Know your farm costs

To be successful on the farm it can come down to being prepared to manage the unmanageable.

That was the message those attending the Rural Roots Ag Day held at the Yorkton branch of the Western Development Museum Friday from Mark Gottselig, Regional Sales Manager of South Saskatchewan and Manitoba with Global Ag Risk
 Solutions.

The key to being ready to manage whatever comes up starts with being ready to change plans on the fly, said Gottselig.

“People who don’t change get gobbled up,” he said.

Gottselig said farming has always been an industry with a number of major risks including commodity prices, yield variability, crop quality and increasing costs.

The key is being ready to deal with the situation should one area negatively impact the bottom line.

“Are you in a position to farm aggressively next year even if you have a wreck this year?” asked Gottselig, adding you are best positioned if you can move forward without dialling back on operations, or being forced to refinance.

“A lot of things are out of your control,” conceded Gottselig. He said that is why producers need to fully understand how to best manage what they are in control of.

In that respect producer need to do “everything possible” to realize the yield capability of the seed they plant.

That effort is more important today because “risks are going up in farming,” said Gottselig.

As an example, “expenses are up 85 per cent in the last decade,” he said, adding that is across a range of inputs including seed, fertilizer, chemicals, land and machinery.

Returns have not exactly kept pace though.

The net return after all expenses “is pretty well flat,” said Gottselig, pegging it at about $25/acre. It’s costing more, but better yields and quality are maintaining the net return.

Small things can impact that net return.

For example for every penny the Canadian dollar gets closer to par decreases the net return shrinks $5/acre, said Gottselig, adding if the dollar increase five cents, the net return disappears.

“Are you prepared for that? What does that mean for your farm?” he asked.

Gottselig said the answer is “to understand your costs.”

The numbers are critical, and need to be well understood.

“What is the cost all-in to grow that bushel of canola?” asked Gottselig, adding if you “know that cost” you can “market more efficiently.”

Gottselig said farmers who have confidence in knowing their numbers are better able to seek out prices to cover the actual investment in the crop.

Knowing the numbers also allows farmers to focus on achieving efficiencies within their costs.

That does not mean reducing crop inputs just to save money, said Gottselig.

“Generally the more inputs the better the gross margins,” he said.

Producers also need a business plan, said Gottselig, suggesting that is the first thing for producers to undertake, sitting down and writing out a vision for their farm. He added it should not be a one-year plan, but should look
 out three, four, five years.

A second piece of advice is that producers need to build a team, said Gottselig. Having expertise to draw upon by having access to an agronomist, or marketing coach, takes the pressure off the producer to make every decision solo.

And finally, Gottselig said having the security of insurance helps.

“Farms that are really successful do have a good insurance policy for the farm,” he said, adding it can cover the core costs and allow producers to be viable when things go wrong.