WEST LAFAYETTE, Ind. — Purdue Extension agricultural
economists are urging farmers to calculate estimated budgets for the 2014
cropping year and again are offering a guide to help with the process.
The 2014 Purdue Crop Cost and Return Guide, which is
available for free download from the Purdue University Center for Commercial
Agriculture website at www.agecon.purdue.edu/commercialag/resources/index.html,
gives estimated costs for planting, growing and harvesting a variety of crops,
as well as estimated contribution margins and earnings.
The guide is updated frequently as grain futures prices
change and the costs of inputs, such as seed, fertilizer, chemicals and fuel,
According to Michael Langemeier, Purdue Extension
agricultural economist, there are two main drivers in the 2014 guide compared
with the 2013 edition — falling grain prices and fertilizer costs.
“The expected drop in corn, soybean and wheat prices is
having a large negative impact on market revenue and contribution margins,” he
said. “More positive is the expected continued decline in fertilizer costs.
Fertilizer prices are quite a bit lower right now compared to what they were
last fall when we were working on the 2013 guide.”
According to guide estimates, revenues for rotation corn on
average-productivity land could fall by $140 per acre compared with 2013.
Rotation soybean revenues on average-productivity land could fall by $35 per
Those changes in grain prices and input costs mean it’s even
more important for growers to estimate their budgets for the next year,
Langemeier said. As it looks now, rotation soybeans could be more profitable
than continuous corn for some farmers in the coming year.
“Rotation soybeans are looking very attractive for 2014, so
we could see more rotation soybeans than continuous corn,” the economist
Right now, the per-acre contribution margin — revenue minus
variable costs — for rotation soybeans on average land is an estimated $395,
while continuous corn is $277. Those numbers could change, however, as the 2013
cropping season wraps up.
Langemeier also pointed out that the estimates in the guide
won’t directly apply to individual farms.
“This guide is not going to be directly applicable to any
farm,” he said. “This guide is specifically that — a guide. It gives a person an
idea of how market revenue should be computed, and it gives an idea of how we
did it, using current futures prices and trend yields.
“More importantly, it gives someone an idea of the important
costs that need to be included and how you would calculate those costs for a
specific farm, for a specific field and for a specific enterprise, such as
Included in the guide are illustrations of how to calculate
variable costs — fertilizer, seed, fuel and chemicals — and overhead costs, such
as machinery, operator labor and land rent.
The guide focuses very heavily on figuring out a farm’s
opportunity costs when calculating overhead. Opportunity costs include the loss
of money from alternatives that aren’t chosen. For example, if farmers own land
and choose to farm it themselves, they give up potential rental income.
“We basically have two bottom lines in this guide,”
Langemeier said. “The first one is called a contribution margin — that’s market
revenue minus variable costs. The second is earnings — the contribution margin
minus overhead costs. The contribution margin should be positive because you
have overhead costs you need to be able to cover. The earnings, we would expect
over a long period of time, to be close to zero. Farmers need to include
opportunity costs in a budget, such as the cost to own machinery, land rent and
the fact that their labor is worth something.”