Barry Ward, Leader, Production Business Management
Lower crop prices and a mix of higher and lower input costs have been the theme for the last several months. High production costs in 2022 gave way to a mix of higher and lower input costs for the 2023 production year. Factors affecting both supply and demand have continued to drive commodity crop prices lower. The result of these changes is an outlook for limited positive margins for the 2023 corn, soybean and wheat crops.
Production costs for Ohio field crops are forecast to be slightly lower than last year with lower fertilizer and fuel prices leading the way. Higher rents, seed costs, machinery/equipment costs and interest rates mostly offset any benefit related to lower cost areas.
Variable costs for corn in Ohio for 2023 are projected to range from $514 to $628 per acre depending on land productivity. The trend line corn yield (181.8 bpa) scenario included in the corn enterprise budget shows a decrease in variable costs of 10% but a decrease in total costs of only 5% due to higher rents and machinery/equipment costs.
Variable costs for 2023 Ohio soybeans are projected to range from $280 to $320 per acre. Variable costs for trend-line soybeans (56.5 bpa) are expected to decrease 10% in 2023 compared to 2022 while total costs are expected to decrease only 2% in 2023.
Wheat variable expenses for 2023 are projected to range from $246 to $309 per acre. The trend line wheat yield (75.4 bpa) scenario included in the wheat enterprise budget shows a decrease in variable costs of 3% with an increase in total costs of 4%.
Returns will be mixed depending on crop price change throughout the rest of the year. Grain prices used as assumptions in the 2023 crop enterprise budgets are $5.00/bushel for corn, $12.00/bushel for soybeans and $8.00/bushel for wheat (wheat price set in October using the September ’23 Futures price at that time).
Projected returns above variable costs (contribution margin) range from $333 to $463 per acre for corn and $378 to $494 per acre for soybeans. Projected returns above variable costs for wheat range from $326 to $415 per acre although significant crop price decreases since last fall (when the price was set for this enterprise budget) will likely cause wheat to be less profitable than these return projections indicate.
Return to Land is a measure calculated to assist in land rental and purchase decision making. The measure is calculated by starting with total receipts or revenue from the crop and subtracting all expenses except the land expense. Returns to Land for Ohio corn (Total receipts minus total costs except land cost) are projected to range from $23 to $254 per acre in 2023 depending on land production capabilities. Returns to land for Ohio soybeans are expected to range from $130 to $348 per acre depending on land production capabilities. Returns to land for wheat (not including straw or double-crop returns) are projected to range from $129 per acre to $295 per acre assuming a planting-time price of $8/bushel. If a current forward harvest price for wheat of $6.80/bushel is used, the Return to Land is in a lower range of $60 to $192 per acre depending on land production capabilities.
Total costs projected for trend line corn production in Ohio are estimated to be $1,003 per acre. This includes all variable costs as well as fixed costs (or overhead if you prefer) including machinery, labor, management and land costs. Fixed machinery costs of $88 per acre include depreciation, interest, insurance and housing. A land charge of $228 per acre is based on data from the Western Ohio Cropland Values and Cash Rents Survey Summary. Labor and management costs combined are calculated at $88 per acre. Details of budget assumptions and numbers can be found in footnotes included in each budget.
Total costs projected for trend line soybean production in Ohio are estimated to be $667 per acre. (Fixed machinery costs: $69 per acre, land charge: $228 per acre, labor and management costs combined: $55 per acre.)
Total costs projected for trend line wheat production in Ohio are estimated to be $619 per acre. (Fixed machinery costs: $43 per acre, land charge: $228 per acre, labor and management costs combined: $56 per acre.)
Data used to compile these enterprise budgets includes research, surveys, market data, economic modeling, calculations and experience of authors.
Current budget analyses indicate less favorable returns for all three primary commodity crops in Ohio for 2023 but crop price change and harvest yields may change this outcome. These projections are based on OSU Extension Ohio Crop Enterprise Budgets. Newly updated Enterprise Budgets for 2023 have been completed and posted to the Farm Office website: https://farmoffice.osu.edu/farm-management/enterprise-budgets.