According to one Andover farmer, tracking production costs and comparing those expenses to potential markets can be key to making a profit. He believes farmers should lock in the opportunities for marketing before planting begins.

When he worked on Wall Street, Scott Anderson learned to build spreadsheets modeling financial statements that forecast mergers and acquisitions activity.

He returned to Andover five years ago when his father, Kevin Anderson, retired. The younger Anderson brought those analytics with him.

“I want to treat each field as a business and to be able to calculate the costs that went into each bushel of corn,” Scott Anderson said.

Knowing those costs helps with management decisions and ultimately allows him to market grain at a profit.

Many farmers aren’t computer-savvy. So Anderson wanted to develop a program that would be as simple as possible, creating the least amount of work for operators, yet providing beneficial information.

“I worked to develop worksheets that would track expenses,” he said. “When I shared it with some fellow farmers, it seemed too complex.”

Anderson worked for three or four years to perfect the spreadsheets, then worked with a programmer for three months to build the software. The resulting program, with formulas and algorithms, is meant to make it easy for information to be plugged into the system. It’s called CashCowFarmer.

A subscription is charged for the cloud-based program, which is used to track expenses and show a continual picture of potential marketing options. The cost depends on how many acres are involved. A 30-day free trial is offered at cashcowfarmer.com.

Demonstrating the program, Anderson illustrated that it’s very easy to use. He entered prices paid for inputs: seed, fertilizer, insurance, repairs, administrative costs, bank service and interest on an operating line of credit. That information is used to compute the per-acre cost of crops.

There’s also a feature that allows farmers to calculate $100 of cost per acre as a production expense so they can make sure they market crops at a profit.

“It’s good to build in the profit level there, so you recognize what it takes to stay cost-effective,” Anderson said.

“Bankers love this and are really excited,” he said. “Those involved in risk management know it’s extremely important, marketing their grain for a profit.”

Now, the program is now set up for corn and beans. By the end of the month, it will also add in sunflowers, field peas and wheat.

The legal description used for crop insurance purposes tacks each individual field. In spring, operators input the crop type, expected planted acres and expected yield. At harvest time, actual yield numbers are plugged in. The program tracks crop inventory with sold and unsold bushels.

It’s versatile in that it tracks both owned and rented land, Anderson said. Custom applicator costs can also be built in to track the application date and harvest.

“Last year, I expected a yield of 180 bushels of corn per acre (and a) break-even price of $3.34 on productive land that was owned,” Anderson said. “On another field, the weighted average was $5.68 to produce corn on rented ground. It can also figure out what extra yield does for the bottom line.”

The program allows a review of what costs and yields have been for fields in the past. That’s helpful in changing to a rotation of corn in the field and allows comparison of input costs.

“Before I go in to negotiate for 2015 prices, I know what the cost of potash has been,” he said. “I can say, ‘I didn’t pay that last year.’”

Many farmers would have the same information. But finding it would mean fumbling through a bunch of papers.CashCowFarmer puts it all at their fingertips.

Some farmers are emotionally attached to grain production. Some get caught in a trap and get greedy. Anderson said if producers get too greedy and wait for corn to go up to $7, they can end up losing everything. Knowing the costs of inputs helps to make prudent marketing decisions, he said.

He noted that there are many producers who don’t have someone to take over the farm from them as they retire.

“There are farmers like me who may want to take on more land,” he said. “That’s when it’s really important to know production costs.”

With attention to detail, Anderson figures he gets a ten-fold return on his investment.

“For corn, I’m $1 ahead of the market and $3 on soybeans. Each year, I spend about $10,000 on marketing advisories and software. I don’t think there is a return on anything else like this.”

Anderson said almost everyone was unhappy with their marketing of crops last year. The swings in commodity markets used to be around 10 cents in six months. Now, they’re much greater.

“We now see huge swings daily,” he said. “It used to be to ‘grow as many bushels as possible and minimize costs.’ We now have to track those costs and plan how to market those crops as soon as the seed is purchased. Being prepared will outdo any other type of investment.”

Follow @farmeditor54on Twitter.

CashCowFarmer is a cloud-based program used to track expenses and show a continual picture of potential crop marketing options. For more information, visit cashcowfarmer.com.

Sourced From Aberdeen American News HERE.