Input Costs for 2011 Andrew Swenson Extension Farm Management Specialist Department of Agribusiness and Applied Economics North Dakota State University
Historic Enterprise Analysis from North Dakota Farm Business Management Education Program
Spring Wheat, North Dakota (excluding Red River Valley) N.D. Farm Business Management Education Program 2002 2003 2004 2005 2006 2007 2008 2009 Yield 23.54 36.21 41.08 38.16 30.74 37.52 38.28 53.45 Price 4.05 3.50 3.51 3.66 4.32 6.67 7.17 4.82 Misc. Inc. 19.88 3.90 5.93 2.56 12.56 9.43 32.79 1.43 Gross 116.00 130.96 150.10 142.26 145.27 259.70 307.26 259.06 Seed 7.23 8.35 9.07 9.86 9.52 10.95 20.54 15.51 Fertilizer 14.83 17.25 22.03 25.43 27.99 30.80 46.53 53.43 Chemical 12.57 15.52 17.05 19.41 16.93 24.32 26.35 28.45 Insurance 5.45 7.54 7.15 8.37 8.16 11.10 24.08 14.84 Fuel & Lube 5.32 6.39 7.79 9.42 10.21 11.32 14.69 10.77 Repair 9.09 9.52 9.59 9.42 9.55 11.44 15.00 15.04 Other Direct 5.79 5.93 5.86 8.50 7.03 8.09 8.39 10.18 Cash Rent 29.72 29.52 29.11 30.24 31.20 32.36 35.43 37.06 Overhead 20.21 19.90 21.87 23.59 22.52 25.47 27.63 31.54 Listed Costs 110.20 119.91 129.51 144.61 143.12 165.85 218.64 216.82 Net Return 5.80 11.06 20.59-2.35 2.14 95.66 88.62 42.24
ND FBM, Selected Wheat Expenses 60 50 40 30 20 10 0 Seed Fertilizer Chemicals Crop Insurance Fuel & Oil Cash Rent 2002 2003 2004 2005 2006 2007 2008 2009
ND FBM, Selected Soybean Expenses 60 50 40 30 20 10 0 Seed Fertilizer Chemicals Crop Insurance Fuel & Oil 2002 2003 2004 2005 2006 2007 2008 2009 Cash Rent
ND FBM, Selected Wheat Expenses 60 50 40 30 20 10 0 Seed Fertilizer Chemicals Crop Insurance Fuel & Oil Cash Rent 2002 2003 2004 2005 2006 2007 2008 2009 2010e 2011e
Cost Per Acre on Cash Rented Land ND Farm Business Management (Excluding RRV) 250 200 150 100 50 0 2002 2003 2004 2005 2006 2007 2008 2009 2010e 2011e Wheat Sunflower Canola Soybean
Spring Wheat Breakeven Prices at 36 Bu/Acre North Dakota Farm Business Mgmt Program (Excluding RRV) 8.00 6.00 4.00 2.00 0.00 2003 2004 2005 2006 2007 2008 2009 2010est 2011est 2003 2004 2005 2006 2007 2008 2009 2010 e. 2011 e. BE Price @ 36 bu/ac. 3.69 3.99 4.45 4.45 5.12 6.88 6.61 6.16 7.17 Cost / Acre 119.91 129.51 144.61 143.12 165.85 218.64 216.82 198.99 234.08 Direct Gov t Pmt -10.00-10.00-10.00-10.00-10.00-10.00-10.00-10.00-10.00 Family Living 22.90 24.30 25.70 27.10 28.50 29.90 31.30 32.70 34.10 Adjusted Cost / Acre 132.81 143.81 160.31 160.22 184.35 247.84 238.12 221.69 258.18
N.D., Excluding RRV, Spring Wheat Breakeven Prices at 36 Bu/Acre Revenue protection per acre /36 bu** Loan Rate* * National Loan Rate. Loan rate by county will vary. ** Revenue protection insurance guarantee per acre (using 36 bu APH at 70% coverage level) divided by 36 bushels. Actual revenue (crop Insurance indemnity plus market sales) will typically be less than the RA guarantee because the harvest revenue in indemnity payment calculations uses a price determined by futures markets, not local cash markets.
NDSU Crop Budgets Are a guide for a large multi-county region Typical or Middle-of-the Road yields and costs at a point in time. Budgets will be wrong for any individual Plug in your own numbers and be aware of the limitations on comparing crop budgets.
