HomeMy WebLinkAboutThe Citizen, 1986-04-16, Page 191
Will it be corn or b eans in '86?
BY BRIAN HALL
FARM MANAGEMENT
SPECIALIST* O.M.A.F.
Which crop can I grow in 1986 to
make money? Many farmers have
been putting a hard pencil to this,
and not finding any easy answers.
There is a great deal of
skepticism about growing cash
crops this spring, poor outlook for
fall market prices ... and so on.
On the positive side, most prices
of farm inputs have not risen at the
rate of inflation in the general
economy in recent years. This
suggests that the rise in farm input
gg P
costs has been moderated by the
depressed production sector. On
the other hand, per acre land
principal and interest payments, or
rental payments have been greater
than many farmers can meet from
earnings.
Our decision on what crops to
grow will depend on a number of
important considerations. One of
these will be our cost of production.
The decision as to what to grow
should be based on those crops
which return the greatest number
of dollars over their variable costs.
Variable costs are those costs
which change with the crop we
grow. Variable costs include our
material inputs (s'eed, fertilizer,
pesticides etc.), crop insurance,
drying costs, storage and market-
ing costs, interest costs, hired
labour, and fuel and repair mach-
inery costs or custom charges.
The other costs we have are fixed
costs. Fixed costs are those costs
which occur whether we grow a
crop or not. Depreciation, insur-
ance, taxes, land costs would be
examples of fixed costs.
A crop will be grown as long as
we are able to cover our variable
costs. Returns above this will help
cover our living costs and fixed
costs.
VARIABLE COSTS FOR CORN
ORBEANS
This past winter, I collected
information from a group of cash
crop farmers in western and south-
western Ontario on their variable
costs for corn and soybeans.
Table 1 shows their average cash
input costs and equipment fuel and
repair cost for preharvest opera-
tions and harvest operations for
continuous corn and soybeans.
Agricrew offers
rural experience
Agricrew is a great summer
work experience.
The program is for young people
between 15 and 24 years of age,
who have unlimited energy, and
are willing to work and learn. It
gives students a challenging job
with plenty of variety and the
chance to work with other people.
Some farm work experience is
required.
Agricrew is a great opportunity
to learn new agricultural skills.
There are foreman and crew
member positions available. Ap-
plications may be obtained from
the Ontario Ministry of Agriculture
and Food Office in Clinton.
••••••••.••••••
•••••••••••••••
Input Costs
Preharvest Fuel and Repair
Harvest Fuel and Repair
TOTAL COSTS/ACRE
Continuous
Corn Soybeans
128.81 73.00
17.47 15.76
9.04 7.78
155.32 96.54
Let's look at our break-even cost
on corn. The input costs varied
from a low of $95/acre to a high of
$160/acre. Part of the variation in
this figure will be due to what each
farmer included in input costs.
Seed, fertilizer, pesticide costs
wouldbe included. Some would
also include interest for six months
on these operating costs, and crop
insurance.
The corn preharvest machinery
costs varied from $7 to $28 per acre.
The lowest preharvest cost was for
a farmer growing corn on ridges.
Some may have had a higher
machinery cost due to older
equipment and therefore higher
repair costs. Also these costs do not
include ownership costs of insur-
ance, interest, depreciation, only
fuel, grease and repairs. Their land
type would also affect the number
of tillage passes and fuel costs to
prepare their fields.
The average yield that they
thought could achieve based on
planting and harvesting at the
most optimum time was 125
bu/acre.
If we check the Ontario Ministry
of Agriculture and Food's Crop
Budgeting Aid we see a similar cost
of $157 per acre for variable costs -
$97 for inputs, $39 for machinery,
fuel and repair (not custom), $14
interest on operating costs and $7
crop insurance. Drying costs and
marketing costs have not been
included in the $157 per acre
OMAF crop budgeting figure or
$155.32 cost for the farmer group.
Adding in these costs for the
farmer group:
Input costs and direct machinery
costs $155.00
THE CITIZEN, WEDNESDAY, APRIL 16, 1986. PAGE 19.
Drying at $12.70/t at 29.5% mois-
ture 36.12'
Marketing 1.00
TOTAL VARIABLE/ACRE
$192.12
At 125 bu/acre for the group of
farmers, the variable costs per
bushel are $1.54. Yields will have
quite an impact on our variable cost
per bushel. Normally we can't
plant or havest all of our corn at the
ideal time of year. So if we thought
that our overall yield would
average 112 bushels (10 percent
less than 125)
o r
u cost per bushel
would rise to $1.72. It's important
that we be as realistic as possible in
whatyield we use in ourcalcula-
tion.
If corn this fall traded at $2.44
per bush our returns over variable
costs would be:
Per acre
Income: 112 bu. at 2.44
$273.28
Expenses = 192.12
Returns $ 81.16
The $81.16 per acre return is
what we have left to cover land
cost, fixed costs, and living
expenses. Thisfigure should be
compared to the return over
variable costs for other crops. Once
this is done, the crops with the
greatest return over variable costs,
should be considered seriously as
the ones to grow.
Each farmer must determine
their own production costs in
deciding what crop to grow, how
much to pay for land rent, and what
market price is needed to cover
these costs. It's a good exercise,
and one I'd be glad to help you
with, if you haven't done it before.
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