February 13, 2013

The 2013 Nebraska Crop Budgets have been estimated and are available in the Economics and Marketing section of CropWatch and in the Crop Budget section of the Department of Agricultural Economics website. This year there are 53 budgets for 16 crops.

One of the challenges in estimating these budgets is determining prices for materials used in production. This is accomplished by visiting with suppliers who share their price expectations.

Costs per acre have increased again this year. For corn this increase varies from 7% to 13%, with the largest increase in  conventionally produced, dryland continuous corn. A number of corn budgets show a 7% cost increase, most of which are no-till or reduced till systems.

Cost increases for soybean range from 12% to 20%. The budget with the lowest per acre cost increase is for a gravity-irrigated, ridge-till system. The budget showing the highest cost increase is the pivot-irrigated, no-till system using Roundup Ready® seed grown after corn.

The no-till fallow budget showed the least increase in cost (5%) for wheat production while no-till following a row crop showed the most (12%).

In addition to estimating a total cost of production per acre, each budget also shows the cash costs of production. While these budgets do not estimate returns, they are based on a given yield which is used to calculate both a total and a cash cost per unit of production.

Trending Price Changes

The general trend is for increased input prices; however, this year the fertilizer prices used are generally lower than last year, except for anhydrous ammonia. Other expected price drops include Roundup Ready® 2 soybean seed, sorghum safened seed, AAtrex® 4L, Lumax®, and Pursuit®.

Two areas where prices have increased substantially from last year’s budgets are real estate and crop insurance.
Opportunity cost is used to estimate land costs for the budgets. It is calculated by multiplying an “investment” interest rate (which is 4% both this year and last) by the price of real estate as determined by an annual survey conducted by the UNL Department of Agricultural Economics. (See the Nebraska Farm Real Estate section and  2011-2012 Market Highlights.) This report indicates that farmland prices continue their upward trend. Producers may want to consider that the latest survey was conducted last winter and current land prices may be higher.

The second area where prices used in the budgets have increased substantially is crop insurance. The USDA’s Risk Management Agency’s website for estimating crop insurance premiums was used this year to estimate these costs. Crop insurance premiums vary based on many factors such as insurance choices and locations. Estimates used 2012 prices since 2013 price data is not yet available. Premiums for revenue insurance were calculated using 100% of projected price and 70% of yield. Since the premiums for revenue insurance are partially based on commodity prices, the higher commodity prices we are experiencing tend to increase these premiums.

Other Changes in 2013

Two new sugar beet budgets were added this year. They differ from the existing ones in that they use field operations for planting into corn stalks using minimum tillage.

As is usual, some of the materials and operations used were changed on some budgets. Changes in operations reflect industry observations. While materials chosen for the budgets reflect the experiences of university agronomists, they are aware that some alternative materials would work equally well and may be better in some systems. Producers should rely on advice from local suppliers and consultants because conditions may cause a material that works well in one area to not be as effective elsewhere.

Using These Budgets

It is important that those who use these budgets realize that they are estimates based on assumptions. While much effect is used to make them complete, valid, and reliable, they should be examined carefully prior to being used for decision making. The Excel® workbook used to calculate these budgets is also available online so you can change the assumptions that have been made or input your costs to customize the budget.

Roger Wilson
Extension Farm Management / Enterprise Budget Analyst