Ohio Corn, Soybean and Wheat Enterprise Budgets - Projected Returns for 2021
Barry Ward; Leader, Production Business Management; Director, OSU Income Tax Schools, May 19, 2021
What a difference a year makes! The crop margin outlook for this year is decidedly different from where we were last year at this time. Factors affecting both supply and demand have driven commodity crop prices much higher over the last 12 months and the result is a positive margin outlook for 2021 commodity crops. In spite of higher fertilizer, fuel and insurance costs among others, there is a good profit outlook for 2021.
Fuel costs have increased as the state of the overall economy has improved over the last months and fertilizer prices have increased fairly dramatically as a number of factors have impacted costs in manufacturing, and overall supply and demand for nitrogen, phosphorous and potassium fertilizers.
Each year producers tend to purchase inputs over a period of several months leading up to planting for a variety of reasons. Some farmers look to spread risk by pricing fertilizer over several months, some purchase inputs early to take advantage of early buying discounts while many will pre-pay for certain inputs to manage income taxes. On-farm fuel and fertilizer storage tend to give producers more flexibility in spreading their purchases over a longer period to take advantage of possible lower prices. This large input purchase window may have paid dividends this year especially if producers priced fertilizer prior to big price increases.
Production costs for Ohio field crops are forecast to be higher than last year with higher fertilizer prices leading the way. Variable costs for corn in Ohio for 2021 are projected to range from $405 to $488 per acre depending on land productivity. The trend line corn yield (177.9 bpa) scenario included in the corn enterprise budget shows an increase in variable costs of 9.5%.
Variable costs for 2021 Ohio soybeans are projected to range from $227 to $253 per acre. Variable costs for trend-line soybeans (55.3 bpa) are expected to increase 12.8% in 2021 compared to 2020.
Wheat variable expenses for 2021 are projected to range from $173 to $207 per acre. The trend line wheat yield (70.6 bpa) scenario included in the wheat enterprise budget shows an increase in variable costs of 5.8%.
Returns will likely be positive for most producers depending on price movement throughout the rest of the year. Grain prices used as assumptions in the 2021 crop enterprise budgets are $5.00/bushel for corn, $13.20/bushel for soybeans and $6.30/bushel for wheat. Projected returns above variable costs (contribution margin) range from $307 to $579 per acre for corn and $357 to $623 per acre for soybeans. Projected returns above variable costs for wheat range from $182 to $327 per acre.
Return to Land is a measure calculated to assist in land rental and purchase decision making. The measure is calculated by starting with total receipts or revenue from the crop and subtracting all expenses except the land expense. Returns to Land for Ohio corn (Total receipts minus total costs except land cost) are projected to range from $135 to $389 per acre in 2021 depending on land production capabilities. Returns to land for Ohio soybeans are expected to range from $233 to $484 per acre depending on land production capabilities. Returns to land for wheat (not including straw or double-crop returns) are projected to range from $93 per acre to $229 per acre.
Total costs projected for trend line corn production in Ohio are estimated to be $824 per acre. This includes all variable costs as well as fixed costs (or overhead if you prefer) including machinery, labor, management and land costs. Fixed machinery costs of $78 per acre include depreciation, interest, insurance and housing. A land charge of $195 per acre is based on data from the Western Ohio Cropland Values and Cash Rents Survey Summary. Labor and management costs combined are calculated at $83 per acre. Details of budget assumptions and numbers can be found in footnotes included in each budget.
Total costs projected for trend line soybean production in Ohio are estimated to be $565 per acre. (Fixed machinery costs: $62 per acre, land charge: $195 per acre, labor and management costs combined: $55 per acre.)
Total costs projected for trend line wheat production in Ohio are estimated to be $479 per acre. (Fixed machinery costs: $36 per acre, land charge: $195 per acre, labor and management costs combined: $45 per acre.)
Data used to compile these enterprise budgets includes research, surveys, market data, economic modeling, calculations and experience of authors.
Current budget analyses indicates very favorable returns for all three primary commodity crops but crop price change and harvest yields may change this outcome. These projections are based on OSU Extension Ohio Crop Enterprise Budgets. Newly updated Enterprise Budgets for 2021 have been completed and posted to the Farm Office website: https://farmoffice.osu.edu/farm-mgt-tools/farm-budgets