Using Realistic Yield Goals and Budgets for Break-Even Analysis
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Examine the two proposed budgets with varying yields below. First realize that at higher yields, all crops provide a profit. However, cotton’s total production cost is among the higher of the crops total production cost yet the return is low for such an investment. As such, unless one anticipates higher cotton prices, higher cotton yield, or reduced production costs, fewer production acres of cotton is a consideration. All crop production plans should be evaluated for return of investment given a reasonable yield and price range with high probability of occurrence. Failure to evaluate these factors could result in devastating consequences.
NC State has developed a Crop Comparison Tool that makes such comparisons easy. For the first budget, reasonable crop yield was used while the other has the same input but for lower yield. Note that as yields are decreased, cotton and peanut shows a loss. Too, while corn and soybean are still profitable, the difference between profit and loss Is only a bushel or two. So, there is little room for any additions to the proposed budget. Note too, that at lower yield, the break-even prices are now higher. Combined with the fact that historically, adverse weather usually negatively impacts at least one crop that we grow, this creates additional risks to manage.
One critical point all this data show is that one must examine every production input. If the input Is not providing profit, it is worthless. While one can increase yield through multiple means, doing so without adding profit is wasted effort. Similarly, failure to accept that some soils simply will not produce the desired targeted yield goals is a wasted effort. This is readily seen in the break-even charts that follow. Note that for corn production of 120 bu/ac sold at $6.25/bu has no profit. The investment of over $700/ac should have been spent elsewhere! Personal records over time are an excellent source of reasonable yield. If this data is not available, review the historic yield based on climate and soil type at Realistic Yield Expectations for North Carolina Soils
Hopefully, this information below will aids in making decisions for production in 2023. Simply realize these are simply projections and may be a bit higher than your actual production expenses. Each producer’s values will differ. If you would like assistance entering your data into the budget for a more accurate assessment, simply call or email your local NC Extension Office. We will be glad to enter your data for similar analysis.