Archives for September 2018

Does Grain Marketing Improve Profitability?

Does Grain Marketing Improve Profitability?By:  Joleen C. Hadrich and C. Robert Holcomb

Farm managers recognize the importance of having a marketing plan to improve their profitability.  And, the title of Ed Usset’s grain marketing book conveys an important truth- “Grain Marketing is Simple-it’s just not easy!”  In the “Top Farmer”[1] survey, crop producers were asked to categorize the percent of their crop marketed across 3 general categories: pre-harvest contracts (cash contracts, futures, and options), post-harvest contracts (cash contracts, futures, and options) and cash sales (harvest and post-harvest).

In order to compare the highest and lowest performing farms, farm profit performance was measured using an adjusted net farm income ratio[2].  Comparison across performance levels was completed for the “Top Farmers” who were in the highest 20% of financial performance, measured by the adjusted NFI ratio, compared to the lowest 20% of farmers.  In 2016, regardless of whether you were in the highest or the lowest 20% of producers, approximately 34-35% of the overall crop was sold using pre-harvest contracts, futures, or options while another 36-37% was sold through harvest or post-harvest cash sales.  The main difference in marketing between these two groups occurred with post-harvest contracts.  The highest performing farms contract approximately 29% of their crop using some combination of post-harvest cash contracts, futures, and options.  The lowest performing farms only contracted 22-23% of their crop with post-harvest contracts, futures, and/or options.  [Read more…]

Take Note

At times it is necessary and desirable to add notes in a FINPACK file.  Notes are a log of important items related to the specific FINPACK tool they are attached to.  Notes are often used to provide additional information related to the customer and the specific FINPACK tool.  Notes can give additional detail and further outline methodology used for FINPACK users.  For example, a Note can be added on a balance sheet to further describe the details of contracted grain.  Or a Note can be added to a cash flow projection to outline the procedure used and thought process behind a loan restructure proposal. [Read more…]

Cash Flow Planning Tools

Cash Flow Planning ToolsPutting together cash flow projections for farm clients can be tedious at times.  What is a reasonable feed expense for dairy operations?  Is the projected cost of production on corn acres in line with peers?  These are a few of the questions lenders and other professionals may ask when putting together projections, especially for new customers.  With that in mind, The Center for Farm Financial Management has put together two different cash flow planning tools.  The Minnesota Price and Cost Summary and the FINPACK Livestock Budget Estimates are two aides FINPACK users may find useful in cash flow planning.  These items and more are found in the FINPACK Knowledge Base.

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