Many people involved in agriculture are concerned about what 2016 has in store for them economically and for their behavioral/emotional well-being.
How can agricultural operations be profitable this year?
Agricultural profitability is difficult to predict for 2016 because every producer’s situation is different and there is little certainty how the weather, markets, and other uncontrollable factors will play out.
Get a good grasp on your cost of production to calculate if you can make money on today’s prices. You should know your cost of production and take belt-tightening measures where needed.
Minimizing expenses is of key importance. While producers have little control over prices for inputs, market prices, and crop-growing conditions, farm people can mostly determine their farm and personal expenditures. Farmers may be able to change some inputs, such as planting non-GMO seeds – soybeans, for example, which are usually less expensive than seeds with built-in GMO traits.
Look for alternatives, said all the experienced farmers. If the cost of production exceeds the expected income from the livestock or crop operation, there is still time to “sit out” the unprofitable parts of farming in many cases.
There is no requirement that an independent pork, beef, or dairy producer who owns the facilities must keep all – or even any – of the feedlots or barns continuously full. Sometimes even producers with contracts can renegotiate their terms.
The producer has the right to request legal representation and other consultants, and for everyone at the table to have equal standing in renegotiation discussions.
Crop farmers have options too. The USDA official I interviewed said there is more interest in the 2016 Conservation Reserve Program (CRP), administered through local USDA Farm Service Agency offices, than there has been for several years, especially for filter strips along waterways, wildlife habitat and pollinator habitat.
While the current Farm Bill reduces total enrollment acres, the CRP reimbursement rate per acre exceeds what many applicants might earn from farming these acres.
There is no deadline for continuous sign-up CRP practices. However, interested farmers should enroll soon while guaranteed federal funds are still available, the USDA official noted. The annual CRP payment limitation is $50,000 per farm operator.
Farmers can sometimes change crops. It could be wise, for example, to plant alfalfa and other hay/straw crops on land that is planned for soybeans, in order to capitalize on high prices for premium-quality large-square and small-square alfalfa or straw bales, and particularly if harvesting equipment and storage facilities are already owned or can be arranged.
Having a ready purchaser is recommended. If good haying weather during the first crop, and sometimes later cuttings as well, has been sporadic the past several years, alternative plans for use of weathered hay might also need to be made.
Prime quality hay is being sold overseas to cattle and dairy operations and domestically to dairy and horse farms. Straw and lesser quality hay are sometimes needed for roadside cover establishment following highway renovations, and by tree nurseries or as bedding in hoop barns, and by ethanol processors of cellulosic fodder.
Agriculture in 2016 will be a “hang-in-there” year for most, but for satisfactory profits in specialty arenas like organic food. 2017 will likely begin an era of gradually increasing profits in corn, soybeans, and food-grade small grains, as the world-wide glut of grains diminishes.
Most remaining conventional livestock operations that produce beef (both cow/calf producers and feedlots), pork, and dairy products will begin to see black ink after a shrink-out of defunct operators.