Tools to Evaluate Profit by Customizing Crop Enterprise Budgets
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Continued depressed commodity prices and increasing production costs greatly limit corn and soybean profit margin if the anticipated yield is average to below average. Maximizing yield with the lowest input cost is crucial in order to realize a profit. Thus, it is critical to plan and evaluate production cost prior to planting.
For many growers, this will simply be a matter of close examination of expenses. However, for some, a change in production strategy may be necessary. One such example is to lower seeding rates for soybean production. There could be as much as $30/ac difference in profit simply based upon seeding rate. NC State University trials (over 63 locations) show no significant yield increase between a final soybean population of 90,000 plants per acre and any higher plant population for May-planted soybeans. Likewise, for June planted soybean, 100,000 plants per acre has been shown to be optimum. As another example, blanket application of 200 lbs/ac of 0-0-60 compared to lowering the rate to lower recommended rates can shave $11-14/ac from production cost. Collectively, these two items may result in an increased profit of $43/ac without reduced yield.
In contrast to reducing cost, corn yield may be limited if proper inputs are not supplied. NC State University research data reflects planting populations ranging from 32,000 to 38,000 plants per acre with higher rates on more productive soils. Within this population range, data commonly reflects yields 150-200+ bu/ac. Failure to increase seeding rates for corn production may dramatically reduce potential yield. Unrealized yield is unrealized profit.
Producers must closely examine production practices and make appropriate changes when necessary. The two charts below show corn production profit or loss based upon variable yields and prices. Assumed land rental rate is $50/ac in the first chart and $60/ac in the second. Both show the need to maximize yield yet keep production inputs minimum.
Equally as important as knowing the true cost of crop production inputs is knowing how prices might alter profit. Within the examples provided, a price of $3.89/bu and yield of 140 bu/ac is necessary to pay a variable cost. A price of $3.78 is necessary to break even at this yield. Just an important, 500 acres of soybean production only realizes a net return to management slightly more than $1500 yet the same acres of corn production provided $29,634.56 net return. Greater production of corn would be a better choice if soils are suitable in this example.
The primary point to these examples is to demonstrate how critical each production decision is to potential profit. Two tools will allow entry of specific data to evaluate crop production expense. The first, the NC State University Crop Comparison Tool – 2019, can be used for those that already know their exact enterprise production expenses. Simply enter these figures into the spreadsheet to compare corn, soybean, sorghum, cotton and wheat production. This tool also includes charts showing state and regional corn and soybean yield.
The second is a similar spreadsheet that allows one to enter data to create a budget for corn and soybean and compare the impact of production expense on potential profit. This tool, 2019 Corn & Soybean Enterprise Budget and Farm Projections was created simply by editing NC State University’s spreadsheet to include charts for variable prices and yield based upon user data entered. It allows for customization of seeding rates, starter verses in-furrow fertilizer cost, custom fertilization practices, and other inputs to create a crop enterprise budget. Lastly, it too will generate a farm summary as the Crop Comparison Tool 2019 but is limited to only corn and soybean crops.
2019 Corn & Soybean Enterprise Budget and Farm Projections (Note. This spreadsheet was based upon the NC State University Crop Comparison Tool 2019. As such, macros to update price and basis were originally included but are no longer functional. After downloading, to begin using, select “Don’t Update” when it opens and proceed to enter data).