Strong yields do not guarantee strong profits when grain prices are under pressure. Pannar Seed’s Lukas Meyer says farmers should focus on break-even costs, smarter input decisions, reliable hybrids and early marketing.
Strong yields do not necessarily translate into strong profits when grain prices are under pressure, according to Pannar Seed business manager Lukas Meyer.
Speaking on Food For Mzansi’s Farmers Inside Track podcast, Meyer said the current production environment requires farmers to look beyond tonnes per hectare and focus more closely on the margin generated by every hectare.
“Farmers are in a very interesting, but challenging space,” Meyer said. “On the one hand, yields are looking strong, which is always a positive signal, but on the other hand, lower grain prices and high input costs mean the pressure on profitability is very real.”
The result, he said, is a need to shift the focus from simply producing the biggest possible crop to understanding what each hectare contributes to the bottom line.
“The big conversation is not only about tonnes per hectare produced, but about what margin per hectare at the end of the season a farmer can realise.”
Meyer said this is one of those seasons where increasing production alone may not improve a farmer’s financial position.
“A big crop does not automatically mean a better financial result,” he said.
Where grain is sold into a weaker price environment, additional tonnes can be offset by lower income per tonne and rising production costs. Meyer therefore urged farmers to know their break-even position and manage each hectare with margin in mind.
The shift, he said, is from asking, “How do I produce the biggest crop?” to asking, “How do I create the best return per hectare?”
That means decisions around seed, plant population, fertiliser, crop protection and grain marketing all need to be considered through a profitability lens.
“Yield still very much matters, but it must pay for itself, and it should not be at the cost of profitability,” Meyer said.
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Hybrid choice is a margin decision
With input costs under pressure, Meyer said hybrid selection is one of the first important decisions farmers make when managing margins.
“The right hybrid does not only bring yield potential, it also helps to manage risks,” he said.
Rather than focusing exclusively on top-end yield, farmers should consider characteristics such as stability, adaptability, disease tolerance, standability and stress tolerance.
“In seasons like this, reliability can just be as valuable as peak performance or yield performance from a specific hybrid,” Meyer said.
He recommended matching hybrids to the potential and risk profile of individual fields.
On stronger, lower-risk soils, farmers may have more scope to select hybrids for high yield potential. More variable or higher-risk fields may call for greater emphasis on stability and stress tolerance.
“We always try to recommend a balanced portfolio across different potentials,” Meyer said. “Different potentials that farmers can use the hybrid package to spread their risk.”
Not a season to simply cut costs
Meyer cautioned against responding to tighter margins by indiscriminately cutting input costs.
“I would not describe this as a cost-cutting season. I would rather describe it as a smarter investment season,” he said.
Cutting the wrong input can reduce yield, while spending money without a clear return can undermine profitability.
The focus should instead be on understanding which inputs have the greatest effect on yield and margin, including seed placement, hybrid selection, plant population, fertiliser efficiency and crop protection.
“The key is to make sure that every input has a clear purpose and a clear expected return, and not only stick to a pure standard recipe,” he said.
Other costs, including fuel, logistics and finance, also need to be considered when calculating the real return from production.
Marketing needs to start before harvest
With potential oversupply adding to price pressure, Meyer said grain marketing should form part of the profitability plan from the outset rather than being left until the crop is ready to sell.
Farmers should first establish their break-even price and then consider a staged selling strategy, while accounting for storage costs and basis levels.
Contracting and hedging options can also form part of a marketing strategy where they suit an individual farming business.
“Marketing should not be left until the last one,” Meyer said. “It’s part of the profitability plan from the beginning.”
While some current price pressure may be seasonal and influenced by international production cycles, Meyer said volatility itself has become part of the farming environment.
Farmers therefore need businesses that can withstand different market cycles, combining production planning and cost discipline with a clear marketing strategy.
Good agronomy connects yield to profit
Meyer also highlighted the role of agronomic advice in ensuring that genetics and inputs translate into a commercial return.
“The seed only reaches its potential when it’s placed and managed correctly,” he said.
That means considering the interaction between hybrid choice, soil conditions, plant population, fertiliser and crop protection, while also taking the commercial realities of the season into account.
Ultimately, Meyer said, attention to detail is what can distinguish a good crop from a good business result.
His advice to farmers was straightforward: “Do not farm only for yield alone, farm for margin.”
“Know your break-even, choose reliable hybrids, and manage inputs carefully,” he said, adding that these decisions should be linked to early marketing decisions to protect profit. “I think in seasons like this, attention to detail is what separates a good crop from a good business result.”
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