Will 2012 crop budgets allow you to earn much income?

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Farm operators which have harvested early may already be engaged in fall tillage, which means a forward look to 2012 crops.  You probably have an idea of prices for anhydrous ammonia, and the seed dealers have been calling you for the past two months.  Some early discussions may have already been held with land owners about cash rents for the coming year.  And if you are harvesting continuous corn that has yielded less than rotated corn, your thoughts about seed bean prices may be top of mind.  So let’s discuss crop budgets for 2012.

The Purdue crew (ag econ, agronomy, plant pathology) has calculated a 2012 crop cost and return guide which will help Cornbelt farmers estimate input costs and know how much money will be left to either pay cash rent or add to their bottom line.  Their calculations are provided for average soils, and also for soils that will provide yields that are both 20% above and 20% below average.  Their numbers also are broken out for farms with 1,000 acres and those with 3,000 acres, with both continuous corn and rotational corn.  Market prices are based on new crop prices for 2012 corn and beans, less an average basis.  Their numbers also include crop budgets and returns for wheat and double-crop soybeans.  Since there are so many variables, let’s look at an average soil with a rotational cropping program.

In this sample farm corn revenue per acre is calculated at $1,027 based on a 163 bu. yield and a $6.30 elevator price.  Beans provide $642 in revenue from a 49 bushel yield and a $13.10 cash price.

The Purdue example uses 2011 input prices, so there will be some adjustment for 2012.  The fertility program is detailed at the website, but costs $179 per acre for corn and $80 for soybeans.  Seed prices are $107 for corn and $62 for beans.  Pesticides are $38 for corn and $29 for beans.  Fuel costs $27 for corn and $12 for beans, with an additional $32 for drying costs for corn.  Hauling, interest, and insurance round out the input costs, for a total of $461 for corn and $230 for soybeans.  When that is subtracted from the revenue generated from crop sales, the contribution margin is $566 for corn and $412 for beans, which is the return to labor and management.

When the margin is spread over the entire farm, it provides $489 per acre for rotated crops, and is added to $20 per acre for government payment to push it to $509 per acre.  Annual overhead is subtracted, which includes machinery replacement at $76 per acre for 1,000 acre farms and $63 per acre for 3,000 acre farms.  Drying costs are $12 per acre, labor and family charges are $52 for smaller farms and $38 for larger farms.  The payment to family is calculated from typical family household budgets, which include non-farm income, and account for both income and self-employment taxes.  After calculating the annual overhead, the Purdue economists say that leaves $180 per acre from 1,000 acre farms and $207 per acre from 3,000 acre farms.  Those earnings leave very little with which to pay cash rent, and again, only include 2011 inputs costs, and not 2012 input costs.

Summary:
While complete crop inputs costs for 2012 crops are not yet known, it is possible to begin the budgeting process for raising corn and beans for next year to help determine levels of potential profitability.  Use 2011 crop input costs and make slight adjustments upward, particularly for fertilizer and seed.  Then factor in 2012 harvest prices, and reduce the per acre revenue with the annual overhead and family living expense.  There will be profits for next year, but insufficient ones to pay high cash rents that land owners may demand.

Source: the Farmgate Blog



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