How Can I Improve Profitability?
HOW CAN I MAKE MORE MONEY THIS YEAR?
A grower looking to increase profit must focus on maximizing the utilization of every input. Especially seed and nitrogen. Cutting out or not implementing technology doesn’t typically save you money, instead could be an expensive management decision. One of the best ways to save money is to fully utilize every input on every acre – OPTIMIZATION. Lose potential of any input, and the investment is lost. Now that input expense becomes expensive. As a producer, how can you make sure to efficiently utilize every input to increase your $/bushel return? The question should not stop at how can I afford new technology, but instead, how can I NOT afford new technology to increase $/bushel.
How CropMetrics CAN help.
As farmers, we share a common goal: Cost/Bushel. To understand Cost/Bushel we have to take a deeper look at our total expenses and total yields.
There are two ways to achieve better margins:
- Decreasing input costs and/or
- Improving yield
The key is not removing an input that will create more yield, but finding a good mix. Industry experts agree that best option is to figure out how to increase yields in order to meet the cost/bushel goal a grower has. We must maximize our Return on Input (ROI).
Take a look at a few examples below.
Without sacrificing yield, how many irrigation rotations can you save with improved irrigation scheduling?
- First Year Example: Save 3 trips of pivot (number based on conservative avg)
- Irrigation savings = 3 x $1,000 (avg UNL cost estimate to run a pivot 1 full circle at 1”/ac)
- 3 x $1,000* = $3,000 savings
- *avg UNL cost estimate to run a pivot 1 full circle at 1”/ac
- $3,000 – $2,650 (1st year cost of probe) = $350 improvement
Any additional irrigation application reductions adds to additional $/bu improvement
Additional Years Profit? More $/bu when you only figure in a lower $1,400 renewal price
- For this example, that means $1,600 improvement ($12.31/ac cost savings – 130ac pivot)
What yield improvements can you expect from probes?
A conservative average is 10% yield improvement from the moisture probes improved irrigation. Many factors to play into this such as improved water management, and improved Nitrogen Use Efficiency to increase yield.
Assumptions for this example:
- Current corn yield (before moisture probe) = 170 bu/ac
- Total Expenses = $680/ac
- Production Goal for Profitability = $3.80 cost/bushel (5% better than break even = PROFIT)
Current scenario = $4.00 cost/bushel ($680/ac / 170 bu/ac = $4.00)
- Higher cost/bushel than the $3.80 profit goal
Let’s compare this with adding a moisture probe:
- Yield after moisture probe = 187 bu/ac (10% improvement)
- Total Expenses after probe = $700/ac ($20/ac increase from 1st year cost of probe)
New scenario with probe = $3.74 cost/bushel ($700/ac / 187 bu/ac = $3.74)
Lower cost/bushel than the $3.80 goal — GOAL ACHIEVED! IMPROVED ROI = PROFIT IN YEAR 1! HOW MANY TECHNOLOGIES PAY IN THE FIRST YEAR?
Although we increased $/ac production expense, we improved our profitability through higher yields. This example does not even account for water savings.
If we use the renewal probe cost instead of the 1st year cost, we then achieve $3.69 cost/bushel (Even better!! Achievable EVERY year!)
Sometimes slashing expenses can be the most expensive thing we do! Take this to your banker!
VRI (VARIABLE RATE IRRIGATION)
The same type of estimates are true for VRI. With ONLY $5/ac cost of VRI, it only takes <2 bu/ac yield improvement to see increased profits. The more variability the fields are, the more yield improvement you will see. With highly variable fields, we will see 15 bushel or more improvement (often 15-20%), so the added cost of VRI helps achieve a grower’s cost/bushel goal much quicker.
VRI Example: Using the same field example above, let’s conservatively assume VRI only improves yield on 30% of the most variable acres under the pivot (40 acres of 130 ac pivot).
- If we improve yield 15% on 40 acres, and keep a 10% improvement on the rest of the 90 acres (from probe example above or combination of both probe and VRI), that would increase the whole pivot yield average to 190 bu/ac from the original 170 bu/ac average. (196 bu/ac on 40 acres, 187 bu/ac on 90 acres)
- $705/ac cost (with VRI) / 190 bu/ac = $3.71/bu (cost/bushel) = MAXIMIZED ROI!!
*These are conservative examples and results will vary. These results do not take into effect all the ancillary benefits that precision irrigation will provide to the overall systems management approach (such as improved nitrogen use efficiency).
In times of depressed commodity prices, every input must be used as efficiently and effectively as possible. Water will have more impact on yields than any other input this year. Make sure your operation is maximizing the efficiency of irrigation this year to achieve the greatest ROI of all your inputs. Learn how utilizing the right amount of water, at the right time and in the right location can affect your bottom line this season.
Is every irrigation service and moisture probe the same? Can I find a lower cost solution and get similar results EVERY year?
Absolutely not. So what makes CropMetrics the leader in the industry? CropMetrics is the only program designed by growers, for growers. Built for grower profit. With a mobile app for iPhone and Droid to deliver vital information at any time, it’s never been easier to make profitable decisions for your fields. CropMetrics is a full-service solution backed by local agronomic experts (Precision Data Specialists) to ensure you receive full benefit from your investment. Rather than “hoping” the technology investment pays, or attempting to learn something new, we ensure you receive valuable information and updates tailored to your operation when you need them most. Find the CropMetrics difference and learn how you can have a profitable year.