business person analyzing charts

Planning for 2020: Small Changes in Costs Expected

The November installment of Two Economists and a Lender, a webinar series sponsored by Frontier Farm Credit focused on budgeting for the new growing season.

Below are highlights from their discussion, as well as the full webinar.

With harvest all but done, now is the time to start budgeting for a new growing season. Some costs likely will increase, although modestly, say Dr. Brent Gloy and David Widmar, co-founders of Agricultural Economic Insights. Producers also should factor continued uncertainty into their 2020 planning.

“Budgets are one of the most important management tools,” Gloy says. “But they often are underrated in its role of keeping on top of where you are. Updates and tracking are key to making good decisions.”

Budgets can be used for cash-flow planning, setting marketing goals, risk management, cost control, enterprise analysis and land rental decisions. The economists stress the importance of looking at “economic costs.” This includes out-of-pocket and overhead expenses, as well as opportunity costs.

In their 2020 cost projections below, Gloy and Widmar account for land and noncash expenses, such as family labor. Producers need to include family living cost in their budgets if they plan to fund it through their farming operation.

While every operation’s budget will be unique, Gloy and Widmar forecast that on the whole, variable corn costs will be slightly higher in 2020 and soybean costs slightly lower. Variable and total costs for wheat will be comparable to 2019. The economists project fertilizer prices will be a bright spot for what they call the “Prairie Gateway.”

Based on harvest-time (2020) futures adjusted for basis, they project a corn price of $4.04; soybeans, $9.36 and wheat, $4.62.

budget outlook 2019-2020

“Don’t be overly alarmed by the fact that corn and soybeans don’t cover non-cash expenses. That is typical,” Gloy says. In fact, with price very near the economic cost, corn looks very promising, he says.

“But wheat’s failure to cover out-of-pocket costs and land explains the reason acreage planted to wheat is falling.”

Once you complete your budget, keep it updated and use it, urged Aaron Raymond, a relationship officer in Lincoln, Nebraska. “If you create it for your loan application then ignore it, it is a useless exercise. Unfortunately, that is what I see most do. But those who do update and use it as the most confident decision makers.”

We hope you will join us for an upcoming webinar in the series:

Lessons Learned from 2019 – Webinar

Many would agree that 2019 “didn’t go as planned.” Before closing the book on this year, it’s important to reflect on the key lessons that can be learned. We will review the top lessons and help viewers reflect on their own operation’s outcomes.

Thursday, December 19 at 12:30 p.m. CT
Preregister via Zoom

We take the security of your personal information seriously. You also can take steps to protect yourself.

Cybersecurity Awareness: Top Ten Tips to Keep You and Your Operation Safe

Protecting your personal information is a priority at Frontier Farm Credit. This includes sharing tips and educational resources that will keep all of us safer online.

laptop with lock Keep your operating systems up to date.

Shield with checkmark Use an antivirus program.

Person on headset Do not give out personal information over the phone or in e-mail.

paddlelock Use a strong and unique password for each account.

window with link Be suspicious of unknown links sent through e-mail or text message.

person with shield Verify authenticity of requests from companies or individuals by contacting them directly.

download to hard drive Back up your data using external hard drives/flash drives or a cloud service.

Phone with wifi Be careful when connecting to public WiFi on mobile devices.

Email with lock Don’t open or download unknown attachments in e-mail.

social network Be careful about what information you share online and via social networks.

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Protecting Your Mobile Security

The use of smartphones, tablets and laptops makes it easier than ever to stay connected and work on the go. However, mobile devices also come with their own security risks.

Up to 91% of cybercrime starts with an e-mail and users are three times more likely to respond to a phishing attack on a mobile device, according to a study by IBM (IBM Security).

Warning Signs

  • Keep an eye on your data usage. Data usage can spike if there is a virus running in the background.
  • An infection on your mobile device may cause it to run more slowly or your battery may drain more quickly than usual.
  • Have you noticed more pop-ups and intrusive ads? Be careful when downloading apps. Some are designed to introduce spyware or viruses. Do your homework before choosing and downloading an app. Your chances of downloading a malicious app are far lower when using official app stores.


  • Be careful when using public WiFi. Do not access sensitive information, such as your bank account, or send e-mails with personal information, including Social Security numbers, account numbers or passwords.
  • Install updates to your operating system as soon as they are available. Better yet, allow for automatic updates to ensure you’re protected.
  • Consider installing mobile security software for your device as an extra layer of protection.
  • Do not use public or free email services or cloud storage systems to retain sensitive emails/files indefinitely. They can become a target for compromise or unintended disclosures.

When you don’t have a system in place to manage your important accounts, you leave yourself and your business exposed to outside threats.

What to do if your security is breached

Contact your financial partners immediately. This increases the chances of recovering funds.

Change passwords and security questions/answers on all accounts that use the compromised password. Ensure the security questions are unique to you and known only by you or, when necessary, a few trusted individuals. Learn more about creating strong passwords to protect your online accounts.

Submit a police report. Many local authorities now have a cybercrime team that can investigate locally, as well as share information with the FBI and/or Homeland Security.

Contact your cybersecurity insurance carrier if you have one.

