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THE COST OF FARMING<br />
“From my perspective as<br />
a lender and what we talk to<br />
our customers about is that<br />
with more dollars invested in<br />
a crop, there’s more dollars<br />
at risk. Risk management is<br />
more important,” Gannon<br />
said, including protecting<br />
prices through marketing<br />
tools, such as hedging or<br />
options, and also through crop<br />
revenue protection insurance.<br />
Bowman agreed.<br />
“If we have the yield and if<br />
I do a good job of marketing,<br />
we’re in an area right now<br />
where we have the opportunity<br />
to make money,” he said,<br />
adding that it also requires<br />
paying close attention to<br />
expenses.<br />
“Sometimes we’ll lock in a<br />
price just to take that piece off<br />
the table,” he said of his fall<br />
decision to pay the $800 a ton<br />
EASTERN IOWA FARMER PHOTO / BROOKE TILL<br />
Farmer and banker Greg Gannon said that some of the positives for the<br />
local ag industry are healthy liquidity, a low degree of leverage, strong<br />
borrowing capacity, and appreciating land and equipment values.<br />
price for anhydrous ammonia.<br />
“If you’re dealing with half<br />
a dozen unknowns, anything<br />
that you can take off the table<br />
– you’re managing your risk.<br />
You might not be optimizing,<br />
but you don’t have to worry<br />
about that anymore. Yes, it’s<br />
high, I agree. Is it good? No,<br />
it’s not good. But let’s worry<br />
about something else.”<br />
Chad Hart, professor and<br />
crop marketing specialist with<br />
Iowa State University, said the<br />
big question farmers have had<br />
to consider in the past year<br />
is how to manage operating<br />
returns.<br />
“When you get a bigger<br />
profit, what do you do with<br />
that extra money? A lot of it<br />
goes back to looking at the<br />
market today. Can you do<br />
things today that will lock in<br />
a profit margin? And if you<br />
can, take advantage of those<br />
opportunities. We know the<br />
last few years have been<br />
profitable, so we have to go<br />
through downturn. Set aside<br />
funds to protect farm. Look to<br />
control our costs or manage<br />
costs in the future. It’s not<br />
a deal of saying things are<br />
always going to be good or<br />
bad. It’s how do we use these<br />
good times to prepare for bad<br />
things?” n<br />
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eifarmer.com FALL 2022 | EASTERN IOWA FARMER 43
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