Pushing Profits Higher

Iowa farmers produced a record 2.7 billion bushels of corn and 571 million bushels of soybeans in 2016, generating over $14.5 billion in production value.

“Iowa farmers are great at what they do,” says Steve Johnson, farm management specialist with Iowa State University Extension and Outreach. “Where we come into play is helping farmers manage price risk resulting from these large crops.”

Johnson is one of eight farm management specialists serving farmers around the state, offering farmers the latest information on farm financial and risk management strategies and marketing tools.

He leads ag marketing clubs that meet during the late fall and winter months in Lynnville, Conrad and Ogden. Farmers gather monthly to discuss trends and best practices for managing a variety of crop risks.

“These groups help farmers build knowledge regarding a variety of crop production and marketing topics that lead to the development and implementation annually of crop marketing plans,” Johnson says.

The most important thing farmers need to know, according to Johnson, is their cost of production as well as the cost of grain ownership once those bushels are stored. Without this information, farmers will likely struggle to identify a good price at which to sell their crops.

“You might not know your actual costs until after harvest, but an estimate will give farmers an objective for what would be a reasonable break-even price and profit margin,” Johnson says. “There is a lot of uncertainty that comes with row crop agriculture, but a large portion of uncertainty is taken away with the use of revenue protection crop insurance.”

This type of information is invaluable for farmers like Jeff and Cheryl Bruene, who farm near Gladbrook. The Bruenes have been a part of Johnson’s ag marketing club in Conrad for over a decade.

“I feel like I could go to Steve with any problem on the farm,” Jeff Bruene says. “He might not have the answer or information right at hand, but he will help point me in the right direction or help find the answer. I learn something at every meeting. I’ve always been a believer that ISU Extension and Outreach is your friend. Farmers need to be using more people like Steve.”

Johnson has seen the risk management skills of the Bruene’s operation improve since beginning to work with them.

“They have been able to incorporate the use of crop revenue insurance to be more aggressive in pre-harvest marketing and in timing futures price rallies to make sales,” Johnson says.

One tactic the Bruenes use each spring, and Johnson stresses, is selling a portion of their new crop bushels. With the uncertainty of production comes higher futures prices in April, May and June. The Bruenes then sell a portion of their guaranteed insurance bushels using revenue protection crop insurance. These pre-harvest sales provide needed cash flow during the fall and winter months at what are typically higher cash levels than waiting until harvest.