Know the Cost of Your Pickles

Written by Brent Thielges, LaMoure Location President. Original story appeared in The Bargain Network, an addition to the LaMoure Chronicle. 

As a banker at Choice Financial, I am privileged to work with the greatest group of people in the world – the farmers who work hard to feed the rest of us. It is very rewarding to partner with our producers on their path to success. One of the most important tools for both the farmer and banker is to have a plan.  A roadmap.  Yet, a plan can be one of the most challenging things to put to paper. After all, none of us have that elusive crystal ball. How is anyone supposed to know what the price of corn will be next fall? What’s the weather going to be like? While we aren’t going to predict exactly how the coming year will play out, having a plan – a roadmap – will at least keep us going in the right direction.

Many experts will say knowing your true cost of production is the foundation of creating a helpful roadmap.  I agree.  No, we don’t know what the cash price of corn will be next fall, but if we know what our breakeven price is, then we have a better idea of where our marketing targets should be.  Beyond the seed, chemical, fertilizer and other direct input costs, what about living expenses, health insurance, equipment payments, or college tuition?  What about all those smaller things that we don’t think add up to much of anything?  This is where the pickles and napkins come into play. If all of these things are considered and you find out your breakeven price of corn is $3.15 a bushel, then it makes it easier to make that sale at $3.25, even though it seems like a shame to not get at least $4.00 like we did a few short years ago. You find out that your marketing price target should be relative to your breakeven price rather than compared to historical market prices. This is especially true in more difficult times. As they say – it’s nice to hit a home run every once in a while, but it’s the singles and doubles that consistently win ballgames.

—Brent Thielges, LaMoure Location President

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