We have finally enjoyed some sunshine and harvest activity that has eased our anxiety to a degree. The angst is that the grain markets have removed much of the risk premium that had been added during the wettest October on record in Minnesota. The corn price has fallen 40 cents, while the soybean price has lost 60 cents. This was to be expected as the much-anticipated grain fills the pipeline.
We have not experienced harvest delays similar to this year since 1992. There has been considerable concern about grain quality in the form of light test weights and mold. Grain drying capacity became a risk management issue as excessively wet corn has stressed our infrastructure. Soybeans were run through grain dryers like never before. Propane delivery was challenged and availability scares added to our anxiety. It seems like every time we turn around an additional challenge came our way.
Fortunately we come from some tough stock. When we think about what our grandparents and great-grandparents endured when they first came to this area and started to farm, it puts some perspective on our challenges today. It is from this heritage that we gain our strength to tackle the issues at hand. Just imagine what our harvest would have been like shucking corn by hand or even with the “modern” two-row corn picker. When we sit in our heated cabs with lights that allow us to harvest late into the night, we must remember were we came from.
With all of the modern conveniences that we enjoy today, they still come with a price to pay. Grain production has come a long way in the last 50 years, but some things stay the same. The cost of production, yield and grain marketing still drive the bottom line. This entire set of challenges can be summed up with two words: margin management. In other words; the sum of the costs, divided by the yield and multiplied by the sale price, equals the margin of profit or loss.
As we see or experience the financial hardship that the swine and dairy producers have faced, we must ask ourselves what decisions we can make to avoid some of that pain as a grain producer. To focus on margin management, along with financial management can be a very valuable practice. Taking a holistic approach may take a philosophical or paradigm shift. A shift away from focusing on producing the largest yield at all cost and selling at the top of the market. Rather, moving towards a shift of balancing cost, yield, risk, market opportunities and margin to impact equity accumulation. In a challenging environment, equity management will be the key to longevity.
When I was 15 years old, I was harvesting corn one afternoon with my grandpa. I was operating the combine and he was driving the trucks to town to unload. At 89 years of age, Grandpa didn’t drive very fast with an overloaded truck. I could see him creeping along the road sure and steady, until he was out of sight. By the time he returned with the empty truck, I had filled the other truck, the grain cart and the combine. Being a young man, I became irritated that he had taken so long to return. Without wasting a minute, I had his empty truck filled and ready to go to town. I could see that I was going to be waiting for him to return again, so I jumped into the other truck and we both headed to town. Upon returning to the field, I realized that we would not finish the field that day. Grandpa, being wise and experienced, detected my anxiety and asked me, “Isn’t it great to have so much corn to haul?” I looked him in the eye and said, “Yes, so what are we waiting for?” He calmly put his hand on my shoulder and said, “After we give thanks for our blessings, we can work until midnight.”
Grandpa is gone now, but there is never a fall harvest that I don’t remember his words and guidance. During this harvest, take some time to reflect on the blessings that have come your way this year. Tell the people you love that they are important to you. These blessings help us endure the long days and overcome the challenges we encounter. While many years of markets and crops have come and gone since that day in the harvest field, I will never forget the “edge” of thanksgiving Grandpa gave me that day.
Grain Angles is written by Tom Neher, AgStar Financial Services vice president of agribusiness and grain specialist from Rochester, Minn.
