states since 2010.
In this case, steps to forestall resistance include planting resistant varieties and rotating to other crops. Mueller advises applying fungicide premixes with dual modes of action.
“Don’t let this lull you into a false security,” he cautions. “Rates may be reduced in premixes.” This can compromise control under heavy disease pressure, he adds.
It’s a buyer’s market for machinery these days. After some great years, machinery sales have slowed.
For example, the Association of Equipment Manufacturers reports that +100-hp. tractor sales dipped 12.4% from November 2013 to November 2014, with four-wheel-drive tractors declining 22.8%. Meanwhile, self-propelled combine sales declined 23.7% during the same time frame.
“Farmers bought a lot of machinery in the past few years,” says Michael Langmeier, a Purdue University agricultural economist. “It will be a pretty tough time for machinery manufacturers over the next two to three years, however. Historically, in times of low returns, machinery doesn’t hold its value very well.”
Dealers will give prices “you have never seen on used equipment,” says Purdue ag economist Michael Boehlje. “You will go home and say, ‘I have never been able to buy a combine that cheap.’ ”
Still, be careful. “Make sure you don’t destroy your working capital trying to get that good deal,” cautions Boehlje.
Farmers typically don’t monitor asset turnover or how many dollars they generate from assets. Custom work or joint machinery ventures are ways to boost it, says Boehlje. Short-term operating leases are other ways to increase asset turnover, as it lowers cash investment.
An objection to sharing machinery is when two farmers would simultaneously need the implement. One way to work around this is to take a page from the wheat industry, Boehlje says. “They start combining in Texas and go north,” he says.
Arrangements like this can enable two farmers growing similar crops in two diverse geographic areas to share the implement.
“When you get twice the acreage on the same machine, costs go down,” he says.
Every year, companies touting corn and soybean herbicides entice farmers to apply their newest wares.
One catch: They may not be new. No corn and soybean herbicide with a new mode of action has been commercialized since the late 1990s. Nor is there one ready to hit the market soon. That means you’re left to wrestle with the plethora of herbicide-resistant weeds lurking in fields with older products.
The good news is you do have plenty of options. One area it will pay to spend money in 2015 and beyond is on a residual preemergence herbicide that controls major problem weeds. They cost $20 per acre or more per pass. Still, yield losses incurred by weeds cost much more.
In 2011, University of Tennessee weed scientists pegged weed competition as routinely clipping 17% of 35-bushel-per-acre soybeans. At nearly 6 bushels lost at $9, a $54-per-acre yield loss results.
Although a preemergence product can’t totally nix weeds, it can take the heat off later postemergence applications.
“The length of residual control in corn and soybeans usually lasts 28 to 35 days,” says Eric Ott, Valent field market development specialist.
As you buy herbicides, you’ll likely be bombarded with a host of premix options. Look closely at the label, says Mike Owen, Iowa State University Extension weed specialist. Premixes contain several compounds that may or may not be effective on your fields’ weeds.
Check herbicide rates within the premixes, too. Premix rates of each herbicide are often lower than stand-alone herbicide rates. That’s done to make the premix cost competitive, says Owen.
“The biggest problem with lower rates (in premixes) is the lack of immediate and consistent control,” says Owen. “A full rate of herbicide may give you two of more weeks of control, compared with a reduced rate typically found in premixes. In certain fields that have high weed pressure, add the herbicide that will provide the longer residual control.”
Cover crops are hot. Claims include reduced erosion, weed-control assistance, and the ability to scavenge leftover nitrogen.
Still, the majority of farmers are not planting cover crops. Why?
“The top objection is that cover crops often make planting more challenging,” says Newell Kitchen, a USDA-ARS soil scientist based in Columbia, Missouri. “Another reason is the perception that cover crops are costly.”
Cover crop seed can cost between $15 and $30 per acre, and aerial-seeding costs another $8.50 per acre. That’s on top of time and expense of killing them with herbicides prior to cash crop seeding.
“It’s also hard to quantify the direct economic benefit of cover crops,” says Chris Clark, an Ida Grove, Iowa, seed dealer.
Seeding also isn’t as straightforward as with cash crops. Can you imagine aerial-seeding corn or soybeans on top of rock-hard ground in August, hoping you’ll get a rain to incorporate it? That’s often the case with cover crops.
“Weather has made it hard to establish cover crops in the fall (in northwest Iowa) and then kill them in the spring,” says Kyle Andersen, precision sales agronomist with E4 Crop Intelligence.
If you’re considering adding cover crops to your 2015 plan, think about what you want to accomplish. They’re a good fit for soils prone to erosion. Kitchen examined erosion rates in a Missouri field.
The average annual sediment loss from 1993 to 2003 was 2 tons per acre per year.
“Some say that is no big deal, but it is still lots of sediment loss,” says Kitchen. “There was four times as much sediment coming off this field as in a larger 28-mile watershed that this field is in.”
Since 2003, cover crops and no-till changed the field’s hydrology by slicing erosion down to .5 to 1 tons per year.
“The erosion is down to the rate of soil formation,” says Kitchen. “Prior to that, we were at net loss, losing more soil than the soil we were forming. There was a significant improvement in keeping nutrients on the field as a result of cover crops.”
Cover crops likely won’t replace commercial fertilizer, though. Data examined by Kitchen shows cover crops had little impact on increasing potassium and phosphorus availability on the Missouri field.
“It illustrates the fact that if you remove those nutrients with grain crops and don’t replenish them, you can’t count on cover crops to do it,” he says.
If you’re looking to skimp on input dollars in 2015, don’t pinch soil fertility.
“I’m not cutting any on fertility whatsoever,” says Illinois farmer Dan Arkels. “Fertility is crucial for crop production.”
If dollars are tight and your phosphorus (P) and potassium (K) levels are satisfactory, it’s tempting to defer applications on these nutrients for the coming year. Just expect payback if you don’t add them in subsequent years.
“If you skip P and K one year, you will have to make up the next year or the year after that,” Arkels says. “You’ll pay for it sooner or later.”
Iowa farmer Neil Mason firmly believes in starter fertilizer. He normally applies a pop-up application of 3 to 5 gallons per acre at planting. “It gives me more jump out of the gate,” he says.
One area in which you can save money, though, is in the time at which you buy, says David Asbridge, president and senior economist with the NPK Fertilizer Advisory Service.
Locking in prices this winter may fend off spring price increases for nitrogen. Last fall’s wet weather in some areas prevented farmers from applying anhydrous ammonia. This pent-up demand likely translates into higher demand for urea and UAN (32% liquid nitrogen) this spring.
“With the fall we had, there should be more nitrogen demand this spring. So we are anticipating a price rise this spring,” says Asbridge.
If corn prices don’t rise and soil levels are sufficient, farmers may not buy much P and K, says Asbridge.
“We may see more demand this spring if soybean prices fall relative to corn and if corn acreage comes in close to 90 million acres,” he says. “There may not be much opportunity to buy it any cheaper than right now, although potash prices could fall a bit more before rising this spring.”