With the recent trend in lower grain prices, being able to take a good look at what the total costs of a particular crop are and how that relates to yield numbers and various land charges, be it land payments or simply cash rent, is of vital interest to today’s producers.  Can producers cover the total costs with today’s prices and can they make those crop budgets work with the prices currently being bid for 2015 crop?

Farm data collected within the South Central Region of the North Dakota Farm Business Management Program, showed an 81% increase in total soybean costs per acre, from 2006 to the end of the 2013 crop.  This increase in production costs included a surge upwards in cash rents as well as other crop costs.

As producers work with the higher per acre costs of various crops, it is imperative to understand the relationship between costs, levels of production and the land charge or cash rent.  If the land involved is owned but has a calculated per acre payment, that amount may be considered in the land charge as it must be covered in one way or another within the cash flow.  What is the effect of changing yields and land charges or cash rents?  What price levels are attainable and still profitable for the producer?

One other item that must not be overlooked is that high profit producers often raise crops for less total expense than the average and certainly less than the low profit producers.  For example, in 2013 high profit soybean fields in the South Central Region generated an average yield of 38.3 bushels for $23.35 less expense than the average fields which produced 32.0 bushels per acre.   When compared to the low profit fields, the difference increased to $44.38 per acre while the production declined to only 21.2 bushels per acre.  These figures and those for other crops are available for producers on the Farm Business Management website at www.ndfarmmanagement.com. 

The tables below show the effect of changing yields and land charges or cash rent levels for barley, canola, corn, HRSW, soybeans and sunflowers.  It should be noted that these are true breakeven costs of production as there is no amount set aside for the operator’s labor or management.  Normally a charge of $25 to $40 per acre can be expected for labor and management.  The expense numbers, such as barley at $252.29 are from the 2013 year and reflect the average costs without any land charge or cash rent.

In the barley table below, with non-land costs of $252.29 and a yield of 75 bushels per acre, a producer would have a breakeven cost of $4.30 with a $70.00 land charge and $4.83 with a land charge of $110.00 per acre.  An operator labor & management charge of $25/acre would add an additional $.33 per bushel.

For additional information about the Farm Business Management Program or to enroll your farming operation, you may contact Steve Metzger or Jory Hansen at the CREC at 701-652-2951.