Crop budgets and acreage implications for 2014
Once the budgets are extended through 2013, we go through a similar process to get estimates for 2014. We don’t have actual changes in prices paid for various inputs, so the changes are forecasts. At the moment – it appears that fertilizer prices will be down significantly for the 2014 crop and this has a big impact on total operating costs, especially for corn. In general, modest increases are assumed in prices for other inputs. With falling crop prices we assume that land rents will level off for 2014. We assume yields return to trend levels as does the ratio of harvested acres to planted acres. For now, we base prices on new-crop futures, adjusted for a “normal” basis.
click image to zoom Once the changes are made to the overall U.S. budgets – we apply this information to the budgets for the USDA regions. We identify the “normal” relationship between the data for the overall U.S. and the same categories for each region. These relationships are calculated and applied for all of the costs categories and for yields and prices. In most cases these relationships hold fairly steady over time but that isn’t true for all of them. Yield differences can be pretty large from year-to-year depending on widely different growing conditions across regions.
Often times it is useful to use a corn-following-corn budget to understand the relative returns for farmers that are deciding to plant corn again next year or shift the land to another crop. Corn yields for corn-following-corn are generally lower than those for corn following another crop and fertilizer costs are higher. It seems logical to assume that chemical costs may also be a little higher for corn-following-corn.
But the USDA budget data are for all corn and not just for corn following some other crop, so the effects of the lower yields and higher costs for corn-following-corn are already included in the overall budgets to some extent. Some university studies put the corn-following-corn yield drag at between 10 percent and 15 percent, and in some years even higher. But this is compared to corn in rotation with other crops so the decline from the yields in the USDA budgets is probably smaller. For this analysis we use an additional yield drag of 7 percent compared to the overall USDA budgets and boost fertilizer costs by 12 percent. This raises operating costs by 5 percent overall but reduces net returns by 17 percent.
The analysis shows U.S. net returns over variable costs for corn at $402 per acre, compared to net returns for soybeans of $361. At least at this point the market is not sending a clear signal to farmers to plant less corn. However, the budget for corn following corn, using the assumptions outlined above shows net returns at $335 per acre. This result of higher net returns for corn based on the overall budget holds true for most regions, except for the Heartland and Eastern Upland regions where soybean net returns are higher than for corn even without the adjustments for corn-following-corn. Net returns for corn-following-corn are higher than net returns for soybeans in the Prairie Gateway and Southern Seaboard regions.
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