This article was written by Donald Guthmiller, former SDSU Extension Crops Business Management Field Specialist.
Many producers prepaid crop inputs for tax purpose last fall and early winter, some of which have been delivered and spread, i.e. fertilizer, and others which you are financing with the supplier until delivery. Nevertheless, cost will be higher for non-land expenses for the 2012 crop.
That likely includes seed, fertilizer, pesticides, drying, storage, crop insurance, power, and overhead costs. Add the cash rent on top of over $400 cost for direct inputs and you have your revenue target for marketing. But don’t forget the return to labor and management, also known as profit that pays for family living.
Higher costs of fertilizer from 2011 will push up production costs for 2012. Higher energy costs, increased acres of corn, and global economic factors will raise the demand for fertilizer. Fertilizer prices have paralleled crop prices in general terms the last several years. We know that fertilizer cost rose during the fall and early winter.
The crop insurance price is set and can be added. into the budget. Rember for cash flow purposes that the premium is due in August this year.
The two major costs for corn and wheat are fertilizer and land costs compared to soybeans. For producers who know their land costs can also be added into the crop budget whether it is owned or rented ground.
Crop budget net returns for corn and soybeans in 2012 are closer together than they were in 2011. Obviously yields play a major role in the breakeven price needed to cover all costs. One of the yields to consider when making final crop plans is the crop insurance yields.
How do you make sure of a profit if production costs continue to rise? One way is to continue to calculate your breakeven cost with a normal crop yield and set goals for the marketing plan. As prospects for the crop size change throughout the year, adjust the breakeven price up or down as you manage your marketing plan.
Current SDSU Extension Economics crop budget tools are available in Excel format. Click on the “2012 Crop Budgets” and once you download your copy, work through each tab from the beginning to complete and compare the returns for each crop. Donald Guthmiller is located at the Watertown Regional Extension Center