by: Barry Ward, Leader, Production Business Management, Department of Agricultural, Environmental, and Development Economics
Production costs for Ohio field crops are forecast to be lower again in 2016 but the profit picture remains poor, much the same as in 2015. Variable costs for Ohio corn for 2016 will be 9.6% to 13% lower ($34 to $60 per acre lower) compared to 2015 depending on land productivity and target yield. Variable costs for corn for 2016 are projected to be $325 to $404 per acre depending on land productivity. Variable costs for 2016 Ohio soybeans are projected to be 6.7% to 8.7% lower ($14 to $19 per acre lower) and range from $188 to $203 per acre. Wheat variable expenses for 2016 are projected to range from $170 to $211 per acre, down $18 to $20 per acre (8.6% to 9% lower). Lower fuel and fertilizer prices will be the primary fundamental drivers of lower variable costs in 2016.
With continued lower crop prices expected for 2016, returns will likely be low to negative for many producers. Projected returns above variable costs (contribution margin) range from $194 to $359 per acre for corn and $244 to $429 per acre for soybeans. (This is assuming fall cash prices of $3.75 per bushel for corn and $10.25 per bushel for soybeans.)
Returns to land for Ohio corn (Gross Revenue minus all costs except land cost) are projected to range from -$31 to $122 peracre in 2016 depending on land production capabilities. Returns to land for Ohio soybeans are expected to range from $69 to $245 per acre depending on land production capabilities.
Total costs projected for trend line corn production in Ohio are estimated to be $787 per acre. This includes all variable costs as well as fixed machinery, labor, management and land costs. Fixed machinery costs of $130 per acre include depreciation, interest, insurance and housing. A land charge of $187 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 $77 per acre. Returns Above Total Costs for trend line corn production are negative at -$146 per acre.
Total costs projected for trend line soybean production in Ohio are estimated to be $562 per acre. (Fixed machinery costs – $108 per acre, land charge – $187 per acre, labor and management costs combined – $57 per acre.) Returns Above Total Costs for trend line soybean production are also negative at -$30 per acre.
These projections are based on OSU Extension Ohio Crop Enterprise Budgets. Newly updated Enterprise Budgets for 2016 have been completed and posted to the Farm Management Website of the Department of Agricultural, Environmental and Development Economics. Updated Enterprise Budgets can be viewed and downloaded from the following website:
http://aede.osu.edu/research/osu-farm-management/enterprise-budgets