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Economics of Intensive Wheat Management Practices - Analysis for 2011

John Hanchar, Farm Business Management
Northwest New York Dairy, Livestock & Field Crops

July 8, 2013

During the September 8, 2011 Advanced Wheat Management Seminar in Batavia, staff from Cornell University and the WNY Crop Management Association as well as a number of producers covered a variety of topics. For that program, we developed economic analyses to examine the benefits and costs associated with an intensive wheat management system compared to a standard or base system. 

We based analyses on Donn Branton's experiences and results for the 2011 wheat crop, and estimated the expected change in profit associated with the intensive wheat management system practiced by Donn versus a program of standard practices. The intensive wheat management system can be described as an information intensive system utilizing tissue sampling, additional soil testing, scouting and crop consulting services to make decisions regarding nutrient, pesticides, and other inputs in a controlled traffic (tramline) system. Application method, rates, timing, and location (as they relate to input use) receive emphasis.

Summary of Results
  • Intensive wheat management has the potential to increase value of production, income, but additional costs to realize that potential can be relatively large.
  • For 2011, analysis suggests that an intensive system outperformed a standard system based upon the estimated change in profit attributed to intensive management. Analysis for 2010 concluded the same.
  • Expected changes in profit are sensitive to a number of factors, such as expected price; expected increase in wheat yield; and expected input use decisions given growing conditions and resulting changes in input costs
Estimating the Expected Change in Profit Using a Partial Budget
One factor that producers use to evaluate possible changes in practices is the expected change in profit. Profit equals the total value of production, income minus the costs of resources, inputs used in production. Expected change in profit equals the expected change in total value of production minus the expected change in costs.

Refer to Partial Budget for Profit Table

Analysts construct a partial budget to estimate the expected change in profit associated with a proposed change in the farm business, such as a change from standard to intensive wheat management system.

Results
Expected changes in profit by expected yield increases by expected wheat prices range from negative $119 per acre to positive $60 per acre for 2011 conditions (Table 1). To illustrate some of the details of the analyses, the partial budget for an expected increase in yield of 30 bushels per acre, and $7.65 per bushel wheat price follows.

The intensive wheat management system outperformed the standard system in 2011 based upon the estimated change in profit of about $49 per acre attributed to the intensive management system. The intensive system outperformed the standard system in 2010 as well. However, the expected changes in profit were $126 and $49 and per acre for 2010 and 2011, respectively. Expected changes in total value of production were very similar for the two years wheat prices were $8.00 and $7.65 per bushel for 2010 and 2011, respectively, while the expected additional yield was 30 bushels per acre for both years.

Refer to Table 1: Expected Change in Annual Profit

However, in 2011 the total additional cost to realize the additional income was considerably higher compared to 2010. Higher prices for some inputs, for example nitrogen, and greater input usage, for example, an additional fungicide application in 2011 compared to 2010, underlie the difference in expected change in profit.

Based upon the 2011 analyses, break even wheat yield increases are approximately 37, 30, 26, 22 additional bushels per acre for expected wheat prices of 5, 6, 7, and 8 dollars per bushel, respectively.




Partial Budget for Profit Table (pdf; 422KB)


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calendar of events

Upcoming Events

Beginning Farmer/Hobby Farmer Workshop $5/pp, class size is limited, so pre-register by April 15th!

April 27, 2019
9:00 am - 1:00 pm
Canandaigua, NY

This hands-on workshop is for beginning or part-time farmers who would like to improve their farm machinery skills, learn to properly and safely maintain their equipment to protect their investment. If you have been thinking about buying a tractor, new or used, two-wheel or four-wheel drive, compact or utility or more come join us. Topics include: selecting the right size/type tractor for the job; basic maintenance; staying safe around tractors and equipment; attaching implements properly; and information about ROPS and SMV's. There will be time for questions.

Pre-registration requested by April 15, 2019 email Amy with your name, address, and phone number or call 585-394-3977 x 429.
Fee: $5.00/person. Class size is limited.

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2019 Pastured Poultry Seminar, lunch included so please register by May 10th! $25/person

May 18, 2019
Registration begins at 8:00 a.m.w/ coffee & donuts with the Program running from 9:00 a.m. - 5 p. m.
Attica, NY

The main speaker this year is Eli Reiff of Mifflinburg Pennsylvania. Eli raises broilers, turkeys, sheep, and beef, all on pasture. Topics to be covered will include the pasture, feed and nutrition, marketing, costs, and much more. As we grow as farm operators and get bigger, we may not pay as much attention to the basics as we should. So those areas are where we will start, and then expand to cover the group's interests.

Mike Badger, Director of the American Pastured Poultry Producers Association will also be available for a round-table discussion. Plans are to have representatives from Farm Bureau, NYCAMH for farm health and safety, Wyoming County Chamber of Commerce, and Cornell Cooperative Extension of Wyoming County, as well as others.

