Focus on Ag Continued From Page 2

and look for any adjustments. Review other ways to manage financial risk.

• Fine tune the farm’s grain marketing plan, based on the cost of production that is updated regularly, which includes set price targets and deadline dates as part of the marketing plan.

• Don’t get caught up in the market hype or chatter — pay attention to how changes in the corn and soybean market prices affect your own farm business. Don’t miss the profit opportunities.

• Look for positive profit margin opportunities in livestock production and take advantage to lock in both cash expenses and market prices when those margins exist.

• Take time to analyze the best farm program options and crop insurance strategies for your farm operation. These decisions can be a key to having a sound risk management strategy.

• Excessive spending for family living and non-farm expenditures can be a hidden expense in the farm business. Include the non-farm expenses and other family living expenditures that are reliant on farm income in the farm cash flow planning process. Pay attention to the repayment ability on Term Debt Loans.

• In addition to declining working capital, a low term debt coverage ratio is a key ratio in analyzing the financial strength of a farm business. This ratio is the cash available for debt repayment divided by the total principal and interest due on all intermediate and long-term loans.

• Make wise decisions on the use of available cash for farm machinery and capital improvement investments, and make sure that the investments are needed for the farm operation.

• Term loans that are set up to finance machinery purchases and capital improvements may require payments for several years, which need to be factored into cash flow budgets for 2023 and beyond.

• Look for opportunities to sell any farm assets that are no longer needed in the farm business and use funds for capital purchases, added working capital or to repay some term debt.

Carefully analyze decisions to purchase farmland.

• There is likely to be a lot of farm real estate for sale in the coming year and some farm operators are likely to have some extra cash available. Be cautious not to get caught up in the hype of “buy now, because they don’t make any more farmland.” Make sure that any land purchases are financially sound for the long-term future of the farm business.

• Shop around before settling on a high dollar purchase of farmland, as there may be opportunities to find comparable farmland, as far as land quality and production capability, for less money.

• Compare the cost of owning the farmland to the likely annual land rental rates over the next few years to secure increased crop acreage.

• Compare the cost and potential return of the cash investment to purchase additional farmland to the cash investment and return of improving existing farmland with upgraded drainage, etc.

• Be sure to include the required annual real estate loan principal and interest payments, along with real estate taxes, into future annual cash flow planning for the farm business.

• In addition, do a “stress test” on the real estate purchases to make sure that those real estate loan payments still have a positive cash flow with a 10% decline in net farm income, a 10% increase in farm expenses and higher interest rates. Communicate with family members, farm partners and ag lenders.

• When financial matters and farm profitability in the farm operation improve, such as in the current situation, it is easy to revert back to bad management habits. It is still very important to discuss and properly analyze farm financial strategies with family members, partners, ag lenders and other consultants in the farm operation.

• Meet with your ag lender early to discuss your farm operating credit needs for 2023 and to consider possible capital or real estate purchases and adjustments for the coming year.

• Utilize farm business management advisors, crop insurance agents, marketing and crop consultants, and other professionals to assist with farm management decisions. View your ag lender and other professionals as consultants to assist with key financial and business management strategies in the farm operation.

• Discuss planned machinery and equipment purchases and potential land purchases, as well as the projected cash flow impacts on the farm business, prior to finalizing those decisions.

• Discuss grain and livestock marketing plans and analyze the impact that marketing decisions could have on cash flow projections.

• Discuss any financial concerns early, either farm-related or nonfarm concerns, while there is still time to make any needed financial adjustments.higher crop input costs, along with increasing land rental rates, will likely put more pressure on crop break-even price levels for 2023. Using typical crop input expenses, other direct costs, average overhead expenses, together with a land rental rate of $275 per acre and a targeted return to the farm operator of $50 per acre, the break-even price on cash rented acres to cover direct and overhead expenses for corn in the Upper Midwest for 2023 will likely be around $5.50 to $6 per bushel. This compares to corn break-even levels of $5 to $5.25 per bushel in 2022 and $3.75 to $4 per bushel in 2021. The break-even soybean price to cover the cost of production and $275 per acre land rent in 2023 will likely be about $12 to $13 per bushel, which compares to soybean break-even levels of $11-$11.50 per bushel in 2022 and $9-$9.50 per acre in 2021.

