Corn and Soybean Projected Profitability 2011
March 22, 2011
Greg Halich
Department of Agricultural Economics
University of Kentucky
859-257-8841
Greg.Halich@uky.edu
March 22, 2011
Greg Halich
Department of Agricultural Economics
University of Kentucky
859-257-8841
Greg.Halich@uky.edu
Corn and Soybean New Crop
Price Estimates for 2011 (Based on CME 3/22/11 Closing) | ||
Scenario: |
Corn
|
Soybeans
|
Low |
$4.75
|
$10.75
|
Baseline |
$5.75
|
$13.00
|
High |
$6.75
|
$15.25
|
Input w/Greatest Impact on Profit?
Fertilizer Cost.
→ Let’s look at fertilizer prices.
Fertilizer Prices:
Spiked summer/fall 2010.
Where will they end up?
Retail Fertilizer Prices:
DAP ↑ $170/ton since July
Anhydrous ↑ $240/ton since July
Potash ↑ $90/ton since Sept.
Base Scenario
| ||
Fertilizer: |
$/ton
|
$/unit
|
Anhydrous (N) |
$790
|
$0.48
|
DAP (P2O5) |
$680
|
$0.55
|
Potash (K2O) |
$590
|
$0.49
|
150 bu corn:
→ 160 pounds N
→ 60 pounds P2O5
→ 53 pounds K2O
45.5 bu soybeans:
→ 32 pounds P2O5
→ 50 pounds K2O
Land Rent:
Highly variable.
Not included in the budgets.
→ Subtract from net revenue.
Machinery and Labor:
Fuel, Repairs, Deprecation, Labor.
Based on Custom Machinery Rates.
→ Increased 25%.
Adjusted to $3.50 fuel price.
Trucking – 15 miles (one-way).
Other:
$2.25/gallon LP 3 pts removed corn.
Direct Payment $20/acre.
Three Soil Productivity Levels
| ||
Corn Yield |
Soybean Yield
|
Corn/Soybean Yield Ratio
|
125 bu |
39.0 bu
|
3.2
|
150 bu |
45.5 bu
|
3.3
|
175 bu |
51.5 bu
|
3.4
|
Projected 2011 Costs (per acre)
| ||
Inputs: |
Corn (150 bu)
|
Soybeans (45.5 bu)
|
Seed |
$76
|
$45
|
Nitrogen |
$77
|
$0
|
P, K, and Lime |
$69
|
$52
|
Pesticides |
$35
|
$25
|
Total Inputs |
$257
|
$122
|
Machinery and Labor |
$121
|
$85
|
Other: | ||
Drying Grain |
$21
|
$0
|
Crop Insurance |
$20
|
$20
|
Misc. |
$20
|
$20
|
Land Rent |
Variable
|
Variable
|
Operating Interest |
$13
|
$7
|
Total Other |
$74
|
$47
|
Total Costs |
$452 + Land Rent
|
$254 + Land Rent
|
Machinery and Labor Costs 150 bu/acre Corn (per acre)
| |
Fuel and Lube |
$24
|
Repairs |
$28
|
Labor |
$21
|
Depreciation/Overhead |
$48
|
Total |
$121
|
Note: Assumes grain trucked directly to elevator and not stored. |
Machinery and Labor Costs 45.5 bu/acre Soybeans
(per acre) | |
Fuel and Lube |
$16
|
Repairs |
$20
|
Labor |
$16
|
Depreciation/Overhead |
$33
|
Total |
$85
|
Note: Assumes grain trucked directly to elevator and not stored. |
- Fertilizer
- Machinery and Labor
- Drying (corn)
- Interest
Higher Costs in Rest of State:
Nitrogen $5-15/acre
Harvesting $0-15/acre
Trucking $10-50/acre
Summary Revenues/Costs (per acre)
| ||
Yield and Price: |
Corn
|
Soybeans
|
Expected Yield (rotation) |
150
|
45.5
|
Future's Price Fall 2011 |
$5.75
|
$13.00
|
Grain Revenue |
$863
|
$592
|
Direct Gov’t Payment |
$20
|
$20
|
Total Revenue |
$883
|
$612
|
Total Costs (Less Land Rent) |
$452
|
$254
|
Gross Return (Less Land Rent) |
$431
|
$358
|
Baseline Scenario (per acre)
$ 13.00 Soybeans (elevator) $ 5.75 Corn (elevator) $.48-N; $.55-P; $.49-K | |||
Gross Return Corn
|
Gross Return Soybeans
|
Gross Return
| |
Rotation
| |||
125 bu corn |
$295
|
$295
|
$295
|
150 bu corn |
$431
|
$357
|
$394
|
175 bu corn |
$552
|
$428
|
$490
|
Note: Subtract land rent to get Net Return. |
High Fertilizer Price Scenario
| ||
Fertilizer: |
$/ton
|
$/unit
|
Anhydrous (N) |
$890
|
$0.54
|
DAP (P2O5) |
$780
|
$0.65
|
Potash (K2O) |
$690
|
$0.58
|
Fertilizer Price Effects
(decrease in profit) Increasing Fertilizer Prices $100/ton (per acre) | |||
Corn Change
|
Soybean Change
|
Rotation Change
| |
125 bu corn |
$17
|
$6
|
$12
|
150 bu corn |
$19
|
$7
|
$13
|
175 bu corn |
$21
|
$8
|
$15
|
Note: Increased in Fertilizer Prices due to $100/ton increase in N, P, and K prices. |
- Corn price drop necessary to equal $100/ton fertilizer price increase?
- What is typical volatility in corn price in an avg. week?
- Marketing crop far more important than input prices right now.
How will this impact profit?
→ Let’s look at two scenarios
First is the “Home Run” scenario:
High Commodity Price Scenario
$15.25 Soybeans (elevator) $ 6.75 Corn (elevator) $.48-N; $.55-P; $.49-K | |||
Gross Return Corn
|
Gross Return Soybeans
|
Gross Return
| |
Rotation
| |||
125 bu corn |
$434
|
$368
|
$401
|
150 bu corn |
$581
|
$459
|
$520
|
175 bu corn |
$727
|
$544
|
$636
|
Note: Subtract land rent to get Net Return. |
“Strikeout” scenario:
Low Commodity Price Scenario
$ 10.75 Soybeans (elevator) $ 4.75 Corn (elevator) $.48-N; $.55-P; $.49-K | |||
Gross Return Corn
|
Gross Return Soybeans
|
Gross Return
| |
Rotation
| |||
125 bu corn |
$184
|
$193
|
$189
|
150 bu corn |
$281
|
$254
|
$268
|
175 bu corn |
$377
|
$312
|
$345
|
Note: Subtract land rent to get Net Return. |
Commodity Price Outlook:
- Current price levels extremely profitable.
- Concentrate on marketing – not worrying about input prices.
- How long will prices stay this high?
- What will happen if they drop?
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