2011 Up the Cost Ladder 5 10% Soybean & Pulse Crop 10 15% Corn Sunflower Flax 15 20% Small Grains Canola
2011 Cost Projections Seed small grain up others fairly flat+ Fertilizer up 50+/-% Fuel & lube up 15-20% Insurance up 50+% Chemical flat + Repair up some Other direct up some Cash rent up Overhead up some
Fertilizer Prices 2011 2010 Nitrogen 0.48/lb 0.34/lb Phosphorus 0.56/lb 0.32/lb Potassium 0.46/lb 0.46/lb
600 500 400 300 200 100 0 U.S. Urea and Corn Prices, April (March prices for 2009-10) 6 5 4 3 2 1 0 $/ton 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 $/bu Urea Corn
Major North America Fertilizer Producers (2007) N P K PotashCorp 3 rd largest in world 2 nd largest in world (6% of world) World s largest (22% of world) Mosaic World s largest (15% of world) 3 rd largest in world (14% of world) Agrium One of top three publicly traded N producers 5 th largest in North America 3 rd largest in North America (10 th in world) CF Industries 26% of N market in corn belt 19% of P market in corn belt Terra Industries (CF Industries bought Terra in 2010) Largest ammonia producer in U.S. Source: Companies
Fuel Prices 2011 2010 Diesel 3.00/gal 2.50/gal Gas 3.00/gal 2.70/gal
Futures Based Price Forecasts for Nontaxable Diesel Fuel Source: Kevin Dhuyvetter, Kansas State University
Cost Factors Price Quantity - slight adjustment or, - all or none (pesticide decision)
Crop Insurance Cost Factors Policy Insured Price Coverage Level Unit Type
Insured Wheat Acreage, by Policy, Foster County, 2010 35,000 30,000 25,000 Acres 20,000 15,000 10,000 5,000 0 APH CRC RA
60,000 Insured Wheat Acreage, by Coverage Level, Foster County, 2010 50,000 40,000 Acres 30,000 20,000 10,000 0 50% 60% 65% 70% 75% 80%
HRSW Crop Insurance Prices and ND FBM (excluding RRV) Costs per Acre APH Price/Bu RA Projected Price/Bu Crop Ins. Cost/Ac 25 20 2006 3.15 4.22 8.16 2007 4.45 5.23 11.10 2008 9.25 11.11 24.08 2009 6.70 6.20 14.84 2010 4.90 5.43 12.50 est. $/bu 15 10 5 0 2006 2007 2008 2009 2010 APH Price/Bu.
Crop Insured Price Discovery Commodity Exchange Price Provision Exchange Used Commodity Used Contract Month Projected Price Avg Daily Close Barley CBOT Corn September February 2 July 2 Harvest Price 1 Avg Daily Close Canola ICE Canola November February 3 September 3 Corn CBOT Corn December February October Soybeans CBOT Soybeans November February October Sunflower CBOT Soy Oil December February 4 October 4 Spring Wheat MGE HRSW September February August Durum 5 1) Harvest price has upper limit of two times projected price 2) Multiplied by factor determined by RMA 3) Quotes in Canadian dollars per metric ton are converted to U.S. dollars per pound 4) Divide each settlement price by two and add one cent 5) Same as spring wheat but multiplied by a factor determined by RMA
Crop Insurance Revenue Guarantee Comparison, 2010 and 2011 Proj. Revenue Price Example Revenue Guarantee* Crop 2010 2011 APH Yield 2010 2011 Wheat 5.43 9.89 44 167.24 304.61 Durum 6.22 10.98 34 148.04 261.32 Barley 3.22 5.93 64 144.26 265.66 Corn 3.99 6.01 104 290.47 437.53 Soybean 9.23 13.49 30 193.83 283.29 Oil Sunfl. 0.209 0.305 1450 212.14 309.58 Conf. Sunfl. 0.259 0.355 1260 228.44 313.11 Canola 0.172 0.263 1480 178.19 272.47 *at 70% revenue protection coverage level and example APH
Land Buyers Producers Investors Recreators Considerations Ability to pay Projected profitability Interest rates Section 1031 & Capital gains tax Psychology (outlook, attitude)
NDSU Crop Budget Regions Renville Divide Burke Bottineau Rolette Cavalier Pembina Towner NW NC NE NV Williams Walsh Ramsey Mountrail McHenry Ward Pierce Benson Nelson Grand Forks McKenzie McLean Eddy Sheridan Wells Foster Griggs Steele Traill Dunn Mercer Billings Oliver EC SV Golden Burleigh Kidder Stutsman Barnes Cass Valley Stark Morton SW SC SE Slope Hettinger Logan La Moure Ransom Grant Emmons Richland Bowman Adams Sioux McIntosh Dickey Sargent
2011 Crop Budgets, East Central, ND Crop Price Yield Income Cost Net Ret. Soybean 11.41 30 342 214 128 Conf Snflr 0.291 1260 367 268 99 Corn 4.32 104 449 366 83 Barley 4.79 64 307 227 80 HRSW 7.17 44 315 246 70 Canola 0.221 1480 327 263 64 HRWW 6.26 48 300 249 52 Drybean 0.245 1350 331 287 44 Oil Snflr 0.199 1450 289 249 40 Flax 12.27 18 221 183 37 Durum 7.45 34 253 220 34
2011 Crop Budgets, East Central, ND Crop Price* Net Ret. Corn 5.20 174 Soybean 12.50 161 Barley 6.00 157 HRSW 9.00 150 Conf Snflr 0.33 148 HRWW 8.00 135 Oil Snflr 0.25 114 Durum 9.25 95 Drybean 0.28 91 Canola 0.235 85 Flax 14.00 69 *current (2/18/11) new crop prices
Crop Plantings are Determined by Expected Profitability, and Price risk Yield risk Labor & management requirements Existing equipment Rotational consideration hassle factor
Objective The objective of crop compare is to calculate the cash price needed for other crops to yield the same return over variable costs as the base crop
CROP COMPARE does not consider the following, (but you can make adjustments) Machinery Storage Labor Management Risk
NDSU Projected Crop Budgets www.ext.nodak.edu/extpubs/ecguides.htm Crop Compare www.ag.ndsu.edu/farmmanagement/tools