Power costs are $92 per acre, which is up only $2 from the current year, and that is attributed to machinery depreciation. Other overhead costs are labor, insurance, building costs and those are all steady at $62 per acre.
For corn, his non-land cost is $516 for corn production, and is allocated for a return to land of $302 and a $90 return to management and labor. That leaves a $262 net return, which has to cover cash rent or other land costs.
For soybeans, Schnitkey is budgeting a $177 direct cost to cover crop inputs, which is down $1 from 2012 with the primary reduction from fertilizer, although seed and pesticide costs will be slightly higher. For soybeans his power costs are $83 per acre, up $3 from last year, due to machinery depreciation. Overhead costs remain at $48 from last year; and that puts total non-land cots at $308, up only $2 from 2012. The soybean return to operator and land is $405, which leaves only $18 for a net return that needs to be applied against cash rent or other land costs.
Based on returns to land, which are $45 less for corn and $79 less for soybeans, compared to 2012, Schnitkey says, “These fundamentals do not suggest that increases in cash rents should occur in 2013.” His numbers do promote corn production over soybeans for 2013 because of the $244 per acre additional return, and he says that is large compared to historical numbers that have averaged about $75 per year for the past 6 years. However, he says, “Whether these relative prices persist into 2013 is an open question, depending on demand conditions and harvests in both North and South America. Whether these relative prices influence 2013 planting decisions also is an open question.”
Source: FarmGate blog