By removing 12.4 acres from planting and harvesting, the return for the grower improved across all categories. The yield was improved by 3 BU/A with no farming practice changes. As time progresses, this yield improvement will increase the Actual Production History (APH) for crop insurance. The APH is the foundation of the policy affecting many aspects including total loss payout.
The operator is reducing the total premium paid for their crop insurance policy by reducing the total acres planted. This does reduce the total premium PRM is receiving, but it also removes the most likely areas to produce a loss. By removing the unprofitable acres, it is positive for all parties involved.
The largest benefit for the grower came in profit and expense reduction. By not planting in unprofitable areas, the total expenses were reduced by $5,868. Even with planting 12.4 acres less, the total profitability increased by $663 or $32.79 per acre. All of these factors add up to a 6.9% increased return on investment for the field. The grower also has a great presentation for his banker the next time he renews his operating loan.
Planting around unprofitable acres is not the end of the process even though the operator already saw an increase in probability. Pheasants Forever employs Farm Bill Biologists and Precision Ag and Conservation Specialists to help evaluate and provide customized solutions for underperforming acres. The Farm Bill Biologist is now working with the grower to determine program options. Conservation Reserve Program (CRP) is only one example of possible programs the farm bill biologists have at their disposal. At the time of the initial visit with the grower, a CRP payment for the marginal ground on this field was $167/acre in additional revenue. Currently, the CRP program is going through some changes to payments and incentives that should make the program even more profitable to the grower. When these program changes are finalized, Pheasants Forever will work with the grower to assess how CRP can benefit their land and bottom line. Other programs are being explored to create a revenue opportunity in the unprofitable parts of the field.
The goal of PRM and Pheasants Forever is to utilize precision technology to improve farm profitability by targeting the underperforming acres and putting those acres to work in a different way that is beneficial for soil health, water quality, wildlife habitat, and improving sustainability.
Price Increase Scenario
With recent crop price increases, the imposing thought of how will the higher market price affect the net negative areas in the farm? On this scenario the crop price was changed to $13/bushel, the profitability distribution is shifted upwards, but there is still 8% of the land not returning a profit. Even with increasing commodity prices, there is still an opportunity for an in-depth analysis for cost savings.