With grain harvest temporarily on hold due to rain in many parts of our territory, now is a great time to update your 2018 cost of production calculations and potential break-even prices based on anticipated yields.
Why is this important? We anticipate that most grain producers will store their 2018 grain and look for marketing opportunities in 2019. Understanding your cost of production on those bushels will give you an informed marketing target.
If you borrowed against your 2018 bushels, you will want to share with your lender both your updated cost of production and marketing plan, including the timing and amount of your planned sales. This conversation will allow your lender to help you identify the appropriate debt structure for your marketing plan and your 2019 production year.
Use your office time to also consider the cumulative impact the past few years has had on your operation. Ask yourself these key questions:
- Do I have adequate liquidity? This is the working capital you have available to meet short-term financial obligations. While always an important indicator of your risk-bearing ability, working capital is especially critical in times of volatility. Frontier Farm Credit recommends, in general, that grain producers have working capital of at least $200 per acre farmed.
- Has my overall debt load increased due to losses? If so, it is important to understand how this increased debt is impacting your fixed costs.
- Do I need to adjust my operation to be cost competitive?
Armed with these answers, you can start putting together your business plan for the coming year. Based on anticipated markets, what are your initial thoughts about your crop rotation? What would your initial cashflow projection look like based on your planting intentions? How does the projected cost of production align with the markets?
I invite you to contact your local Frontier Farm Credit financial officer to discuss these and any other questions you might have as you assess your financial position.
