NDSU Crop budgets estimate higher returns in 1996

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Prairie Grains is the
official publication of
the Minnesota
Association of
Wheat Growers,
North Dakota Grain
Growers Association,
South Dakota Wheat,
Inc., and the
Minnesota Barley
Growers Association.

"The 1996 crop budget projections are generally more positive than projections made the last few years, because of a higher level of commodity prices," says Andrew Swenson, NDSU extension farm management specialist. However, producers may have more financial risk because of the steady increase in production costs.

For example, Swenson says direct costs for 1996 spring wheat production in the Red River Valley are projected at $67 per acre, compared to $50 projected just three years ago—an increase of more than 30 percent.

Certified seed for spring wheat, durum, barley, oats and soybean seed are projected to cost $1 to $1.50 per bushel more than in 1995. Prices of other seed, such as corn and sunflower, should be mostly unchanged from last year.

Fertilizer costs are expected to remain at current high levels going into the next growing season, while the cost of chemicals and repairs is projected to increase at general inflation rates. Fuel costs and interest rates are projected to be steady to slightly lower than last year.

"Crops that show the strongest returns, in areas of North Dakota that historically grow them, are soybeans and durum," says Swenson. "Minor crops that project good returns are confectionery sunflowers, canola, dry edible beans and buckwheat."

The new budgets from NDSU are intended to be used only as a guide, since soil types, weather conditions, management, debt levels, and production practices vary considerably between farms in the region. The new budgets are available to growers, and a column is provided where they can enter their own budget numbers.

"The profitability budget includes all direct cash costs plus replacement costs for machinery and opportunity cost of land," he said. "The bottom line is the return to labor and management, which is the expected ‘payment’ to the producer for the labor and managerial efforts required by the crop enterprise," says Swenson.

The cash flow budget shows the one-year cash flow feasibility of the crop enterprise. The net cash flow represents the cash left for family living, state and federal taxes, saving and investment after all the cash operating expenses and 1996 land and machinery debt obligations—principal and interest payments—have been met. It is assumed that there are loans on 34 percent of the land and machinery investment.

When the budgets were printed, the farm program for 1996 had not been determined. The most likely legislation appears to be some form of the Freedom to Farm Act, which would decouple government payments from production. Payment would be based on historical plantings and yields, not on current plantings.

So decisions regarding which crops to plant should be made solely on the basis of income and costs in the marketplace, without regard to government payments, according to Dwight Aakre, NDSU farm management specialist.

"It is still possible that Congress will pass legislation that keeps program payments tied to production," Aakre said. "In that case, the deficiency payment that is earned from each planted acre of program crops should be added to the labor and management return, as has been done in the past. Costs of set-aside do not need to be considered as there will be no set-aside requirement for 1996."

The NDSU crop budget estimates are available on computer diskette, which allows viewing, modifying, and printing the budgets with MS-DOS and IBM-compatible microcomputers. For a disk, contact Extension Computer Services, PO Box 5655, NDSU, Fargo, ND 58105. The software costs $10, and customers should specify the county where they farm (as the budgets are adapted for eight ND growing regions) and whether they want a 5¼ or 3½ inch disk. NDSU county extension offices also have copies of the printed budgets.

Minnesota and South Dakota growers may request from NDSU an estimated crop budget for a North Dakota region that is nearest to them. However, they should check their local extension offices first, for the availability of an estimated crop budget that may apply more closely to growing areas in their states.