Purdue economists urge farm budget calculations, offer guide
Included in the guide are illustrations of how to calculate variable costs - fertilizer, seed, fuel and chemicals - and overhead costs, such as machinery, operator labor and land rent.
The guide focuses very heavily on figuring out a farm's opportunity costs when calculating overhead. Opportunity costs include the loss of money from alternatives that aren't chosen. For example, if farmers own land and choose to farm it themselves, they give up potential rental income.
"We basically have two bottom lines in this guide," Langemeier said. "The first one is called a contribution margin - that's market revenue minus variable costs. The second is earnings - the contribution margin minus overhead costs. The contribution margin should be positive because you have overhead costs you need to be able to cover. The earnings we would expect, over a long period of time, to be close to zero.
"Farmers need to include opportunity costs in a budget, such as the cost to own machinery, land rent and the fact that their labor is worth something."
- Soy, cotton futures led the ag markets Wednesday morning
- Monthly fertilizer prices: Comparing 2014 through 2009
- USDA releases April water supply forecast for the West
- Know your enemy: The importance of weed identification
- Most Texas farmers have corn in the ground
- Mosaic to acquire ADM's Brazil, Paraguay fertilizer business
- Commentary: Blame anti-GMO groups for deaths
- Julie Borlaug says biotech is necessary in fight against hunger
- What does “sustainable” food and agriculture really mean?
- Climate change will reduce crop yields sooner than we thought
- Ohio bill to require certification to apply fertilizer
- Carbon-dioxide hurts nitrogen assimilation by plants