Despite some tough times for farmers in recent years, cutting production costs may not be high on their priority lists as the 2020 planting season approaches.
“We’re always looking to cut, but you can only cut so far,” said Illinois farmer Jim Raben, who grows corn and soybeans near Ridgway in Gallatin County. “You like to cut down on chemicals and fertilizer, but you’re going to cut production as well. It’s a negative cut.”
University of Illinois ag economist Scott Irwin said the sky is not falling, and therefore making big cuts could hurt farmers in the long term. He sees light at the end of the tunnel, especially regarding a tentative trade pact between the U.S. and China.
“Interestingly, I think we at least have to be careful not to overly emphasize cuts in production costs for 2020 when there’s at least the possibility on the horizon of a demand-driven boom due to President Trump’s dealings with China,” he said. “There is always the need — we’re in a high-volume, low-margin commodity business — and low costs often win. But it’s important not to get too bearish.
“The good news is we’ll know within a few weeks whether this agreement is real or not. Let’s see if it falls apart before final signing. If this new trade deal is not signed, sealed and delivered sometime in January, I would be real skeptical.”
Justin Harre of Nashville, Illinois, also doesn’t anticipate wholesale cuts. But he is looking at seed as one possible place to economize this year.
“We’re trying to make sure we get seed costs down as much as we can, possibly planting some lower populations on corn and soybeans,” Harre said. “So far, we’re still going with the traited products. I know some guys are going with the traditional products.”
Planting seeds stacked with multiple GMO traits may cost more on the front end. But that can also mean savings on fuel.
“No doubt about that,” Raben said. “That helps minimize trips over the field. I think everyone can be more efficient. Put your best foot forward and you won’t have to pay out so many hours of labor.”
He also plans to shave a bit off production costs by a recent purchase of larger fuel tanks for the farm.
“I had a chance to buy larger fuel tanks so we can buy trailer- loads of fuel,” Raben said. “That will be some savings. Not that much, but everything helps. Little things add up.”
Crop consultant Larry Cooper said his clients aren’t talking about large-scale cuts, though a few are toying with the notion of trimming expenses. One farmer has indicated he will consider changing from a triple-stack to a double-stacked hybrid and using soil-applied granular insecticide instead.
“A lot of people are also saying they may be looking into secondary and trace elements,” Cooper said. “One individual is exploring those options, but he may put that on the back burner.”
Farmers likely aren’t planning to drastically reduce inputs such as fertilizer because experience has shown they lose in the long run.
“Most have played that game before and realize that sometimes if you save a dollar, you may compromise more than that,” Cooper said.
Matt Emerick, who farms near Vandalia, Illinois, said he did most of his cutting last year. He sold some excess equipment and cut out other expenses, such as phone lines.
“We cut some fertilizer, but mainly because of timing, not because of money, just to get it in the ground,” he said. “We’re about as lean as we can possibly go.”