WEST LAFAYETTE, Ind. — Economists are urging farmers to think carefully before cutting inputs as a way to save money while margins remain tight. Items such as chemicals and seed may be on the top of a producer’s list to trim, but such a move could hurt their bottom line in the long run, the economists said.

"Do producers evaluate costs? Absolutely they do," said Michael A. Gunderson, an associate professor of agricultural economics at Purdue University. "After five years of record net income, we’re back to the place where we do evaluate costs."

A part of assessing costs would naturally include looking at inputs, he noted. "A few colleagues and peers have been suggesting farmers may need to reduce costs per acre about $100. But be thoughtful and careful about how you do it."

Attempting to renegotiate cash rents would be a good way to start lowering costs, Gunderson said.

"The lowest-hanging fruit is cash rent," he explained. "Try to renegotiate again so they reflect the environment we’re currently in. Land values come down faster than cash rents. Producers aren’t very aggressive in negotiating or, if they are, another farmer may be willing to (step in to) pay the higher prices."

The goal in deciding what costs to trim should be to maximize profit given the situation at hand, said Jim Hilker, a professor in Michigan State University’s Department of Agricultural, Food and Resource Economics.

"There are only so many things they can cut, and if they’re going to cut something, it’ll be an input," explained Hilker, also director of undergraduate studies and associate chair of the department. "They’ll ask themselves if they should add or subtract inputs.

"When input costs are constant, if (commodity) prices go up, you add more (inputs); if prices go down, you add less, but don’t be dumb about it."

Hilker recommended soil tests to be sure producers use the proper amount of chemicals. "Let’s get the proper information needed to make a correct decision. It’s Farm Management 101. You need to know the costs, what you’ll get for it and the effect on yield in doing it."

Farmers may consider cutting soil tests as a way to save money, but Hilker questions if that is a smart move. Depending on the situation, producers may cut back by not testing each field annually or by taking fewer samples from a field.

"Some people get in cash flow binds," he said. "If you do, you want to cut things that will cut your profit the least. There are very few bad farmers. Are there better or worse farmers? Yes, but they’re bright people. Sometimes, they just need to be reminded."

It was a little easier for farmers to make input decisions when commodity prices were higher, Hilker noted. A producer might have been willing to add inputs because each bushel was worth so much.

Growers should look at seed varieties and find the traits that would best work for their operations, Gunderson said, adding they should evaluate herbicides, insecticides and fertilizer as well.

"I suppose for most producers, most benefits on yield probably come from seed technology," he said. "Farmers see prices (for some inputs) rising faster than they like and that’s the culprit for putting the squeeze on."

Reduced yields could be a negative impact of cutting inputs, Gunderson said. Producers should instead focus on the production cost per bushel.

"A grower budgeting based on cost per acre might forego the most expensive input simply because it costs more," he pointed out. "Someone budgeting based on cost per unit of output might note that spending additional money per acre actually reduces total cost per acre because that input yields more bushels."