3. Strong grain prices continue in 2022.

As in most years, where farmers were positioned in the grain market and the grain marketing decisions that were made by farm operators will have a big impact on the profit levels for their crop enterprise in 2022. Both corn and soybean markets have remained quite strong throughout most of 2022 due to increased demand both for domestic uses and for export markets, especially to China. The basis level between Chicago Board of Trade (CBOT) prices and local corn and soybean prices has remained extremely tight in many areas of the Upper Midwest due to strong local demand and tight grain supplies, which has also enhanced grain marketing opportunities during the year. New crop cash corn price bids the digital plan documents for free by entering Quest project # 8368809 on the website’s Project Search page. Documents may be downloaded for $50.00. Please contact QuestCDN. com at 952-233-1632 or info@ questcdn.com for assistance in free membership registration, viewing, downloading, and working with this digital project information.

BID SUBMITTAL: A bid shall be submitted online no later than the date and time prescribed. For this project, the City will only be accepting online electronic bids through QuestCDN. To access the electronic bid form, download the project document and click online bidding but- in Southern Minnesota were near $5.25 per bushel early in 2022, before rising to near $7 per bushel by April and staying above $6 per bushel for the remainder of the year. The cash corn price was above $6.50 per bushel in mid-December. ton at the top of the advertisement. Prospective bidders must be on the plan holders list through QuestCDN for bids to be accepted.

The 2022 new crop cash soybean bids in Southern Minnesota started the year at $12.50-$12.80 per bushel and rose to near $15 per bushel by late April, before finishing the year in the $13-$14 per bushel range from July to December. The cash soybean prices were above $14.25 per bushel in mid-December at many locations. The USDA is currently estimating the average farm prices for the 2022-23 marketing year, which ends on Sept. 30, 2023, at $6.70 per bushel for corn and $14 per bushel for soybeans. The current forward price bids being offered in many areas for the Fall of 2023 are near $5.50 per bushel for corn and $13.25 per bushel for soybeans.

4. Variable crop yields across the Midwest.

Some crop farmers in Southern Minnesota and Northern Iowa would categorize 2022 crop yields as better than expected. Following a somewhat late planting season, favorable growing conditions for both corn and soybeans allowed crops in many areas to make rapid progress. Weather conditions turned very hot and dry from late May through July. Many portions of this region only received 50-75% of the normal growing season precipitation from May 1 through Sept. 30, and much of that came in mid-August or later. However, the combination of excellent planting conditions, nodrown-out loss, timely rainfall and above normal growing degree units resulted in average to above average corn and soybean yields for the year in some portions of the region.

On the other hand, mother nature was not kind to many producers in Nebraska, Kansas, South Dakota and Western Iowa, as well as in portions of Western Minnesota, as producers in those areas experienced some of the worst drought conditions since 2012, and in some cases the worst drought since 1988. The drought in these areas resulted in corn and soybean yields that were 20-30% or more below APH yields. The drought also resulted in very low hay and pasture production, which led to many cow/ calf producers in the region being forced to liquidate a portion of their beef herd.

5. Sharp increases in land values. Iowa State University recently released the 2022 Farmland Survey results, which showed that average farmland values in Iowa increased by 17% in 2022 as compared to 2021 farmland value. The rather large percentage increase in annual land values this year came one year after a 29% increase in 2021, which was the second highest on record, trailing only a 32.5% increase in 2013. The 2022 average farmland value in Iowa was $11,411 per acre, compared to $9,751 in 2021 and $7,559 per acre in 2020. The 2022 average is at the highest nominal land value since Iowa State began surveying land values in 1941.

Recent U.S. Federal Reserve data reported year-over-year average annual land value increases in the third quarter of 2022 at 30% in North Dakota, 27% in Kansas, 24% in Minnesota, 22% in Iowa, 20% in Nebraska and Illinois, 13% in South Dakota and 12% in Wisconsin. The higher land values were largely driven by high farm profit levels in 2021 and 2022.

BID SECURITY: A Proposal

Bond in the amount of not less than 5 percent of the total amount bid, drawn in favor of City of Nicollet shall accompany each bid.

OWNER'S RIGHTS

RESERVED: The Owner reserves the right to reject any or all bids and to waive any irregularities and informalities therein and to award the Contract to other than the lowest bidder if, in their discretion, the interest of the Owner would be best served thereby.