Manage Your Costs to Stay Profitable
by Stephan Becerra, CEO

Even as harvest is underway, the rising cost of fuel and nitrogen has all of us, who are engaged in production agriculture, thinking about next year and how our operations will be affected. Fluctuating weather, global commodity stocks and consumption patterns make for uncertain farm income, which adds to the concern about how profitable our farming operations will be next year. The good news is that we do have control over many decisions that impact farm profitability. Some common sense suggestions can improve the potential for staying profitable, even in the face of rising input costs.

Know Your Break-Even Costs
Knowing your break-even cost of production for each crop and comparing budget projections to actual results in-season can be invaluable in making adjustments as the season progresses. Benchmarking costs of production is another tool that can be used to make improvements. A good resource for farm accounting information is the University of Illinois Web site: http://www.farmdoc.uiuc.edu/. Look under the FAST Tools link.

Conserve On Fuel
With high fuel costs looking like they are here to stay, maximizing fuel efficiency in your farming operation makes good sense. Recommendations compiled from university agricultural engineers include:

• Inflate tires to proper pressure.
  Studies have shown that over-inflated tractor tires waste fuel and reduce productivity. Under-inflated tires increase sidewall wear and can undermine tires in other ways.
• Evaluate your tillage plans.
  Reduce tillage, or the intensity of tillage, wherever possible, and change to a no-till planting system where field conditions permit.
• Use the appropriate-sized tractor for the load.
  Engineers say that if farmers find themselves using a high-horsepower tractor to pull a light load, they can save fuel by running in a higher gear but at a lower engine speed.
• Match the irrigation pump with the engine.
  For diesel-powered irrigation pumps, be sure to match the engine output horsepower with the horsepower demanded by the pump.
• Think about how you use your pickup truck.
  Heavy-duty pickups and trucks perform crucial roles on farms, but are sometimes used for trips to town that don't require their power and hauling capacity. No matter what vehicle you drive to town, consider combining trips for errands such as purchasing farm supplies, arranging for services, etc.

Conserve On Nitrogen
It appears that fertilizer prices will be higher for the 2006 crop year. Things to consider when planning your fertility program for next year include:

• Take credit for homegrown nitrogen.
  Reduce the N application by at least 40 pounds per acre for corn following soybeans. Many studies have shown that corn following a good stand of alfalfa needs no additional nitrogen fertilizer. At the very least, reduce nitrogen application by 100 pounds per acre for corn following alfalfa.
• Use alternative sources of nitrogen.
  Utilize livestock manure, whether your own or from a neighbor, as a nitrogen source. Also, consider using sewage sludge from a local municipality. The municipality will have information on the availability of nitrogen from the sludge and on the regulations associated with its use.
• Use proven crop production practices.
  Nitrogen use efficiency will be optimized when soil pH is maintained above 6.0, and soil P and K tests are maintained at the optimum level for your soil type.