By JEFF BURBRINK
Extension Educator, Purdue Extension Elkhart County

ELKHART COUNTY — There is no doubt that margins are going to be very tight for the 2016-2018 growing season. Surpluses and reduced grain usage around the world have reduced grain prices worldwide.

Purdue’s annual crop budgets tell the story. After subtracting variable costs (the out of pocket expenses you have to put a crop out), there is approximately $10 to $300 per acre left to contribute to machinery ownership, hired labor, land and family living. This wide range in contribution margin varies depending on the crop being grown and the productivity of the soil.

Let’s make the assumption this is a very productive farm and that we are in a corn/soybean rotation and have $300 per acre left after variable costs. Further, let’s say the farm is about 1000 acres with about $1,118,000 invested in machinery replaced every 10 years ($118/acre), and the family withdraws about $80,000 per year for a family living expense ($80/acre) and there is no hired help.

The amount left to contribute to land (owned or rented) is only about $102/acre ($300-118-80) in this optimistic budget. On less productive soils, the margin contribution can be far less. As you know, rents are quite a bit higher in our region. This is the reason many are predicting rents will be dropping over the course of the next two to three years.

The reality is that farmers really do not like to walk away from a farm they have rented, in part because it can be so hard to get the land back in the future. But, it might be possible to “lose less” by using a combination of cost savings on inputs and some renegotiation of rent.

Where might you be able to squeeze a few dollars? The three largest variable costs to put a crop out are fertilizer, pesticides and seed, accounting for about 65-75 percent of most farmer’s costs. That’s the place to concentrate your focus.

For instance, if you have fields with P or K levels in the medium level or higher, there is a lot of research showing you can cut back on fertilization for a year or two because the chance of an economic response to fertilizer is much smaller.

There may be places to save on seeding rates too. Bob Nielsen’s trials suggests the optimum corn population for corn grown under typical yield levels and growing conditions is 32,100 plants per acre or a seeding rate of 34,000 seeds at a 95 percent stand.

In soybeans, Shawn Conley has found years of data that shows the yield potential is 100 percent in full-season beans at a final uniform population of around 100,000 plants/acre for drilled beans, and 80,000 for row beans. Decades of Purdue research have shown no effect of soybean seed treatments on grain yield, but it does have a significant increase in the soybean stand. Growers should look at the cost of doing a seed treatment versus the cost of the additional seed. The key factor is keeping the final stand above 100,000 plants per acre.

Regarding pesticide expenses, much of the cost of insect control has been transferred to seed budgets, since the advent of BT and plant resistance. However, there has been a large increase in fungicide use in field crops the past few years. It is important to note that fungicides do not increase yields. Rather, they can only save yields from being taken by disease. There is plenty of evidence showing that fungicides are profitable when conditions are high risk for foliar disease and a drain on the budget when disease risks are low. They should not be thought of as a yield enhancer.