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Calling all 9th-12th graders! 4th Annual Precision Agriculture Day at Genesee Community College

May 21, 2019
9:00 am - 1:30 pm Register by Friday May 10th! $15/per person includes lunch
Batavia, NY

Calling all 9th-12th graders!  We have an exciting new program for students interested in technology, science, engineering, and agriculture!
Would you like to:
  • Learn about how Drones collect information
  • Check out some potential career opportunities that have new and ever-changing technology
  • Learn how these technologies can be used in our own backyards in WNY
  • Discover potential and exciting career opportunities

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Announcements

Producers Previously Enrolled in the LGM Program Now Eligible for MPP

Dairy Producers Previously Enrolled in the Livestock Gross Margin Program Now Eligible for 2018 Margin Protection Program
The U.S. Department of Agriculture (USDA) today announced that dairy producers who elected to participate in the Livestock Gross Margin for Dairy Cattle Program (LGM-Dairy) now have the opportunity to participate in the Margin Protection Program for Dairy (MPP-Dairy) for 2018 coverage. Sign-up will take place March 25 through May 10, 2019.
Eligible producers can enroll during the sign-up period at their local USDA service center. To locate your office, visit farmers.gov.


Smart Farming Team Technical Assistance Grant Application

The Labor Ready Farmer Project is offering grants to provide up to 12 hours of Technical Assistance (TA) consulting services to farms who want to make improvements to their farm's processes in hiring, training, managing or evaluating employees. Applicants will choose from one of the following four areas for TA assistance and identify a specific project. If selected they will be matched with a "Smart Farming Team" of consultants who will provide one on one technical assistance.
  • HIRING EMPLOYEES 101 - GETTING OFF TO A GOOD START
  • ONBOARDING & TRAINING EMPLOYEES QUICKLY AND EFFECTIVELY
  • FINE-TUNING & IMPROVING THE WORKING ENVIRONMENT
  • H2-A READINESS
Please complete this application and send to Nicole Waters, Beginning Farm Project Coordinator for the Cornell Small Farms Program. The form can be submitted by email, mail or in-person at the address listed below. Please feel free to call or email with any questions.

Nicole Waters - Beginning Farmer Project Coordinator
Plant Science Building, Room 15b
Tower Road, Cornell University
Ithaca, NY 14853
Phone: 607-255-9911
Email: nw42@cornell.edu

Applications accepted on a rolling basis.



USDA Announces January Income over Feed Cost Margin Triggers First 2019 Dairy Sa

WASHINGTON, March 6, 2019 ? The U.S. Department of Agriculture's Farm Service Agency (FSA) announced this week that the January 2019 income over feed cost margin was $7.99 per hundredweight, triggering the first payment for eligible dairy producers who purchase the appropriate level of coverage under the new but yet-to-be established Dairy Margin Coverage (DMC) program.

DMC, which replaces the Margin Protection Program for Dairy, is a voluntary risk management program for dairy producers that was authorized by the 2018 Farm Bill. DMC offers protection to dairy producers when the difference between the all milk price and the average feed cost (the margin) falls below a certain dollar amount selected by the producer.

Agriculture Secretary Sonny Perdue announced last week that sign up for 
DMC will open by mid-June of this year. At the time of sign up, producers who elect a DMC coverage level between $8.00 and $9.50 would be eligible for a payment for January 2019.

For example, a dairy operation with an established production history of 3 million pounds (30,000 cwt.) that elects the $9.50 coverage level for 50 percent of its production could potentially be eligible to receive $1,887.50 for January.

Sample calculation:
$9.50 - $7.99 margin = $1.51 difference
$1.51 times 50 percent of production times 2,500 cwt. (30,000 cwt./12) = $1,887.50

The calculated annual premium for coverage at $9.50 on 50 percent of a 3-million-pound production history for this example would be $2,250.

Sample calculation:
3,000,000 times 50 percent = 1,500,000/100 = 15,000 cwt. times 0.150 premium fee = $2,250

Operations making a one-time election to participate in DMC through 2023 are eligible to receive a 25 percent discount on their premium for the existing margin coverage rates.

"Congress created the Dairy Margin Coverage program to provide an important financial safety net for dairy producers, helping them weather shifting milk and feed prices," FSA Administrator Richard Fordyce said. "This program builds on the previous Margin Protection Program for Dairy, carrying forward many of the program upgrades made last year based on feedback from producers. We're working diligently to implement the DMC program and other FSA programs authorized by the 2018 Farm Bill."

Additional details about DMC and other FSA farm bill program changes can be found at farmers.gov/farmbill.


New Guidance for Mortality Disposal Issued

NYS Department of Ag and Markets has posted guidelines on disposal of livestock carcasses, in response to reports that some rendering companies have halted pickups from farms.

https://nwnyteam.cce.cornell.edu/submission.php?id=761&crumb=dairy|1

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