Use NDSU Crop Budget Estimates to Tailor Your Own for ‘04

The North Dakota State University Extension Service has posted crop budget estimates for 2004 on the Web at www.ext.nodak. edu/extpubs/ecguides.htm which producers can use as a basis to tailor their own farm-specific budgets.

NDSU extension farm management specialist Andrew Swenson notes that budgets for fertilizer, fuel, land, machinery ownership, and repair costs are estimated higher than in last year’s budgets. Seed costs are expected to be similar to last year or up slightly. Interest rates should remain at low levels for financing crop inputs.

He emphasizes that the budget projections are just that. “Commodity prices and yields are extremely difficult to predict from one year to the next. It is critical to evaluate crop insurance and consider the financial downside risk, as well as the upside potential of the crop rotation.”  Swenson also notes that the budgets do not include farm payments that are part of the crop income equation.

The direct costs of wheat production may increase 10 percent because of higher fertilizer expenses according to Andrew Swenson, North Dakota State University Extension Service farm management specialist.

Nitrogen and phosphate fertilizer prices are up significantly from last year. “In addition, soil nitrogen in much of the southern half of the state is lower. That means more of the expensive fertilizer is necessary for the same yield goal of a year ago,” Swenson says.

Spring wheat does not project a positive return to labor and management in any of the eight crop budget regions and durum only showed a profit in the southwest. Swenson cautions that the budgets are based on the average yield from 1996 to 2002 with the low and high yield years omitted. Current soil moisture conditions are not considered.

“Although it may be considered more risky, winter wheat shows a better return than spring wheat in all regions outside of the Red River Valley,” Swenson notes. Malting barley looks the most favorable of the small grain crops. It shows a profit in nearly all regions outside of the Red River Valley. Oats and rye once again are on the bottom of the profit picture with losses ranging from $20 to $65 per acre.

Soybeans look like a good crop choice again in 2004 with positive returns to labor and management in every region except the northwest and southwest for which soybeans were not considered because of high production risk. Although the per unit price of GMO soybean seed has increased, it may not result in a higher per acre cost because, due to smaller seeds, there are generally more seeds per unit.

Another good crop choice may be sunflowers, which show more than a $20-per-acre return to labor and management in most regions. NuSun varieties offer a premium price and are becoming dominant. Processors of non-oil sunflowers are offering contract prices that may entice acres. Conversely, canola projected negative returns in every region. Flax fared better, but also did not show positive returns.

Like last year’s projections, safflower and lentils in the west and mustard projected a profit of around $30 per acre. Swenson says if a price for minor crops with thin markets is attractive, producers may want to consider contracting and consider an ‘act-of-god’ clause for protection from a production shortfall.

According to Swenson’s projections, the crop with the best profit potential is dry edible beans. Although the crop is considered to have more production risk than many, the average yield has steadily increased. At a market price of 17 cents per pound and average yields, dry edible beans should provide good returns this year.

“Land costs are higher, machinery ownership and repair costs creep up each year and fuel prices will be somewhat higher than those budgeted for last year. However, not all costs will increase,” Swenson says. Seed costs for small grains are expected to be lower. Other seeds, such as corn, sunflowers and canola are expected to be similar to last year or up slightly. Interest rates should remain at low levels for financing crop inputs.

“Somewhat surprisingly, the Red River Valley regions have fewer crops that project a profit than the rest of the state,” he says. The reason is higher costs, primarily land rent.

Swenson emphasizes that the budget projections are just that. “Commodity prices and yields are extremely difficult to predict from one year to the next. It is critical to evaluate crop insurance and consider the financial downside risk, as well as the upside potential of the crop rotation,” he says.

Swenson also notes that the budgets do not include federal aid that is de-coupled from crop selection and production (direct and counter-cyclical payments). However, those payments are very important to whole farm profit.

Producers can contact their local office of the NDSU Extension Service for area-specific budgets. The budgets are also available on the Web at www.ext.nodak.edu/extpubs/ecguides.htm.