A Tool for Comparing Crop Prices

By Tracy Sayler

Market consultant Mike Krueger of The Money Farm believes the fight for acres will go right down to the day planters hit the fields. While potential returns per acre have been commanding the acreage discussion all winter, it will be spring weather, as always, that will dictate what farmers eventually plant. Krueger says an early start with beneficial moisture will surely mean more corn, while a late start coupled with dryness concerns will shift some acres toward oilseeds. 

It’s not as easy to jump into corn production in the far Northern Plains as one might think. Jon Christensen and Greg Kalinoski, both instructors with the Northwest Minnesota Farm Business Management Program, point out that there are a number of factors to consider when getting into corn production:

Direct Costs – Seed, fertilizer, and chemicals; dryer fuel and hauling costs; time and labor needs; extra interest expense.

Indirect Costs – Costs of headers, planters, trucks, dryer; costs of storage or new bins; extra costs of interest; tillage equipment needs.

Intangibles – Weather, crop rotations, fall tillage, trash management, crop insurance.

As corn has gone up in price, what price do other crops have to be to be profitable? There are rules of thumb out there; for example, Christensen and Kalinoski point to a corn/soybean ratio of 2.5 to 1, which is a rough determinant of corn or soybeans for many producers. Example: $3.00 corn = $7.50 soybeans at 2.5 to 1.

A rule of thumb on navy beans is 3 x the price of soybeans; thus, $6.50 soybeans would equate to roughly about $19.50 for navies.

Get a more exact comparison by using 2007 Crop Compare.  Enter the price of one crop in this free Excel spreadsheet developed by Dwight Aakre and Andrew Swenson of the NDSU Extension Service, and find out the price of competing crops necessary to generate the same return over variable costs. 

The online tool compares different crops in various regions of the state.  In the north valley, for example, returns of corn, soybeans, wheat, barley, dry beans, oil sunflower, confection sunflower, canola, and flax can be compared. The southwest N.D. spreadsheet compares corn, spring wheat, durum, barley, oats, oil sunflower, field pea, canola, flax, and winter wheat.

Go to www.ag.ndsu.nodak.edu/aginfo/farmmgmt/resources.htm - under ‘Software’ see Excel file under ‘2007 Crop Compare.’

Two more online sources for crop decision making:

NDSU Crop Budgets – NDSU has crop budgets for 2007 online at www.ag.ndsu.nodak.edu/aginfo/farmmgmt/cropbudget.htm . Here, there are also budgets for previous years, and for irrigated, no-till, and organic situations. The budget projections for regions throughout North Dakota are not absolute; obviously crop costs and profit vary by farm.  However, the budgets are useful for baseline comparisons and crop planning.

Ag Decision maker – Excellent resource from the Iowa State University Extension Service for analysis relating to costs and returns, marketing, machinery, and cropping decisions. Go to www.extension.iastate.edu/agdm/homepage.html - click on ‘Decision Tools’ then ‘Cost and Returns.’

Cash Price for Breakeven Return over Variable Costs - Northeast N.D.							Base Crop is Wheat
	Enter the futures price for			Wheat	$5.00
	Enter your expected local basis				$0.50
	Expected local cash price for			Wheat	$4.50
Base crop = 1	0	0	1
	Corn	Soybean	Wheat	Barley	Drybeans	Oil SF	Conf. SF	Canola	Flax
Yield	94	27	36	55	14.2	13.2	11.9	14.4	22
Price	$2.30	$5.68	$4.50	$2.75	$14.06	$12.81	$15.78	$12.66	$6.42
Income	$215.88	$153.48	$162.00	$151.50	$199.7	$169.15	$187.75	$182.36	$141.25
Variable costs:
Seed	$37.18	$32.01	$10.15	$8.40	$31.00	$14.52	$20.90	$17.60	$7.20
Herbicide	7.75	7.75	12.10	10.30	23.25	15.00	15.00	17.50	14.71
Fungicide			5.50	1.25
Insecticide						5.00	11.00	6.00
Fertilizer	39.14	5.10	27.73	25.66	20.25	18.45	14.86	36.58	13.29
Crop Ins.	7.80	7.70	5.60	3.50	17.00	8.40	12.50	5.30	5.50
Fuel & lube	16.30	11.09	11.40	12.62	14.59	13.69	14.08	9.92	11.63
Repairs	14.10	10.41	10.27	10.93	12.91	11.83	12.00	9.43	10.47
Drying	12.29					2.74	2.42
Misc.	1.00	1.50	1.00	1.00	1.00	1.00	5.75	1.00	1.00
Operating int.	5.42	3.02	3.35	2.95	4.80	3.63	4.34	4.13	2.55
Total var. costs	$140.99	$78.58	$87.10	$76.61	$124.80	$94.25	$112.85	$107.47	$66.35
Return over var. costs	$74.90	$74.90	$74.90	$74.90	$74.90	$74.90	$74.90	$74.90	$74.90
Note: Only variable costs are considered in this comparison. You can include an amount under “misc.” to account for any differences between crops in fixed costs, labor, management and risk.

2007 Crop Compare is a free Excel spreadsheet developed by Dwight Aakre and Andrew Swenson at NDSU to
 compare the price of competing crops necessary to generate the same return over variable costs. Go to
www.ag.ndsu.nodak.edu/aginfo/farmmgmt/resources.htm - under ‘Software’ see Excel file under ‘2007 Crop Compare’