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2012 Crop Budgets Update Alan Miller and Craig Dobbins Learning Tuesday Webinar February 21, 2012 Purdue University is an Equal Opportunity/Equal Access.

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Presentation on theme: "2012 Crop Budgets Update Alan Miller and Craig Dobbins Learning Tuesday Webinar February 21, 2012 Purdue University is an Equal Opportunity/Equal Access."— Presentation transcript:

1 2012 Crop Budgets Update Alan Miller and Craig Dobbins Learning Tuesday Webinar February 21, 2012 Purdue University is an Equal Opportunity/Equal Access institution.

2 Budgeted Crop Price Changes 2011 Crop in Jan. 2011 2012 Crop in Oct. 2012 2012 Crop in Jan. 2012 Corn$5.54/bu.$5.40/bu.$5.60/bu. Soybeans$13.12/bu.$11.60/bu.$11.90/bu. Wheat$8.21/bu.$6.40/bu.

3 Yield Relationships Changed Crop20112012 Soybeans30% of rotation corn yield33% of rotation corn yield DC Soybeans60% of rotation bean yield 70% of rotation bean yield Wheat48% of rotation corn yield on low yield soil, 43% of rotation corn yield on average & high yield soils 43% of rotation corn yield

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7 Variable Costs (Average Cropland) Crops 2010 $/acre 2011 $/acre 2012 $/acre % ∆ 11 to 12 Continuous Corn355415486+17% Rotation Corn342397461+16% Rotation Soybeans183200243+22% Wheat149181202+12% Double Crop Soybeans156174205+18%

8 Variable Cost Changes Rotation Corn (Average Cropland) Cost Component 2011 $/acre 2012 $/acre % ∆ 11 to 12 Fertilizers151175+16% Seed99107+8% Pesticides3538+9% Drying fuel2632+23% Machine fuel2327+17% Machinery repairs1421+50% Interest1113+18% Insurance, Misc.2333+43%

9 Variable Cost Changes Rotation Soybeans (Average Cropland) Cost Component 2011 $/acre 2012 $/acre % ∆ 11 to 12 Fertilizers6983+20% Seed5962+5% Pesticides2729+7% Machine fuel1016+60% Machinery repairs1018+80% Interest67+17% Insurance, Misc.1423+64%

10 Variable Cost Changes Wheat (Average Cropland) Cost Component 2011 $/acre 2012 $/acre % ∆ 11 to 12 Fertilizers97104+16% Seed3941+5% Pesticides78+14% Machine fuel1416+14% Machinery repairs1018+80% Interest56+20%

11 Variable Cost Changes Double Crop Soybeans (Average Cropland) Cost Component 2011 $/acre 2012 $/acre % ∆ 11 to 12 Fertilizers4562+38% Seed6872+6% Pesticides2526+4% Machine fuel1012+20% Machinery repairs1015+50% Interest56+50%

12 Contribution Margins, 2010 – 2012 (Average Cropland) Crops 2010 $/acre 2011 $/acre 2012 $/acre % ∆ 11 to 12 Continuous Corn271422371–12% Rotation Corn326495452–9% Rotation Soybeans287443400–10% Wheat194394246–38% Double Crop Soybeans122206247+20%

13 Contribution Margin by Crop & Yield, 2012 Crops Low Yield ($/acre) Average Yield ($/acre) High Yield ($/acre) DC Wheat/Soybeans348493638 Rotation Corn310452619 Rotation Soybeans285400514 Continuous Corn241371525 Wheat183246308

14 Contribution Margin by Rotation, 2012 1 Crops in Rotation Low Yield ($/acre) Average Yield ($/acre) High Yield ($/acre) Corn – Wheat/DC Beans329472628 Corn – Soybeans298426566 Soybean – Corn – C-Corn279408553 Continuous Corn241371525 1 Sum 2012 contribution margins for individual crops, then divide by years in rotation.

15 Variable Costs Per Bushel 2010 – 2012 1 Rotation Low YieldAverage YieldHigh Yield $/Bushel 101112101112101112 Rotation Corn 2.432.783.222.152.472.831.862.142.44 Rotation Beans 4.464.795.283.734.084.503.313.614.00

16 Fixed Costs Change, 2011 – 2012 (3000 Acre Farm Size) Rotation Low YieldAverage YieldHigh Yield $/Acre 1112% ∆1112% ∆1112% ∆ Machinery Overhead 6877+13%7282+14%7484+14% Family & Hired Labor 3845+18%3845+18%3845+18% Land Rent 138146+6%167189+13%208239+15% Total Overhead 244268+10%277316+14%320368+15%

17 Cost Structure – Rotation Corn 2012 Rotation Corn Low Yield Average Yield High Yield % of Total Cost % of Total Cost Variable Cost 615957 Fixed Cost 394143 Fixed costs are for 3000 acre farm. Assumes fixed costs are shared equally between corn and beans.

18 Cost Structure – Rotation Beans 2012 Rotation Corn Low Yield Average Yield High Yield % of Total Cost % of Total Cost Variable Cost 464341 Fixed Cost 545759 Fixed costs are for 3000 acre farm. Assumes fixed costs are shared equally between corn and beans.

19 Total Costs Per Bushel 2010 – 2012 1 Rotation Low YieldAverage YieldHigh Yield $/Bushel 101112101112101112 Rotation Corn 4.314.675.283.894.194.773.543.804.32 Rotation Beans 10.5611.0511.519.409.7310.358.759.039.66 1 Overhead costs based on corn–bean rotation on 3000 acre farm.

20 Source: Keep in Mind Family Living When Doing Crop Budgets, farmdocDAILY, February 17, 2012.

21 Returns Above Total Costs Per Acre, 2010 – 2012 Acres & Rotation Low YieldAverage YieldHigh Yield $/Acre 101112101112101112 1000-acre corn-bean -43818191829077279184 3000-acre corn-bean -81154750212130114315224

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24 Management Implications –Input prices increase sending variable costs higher –Overhead costs will increase in response to strong contribution margins – machinery overhead, family living/labor expenses, and land rent –Potential for economic profit –Budget reflects strong demand for corn which may influence rotation decisions –Risk of margin squeeze/margin decline likely will be significant because of price volatility

25 Questions, Comments Purdue University is an Equal Opportunity/Equal Access institution.


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