Evaluating Commodity Profit Potential for 2016
Even though there seems to be little indication of a major increase in commodity prices, as a grower, one must still plant. Taking time now to evaluate actual production expenses may influence planting intentions and help with land lease negotiations. Following are some comments for each commodity production enterprise for consideration as grown within Eastern North Carolina.
Actual cost of production are estimates. Each grower will need to calculate each crop enterprise, if for no other reason, simply because these budgets referenced are for the years 2012-2013. Prices have changed since publication but these are the most recent resource available from North Carolina State University. Also, while variable cost has changed, much of the information provided within the fixed cost is likely to be about the same. (Note: Most producers assume only variable cost (production inputs) when estimating production. This is a mistake. It ignores general cost of operation, labor, fuel, interest and other expenses that are essential to operation. One may be tempted to ignore these fixed cost, especially when older equipment is used that has been paid fully, but doing so simply uses the equity provided by these assets to balance production expenses. One may do so to “float” a year or two but eventually, this will not work!)
A last bit of information that may need to be modified is land lease. All of the examples below utilize a land lease rate of $65/ac. This value is simply about 15% above the most recent USDA estimate (2014) for land rent within Craven County. (Source: http://quickstats.nass.usda.gov/results/E0F5EB36-3313-3D7B-9E7F-E56A3365CF2B#9A9F55D7-E267-38C6-ACB9-DF106291B5A7)