As your combine yield monitor displays numbers never before seen, you wonder how you will be able to pay for putting in a crop next year, particularly if you don’t have crop insurance or have a high deductible? When you get to the point of putting pencil to paper to calculate 2013 crop budgets the cost may not be as much as you anticipated. The only problem is, can you rely on today’s estimates when it comes time in estimating your profit margin next year.
There are a lot of uncertainties in trying to cobble together a budget for next year’s crop production. You will have to do it soon as seed companies pressure you for an order and you book anhydrous ammonia for fall application. But University of Illinois farm management specialist Gary Schnitkey has presented some numbers that seemingly allow more profitability than one would have imagined. But to his credit, Schnitkey raises questions about the certainty of revenue based on his estimated market prices for corn and beans in the coming year.
Starting from the top, Schnitkey uses trend line yields for corn and soybeans, which will be 195 and 57 bushels respectively in 2013. Trend line yields were used for 2012 budgets and did not turn out that way, but using those estimates provides a necessary starting point. The value of the crop is one of the bigger question marks, but Schnitkey suggests using $6 for corn and $12.50 for soybeans based on prices that are currently projected by the futures market for harvest prices next year. August 23rd futures prices for both corn and soybeans were about 9% above that level. However, Schnitkey says that projects gross revenue of $1170 and $713 per acre for the two crops.
A big issue that farmers will have to resolve on their own is cash rent and other land cost, and Schnitkey does not address land cost, so his budget is based on a return to labor, management, and land.
Direct costs for corn are lead with fertilizer, and Schnitkey reports a $10 reduction in fertilizer cost from 2012, with $155 per acre estimated. Seed cost is estimated at $100 per acre, up $2 from last year, pesticide is at $52, also up $2. Some farmers may find his seed estimate conservative, based on expected higher prices due to drought-reduced supplies. But if farmers are forced to plant lesser desirable hybrids, then seed costs may not be as high. Storage and drying costs remain at $27, and crop insurance is steady at $28 per acre. That puts total direct costs at $362 which is a $6 cut from 2012.