By Craig Rogan, Investors Community Bank
As the 2021 harvest season comes to an end, a new beginning is in the horizon. As we reflect on the second year of increased feed inventory throughout most of the state for dairy farmers, our producers may be facing a decision on how to best capitalize on excess feed inventory. The farmer, with the help of his team of advisors (nutritionist, agronomist, vet, consultant, banker), may consider the following options:
Should excess feed be sold as another revenue stream?
Does the farmer consider alternative crops such as oats to sell and harvest the straw to sell or keep for their own use?
Can the herd be expanded in existing facilities to increase milk production with more animals on feed?
If an expansion is looked at, be sure to consider whether it will affect a quota with the milk plant or if the milk plant will even take the additional milk.
Does the increase in feed inventory provide an opportunity to reduce cropping costs in 2022?
Feed and cropping expenses increased throughout 2021 and appear to be on an upward trend into 2022. Does the excess feed inventory provide opportunity to save on fertilizer cost, for example, knowing they can reduce spread on the field despite a potential negative effect on 2022 yield?
The importance of making a robust plan with the help of advisors will be a key to success for our farms in 2022.
As bankers, we can help our customers navigate through making these decisions by providing financial analysis help in working through various scenarios and the impact each has on the client’s cost of production.
As feed and fertilizer cost increase heading into 2022, maximizing this excess feed inventory will be the key to 2022 cash profitability. One notable aspect that can be completed now to assist in mitigating continued rising costs is fall tillage. Future fuel costs are expected to be higher than today and it could be prudent to do tillage along with manure application in the fall. Optimum 2021 fall weather conditions are ideal for completing tillage. By completing fall tillage this will allow for less work, stress and timely planting in 2022. Not completing fall tillage will be a missed opportunity. Communication is the key in any relationship. Continue to work with your customers to be proactive in their planning for the upcoming year.
Craig Rogan is vice president, ag banking officer with Investors Community Bank in Stevens Point and serves on the WBA Agricultural Bankers Section Board of Directors.