Keep a close eye on costs before and after harvest
With low crop prices and another big harvest this fall, maximizing yield while reducing costs will be a priority. However, final yields aren’t assured from a standing crop until the bushels are harvested and transported to the marketplace or stored.
"Solid pre-harvest marketing this spring allowed for much higher futures prices to be captured," said Steve Johnson, farm management specialist for Iowa State University (ISU) Extension and Outreach. "Moving bushels at or shortly after harvest should eliminate longer-term storage and interest costs that unpriced bushels will likely endure."
The first step in marketing any crop is to determine the cost
s of production, local basis, futures market carry and the cost of grain ownership. Managing harvest costs include estimating harvest losses, corn drying and shrink, storage, handling grain and accrued interest.
These losses cannot be completely eliminated, but they can be reduced to 1 bushel per acre or less in good standing corn and soybeans if you take time to check the performance of the combine.
"You’ll need to know where losses occur, how to measure them, what reasonable loss levels are and what machine adjustments and operating practices will reduce those losses. Keep your combine properly maintained, and check the operator’s manual for suggested settings to properly gather and clean the grain," said Johnson.
The cost of drying corn will often depend on what the moisture levels are at when the crop is harvested. If the corn will need to be dried artificially, farmers will likely let the corn dry down as long as possible in the field. Corn delivered to the market will typically be discounted in price if the moisture level is above 15 percent. Farmers prefer to dry corn on-farm that they intend to store beyond the winter months to about 13 percent to 13.5 percent moisture.
Johnson said: "To compute the extra shrinkage for farm-stored corn, use a shrink factor of 1.25 percent. Commercial elevators often use a shrink factor of 1.35 percent to 1.4 percent. The extra shrink cost is calculated by multiplying the extra points of moisture removed times the shrink factor times the current corn price."
If grain can be stored in existing on-farm storage facilities, the ownership costs (depreciation, electricity, maintenance, insurance, etc.) could easily run 1 to 2 cents per bushel per month.
Bushels stored commercially at an elevator will typically run 3 to 4 cents per bushel per month.
"If a farmer has a loan, there is interest accruing. The loan can be repaid with proceeds from the sale of grain. So interest expense is reduced if the grain is sold and delivered at harvest. But if the grain is stored and the loan is not repaid, the interest expense continues. So another cost of grain ownership is the additional interest expense," said Johnson.
Interest costs could run from 1 to 2 cents per bushel per month for corn and 3 to 5 cents per bushel per month for soybeans.
Grain handling expenses
The cost of moving grain in and out of farm storage is another consideration. Costs vary by the type of handling equipment, bin size and bin shape. But generally, handling costs are greater for flat storage and smaller bins. The extra handling costs associated with most farm storage facilities range from 2 cents to 2.5 cents per bushel, he said.
ISU has an online decision tool to compare selling corn at harvest versus the shrink loss, drying and storage costs you would incur by drying and storing corn. Using the ISU Extension and Outreach Ag Decision Maker Decision Tool A2-32, Corn Drying and Shrink Comparison, you plug in your own information and assumptions.
Compare your grain sale alternatives at harvest. You can: 1) Sell wet corn and incur a moisture discount. 2) Dry the grain commercially and then sell. 3) Dry it on-farm and sell it. Or store the crop until futures prices increase and basis improves or the grain is sold for cash flow needs. Go to http://bit.ly/2bvcPNl to access the online tool.
Kort is a freelance writer in Ankeny.
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