by: Chris Zoller, Extension Educator, ANR, Tuscarawas County
The United States Department of Agriculture Economic Research Service (USDA ERS) announced their farm-level price projections for corn, soybeans, and wheat through 2029 on February 14, 2020. See the chart below.
It is important to remember that these are only projections using information available today, and these forecasts will likely change with time. However, using these projections, we are likely to see prices for these three commodities remain relatively flat over the next several years.
Let us assume these projections are correct. Can you continue to operate your farm business when the price you receive for these commodities remains relatively unchanged for the next several years? If you do not believe you can, what are your options?
Options to consider and evaluate
Following are options to consider as you evaluate the future of your farm business. There is no “one-size fits all” approach, as each farm, family, and situation is different.
- Make no changes. Maybe your age, family circumstances, or other reasons allow you to continue with the status quo. If that’s the case, continue doing what you’ve been doing.
- Plant more acres of the commodity that is likely to yield the highest dollar return. This may mean that you grow less of one or more crops to grow more of another on acreage you already control. It might mean you rent or buy additional acres to expand. Or it may mean not farming some of the less productive ground. Obviously, the unknown is which commodity will net the highest return over time.
- Do something completely different. Like the saying goes, “if you do what you’ve always done, you’ll get what you’ve always gotten.” However, before making a change, do your homework!
Do your homework
Why is it important to do your homework before making changes? Here are a few items to consider:
- Know your current financial position. Evaluate your balance sheet, income statement, and financial ratios to understand your performance. Contact your county Extension Educator to discuss the FINPACK program to perform this analysis. Knowing this information can help you evaluate alternatives.
- Do you know your cost to produce corn, soybeans, and wheat? Furthermore, have you calculated the return for each property you are farming? Is there ground you should not be farming?
- What are your goals? As you write your goals, make them Specific, Measurable, Attainable, Rewarding, and Timed (SMART). What goals do your spouse, children, or business partners wish to accomplish? Now is also a good time to complete a Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis.
- What other enterprises can you explore raising in addition to, or in place, of some of the crops you currently raise. How much do you need to make in a different enterprise? Do you have any criteria or parameters to consider as you evaluate a new enterprise? Brainstorm a list of potential new enterprises or direction for your farm.
- What does the customer want/need that you could fulfill? Research trends, talk to others about ideas, meet with farmers who have successfully changed their business model.
- Realize this process takes time and will require work on your part. Changes are not going to happen immediately, but never will if you do not spend time thinking, researching, and evaluating.
There is comfort in doing what you have always done because you have knowledge, experience, and history. However, this may be a time to think outside your comfort zone to evaluate alternatives and your business plan. Invest time and energy talking to your farm and non-farm friends, family members, and local Extension professional for advice and assistance with the process.
Conducting a SWOT Analysis of Your Agricultural Enterprise https://ohioline.osu.edu/factsheet/anr-42
Developing Goals for the Agricultural Business https://ohioline.osu.edu/factsheet/anr-45
Ohio State University Extension Farm Budgets https://farmoffice.osu.edu/farm-mgt-tools/farm-budgets#2020
USDA Agricultural Projections to 2029 https://www.ers.usda.gov/publications/pub-details/?pubid=95911