Get a Handle on Farm Machinery Investments

Frontier Farm Credit and Farm Credit Services of America (FCSAmerica) are co-sponsoring a webinar series, Two Economists and a Lender. This webinar, featuring Agriculture Economic Insights (AEI) co-founders David Widmar and Brent Gloy and Jason Gates, a relationship officer in Cedar Falls, Iowa, focused on machinery investment. Register for our next free webinar, Budgeting and Getting Ready for 2020, on Thursday, November 21 at 12:30 p.m. CDT.

Below are highlights from their discussion, as well as the full webinar.

Do you know your machinery expenses for 2019? There are a number of ways to arrive at this cost. You might, for example, cite the depreciation deduction on your tax return. Or maybe you use the principal payment on your equipment loan or your lease payment to calculate it. Any and all of these are relevant. But none tells the whole story.

Gloy shared the DIRTI approach to calculating machinery expense:

  • Depreciation (but economic, reflecting the expected life, not your tax claim)
  • Interest
  • Repairs
  • Taxes
  • Insurance
  • Custom hire (expenditure on hired work netted against any income from custom work)

Depreciation, repairs and custom are particularly useful for tracking and understanding your costs, said Gloy. “But we recommend using depreciation that reflects its life being used up. If you depreciate the whole purchase in the first year, that would be misleading in this context.”

Every farm is different

The economists pointed out the wide variability in per-acre cost. Based on one set of farm business management records, farms in the 1,000-acre range have investments ranging from $50/acre to more than $600/acre. In the 3,000- to 4,000-acre range, investments generally are between $100 and $300 per acre. (See chart.)

crop machinery investment per acre

“One way we like to look at machinery expense is as a percent of gross revenue,” Gloy explained. “Twenty-five percent or lower is a good goal. At 25% to 30%, you may want to approach new investments with caution and over 30%, you are devoting a huge portion of your gross income to this category.”

“Keep in mind that variable costs such as inputs typically account for half of gross revenue. If an added 30% goes toward machinery, that doesn’t leave much for other expenses or family living.”

Resource deployment

Once a producer has a handle on machinery costs, he or she can begin to develop a capital expenditure plan: What will be replaced in 2020, in three years, in five years and how will these investments be funded? What about other capital expenditures, such as irrigation rigs or grain bins?

Widmar cautioned against using machinery to defer income tax by financing purchases and using accelerated depreciation year after year. This can have a snowball effect. Fully depreciating capital purchases while also using debt financing means future earnings will be needed to make those principal payments. This can have a compounding impact over multiple years. The table below from AEI illustrates this impact. By year four, in this example, the farm’s entire income is needed for principal payments.

“This is an extreme case, where the farmer is making purchases in multiple years to eliminate taxable income, but it points out how you should consider the implications of a purchase several years out,” Gates said.

accelerated depreciation and debt

Red flag statements

Gates encourages producers to both dig into the economics of their farm and evaluate their objectives before making a machine purchase. A red flag should go up, he says, if your motivation can be summarized with any of the following statements:

  • I have a tax issue.
  • That machine has a repair that will take too long (or cost too much) to fix.
  • My neighbor / friend / other just bought one.
  • The dealer has one on the lot.
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Password Practices Have Power to Protect

Passwords are the first line of defense for most online accounts. However, creating and remembering complex passwords for dozens of accounts is a major challenge. Follow these tips to help manage your passwords, strengthen your online security, and protect your personal and business information online.

Length is Strength

As your password grows in length, it becomes harder for hackers to crack. Each additional letter, number or symbol, increases the possible combinations exponentially. When possible, use a passphrase composed of a short sentence or series of random words, such as:

  • I take my coffee break at 3:30 pm
  • Mosquito-daze-battery-February

These types of passwords are harder for computers to guess and often easier for humans to remember. Varying your capitalization, substituting symbols for letters, and incorporating numbers into your phrase are all great ways to strengthen your passphrase.

Nothing Personal

Try to avoid incorporating personal information into your passwords. Important dates like birthdays and anniversaries, home towns, high schools and names of relatives can all be discovered by hackers. A good rule for selecting passwords: If something about you can be discovered on social media, don’t include it.

Don’t Recycle

Reusing passwords across different accounts is a major security risk. If hackers gain access to one account, they wil try to use the same credentials to access your other  accounts. Don’t make it easier for hackers; make each password unique.

Keep it Manageable

A password manager is a great way to keep track of all your accounts and passwords. Password managers are computer applications that securely store passwords in an encrypted vault. Now you only have one password to remember — the password to your password manager. Popular password managers include:

Setting up strong passwords across all your accounts is an important step toward limiting your exposure to risk online. When you don’t have a system in place to manage your important accounts, you leave yourself and your business exposed to outside threats.

Frontier Farm Credit offer AgriPoint® and mobile apps with your convenience and security in mind. Customers who create and securely store strong passwords/pass phrases are adding additional layers of protection. But Kris Plambeck, our business solutions manager, advises customers to follow a few additional Dos and Don’ts.

Do’s and Don’ts

Keyboard wih Password Button


  • Change passwords frequently
  • Use screen lock on mobile devices
  • Use biometrics (fingerprints, facial ID) to gain access to devices and accounts


  • Create passwords to AgriPoint or our mobile apps using Social Security/tax identification numbers; familiar dates, such as birthdates and anniversaries; yours or your children’s name
  • Repeat the same username or password across apps
  • Save your username or password in a spreadsheet on your mobile phone, laptop, etc.
  • Share your usernames or passwords with others