Establishing a Marketing Price Range

Sue Martin, president of Iowa-based Ag. & Investment Services, Inc. and a regular analyst on the nationally syndicated TV program “Market to Market,” offers the following worksheet to help producers establish a marketing price range:

A) What was my cost per acre last year? __________

B) Is there anything that made last year different from a “normal” year? For example, higher than normal fuel costs or lower-than-average herbicide costs? If so, factor these costs in here. +/- __________

C) What is the current rate of inflation? (Now it’s about 1.5%)

D) What is the expected increase in cost of production due to inflation?
     (A +/- B) x C = __________

E) What is my expected production cost per acre?
       (A +/- B) + D =__________

F) What can I expect to yield per acre this year? __________bu/acre

G) What is my expected cost of production per bushel? E/F =__________

H) Add a reasonable profit margin on to your expected cost of production to establish a price goal. __________

The range between your break-even point (line G) and your price goal (line H) can be looked at as your target price range. When prices move into this range, you should consider marketing alternatives.