March, 1999

...Remarked several farmers at a recent meeting.
 

Then they looked at me as if I could suggest some plans of action to solve the problem.
 

"I'm going to plant only peanuts and tobacco", remarked one grower. "They're the only crops that show a profit potential".
 
 

Nearly a year ago we read in an agricultural newsletter "There's a growing discontent among the ranks of U.S. farmers. Many have misgivings about the recent changes in farm policy".
 

The decline in major commodity prices and the phasing out of traditional farm programs have created an atmosphere of confusion and anxiety. While the problem is common in the Mid-West and Great Plains where a high percentage of farm income was from government programs, the uncertainty has spread to the Southeast U.S. Georgia has seventeen counties where agricultural income makes up more than 20% of total income.
 

And many livestock prices are also generally depressed. These prices have shown they go in cycles, but there is little comfort when we're at the low phase of the cycle. The realization that prices will improve sometime in the future provides nothing to help the current cash flow.
 
 

Start first by determining your production costs and expected commodity prices. Then estimate your cost per unit of production.
 
 
 
 
 

Our estimate of variable production costs per acre of major row crops in 1999 are:
 

Dryland Crops: Peanuts - $412; Cotton - $291; Corn - $164; Soybeans - $126.
 

Irrigated Crops: Peanuts - $462; Cotton - $352; Corn - $294; Soybeans - $150.
 

Now estimate your yield and come up with a cost per bushel for variable costs.
 

Any income above variable costs can be used to help pay farm overhead and debt.
 

And if you can cover total costs, then you're ahead of the game.
 
 

About 40% of the farmland in the state is rented. This means a lot of producers have rental costs.
 

If you rent land, take the above figures as a starting point (to estimate your production costs) and see if land rental is a good option. Use the following work sheet.
 

Estimating Returns (per acre) from: _____________ (crop)
Yield (bu., lbs., etc.)	____________
Price	$___________
Receipts per Acre (Yield x Price)	$___________
Now Estimated Your Variable (or cash) Costs per Acre
Variable Costs Per Acre	$___________
Estimated Receipts less Variable Costs = Returns:	$___________
To:	Land Rent $___________ (Price Paid)
(Divide the Returns to These Three Factors)	Farm Overhead $___________
	Profit $___________

If it won't cash flow on paper, it likely won't cash flow in the field.
 

Not renting land may not be a desirable option, but better to minimize your losses by not renting than to rent and have only the land owner showing a profit.
 

We don't like to think about letting land lay idle for a year. There are bills to pay and many have land payments and equipment payments to pay. But don't make things worse by making a bad decision.
 

Talk with your lender and let him (or her) help with your plans. These folks are affected by your well being and can likely offer some good suggestions.
 

William Givan, Editor

Extension Economist

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