by: Chris Zoller, Extension Educator, ANR in Tuscarawas County
According to data compiled by the USDA Economic Research Service (ERS), the period from 2009 – 2019 provided variable net returns to U.S. producers of corn, soybeans, and wheat. The ability to cover total costs of production has been most significant since 2012, the last year all three commodities provided positive returns (see Figure 1).
Total costs include operating costs, such as fertilizer, seed, and chemicals, and overhead costs, including unpaid labor, depreciation, land costs, and other opportunity costs. While crop sales generally cover the annual operating costs, net returns have often been negative. Net returns are calculated by subtracting total costs from total receipts. Because of this, overhead costs are often not covered from resulting crop sales.
According to an analysis by USDA ERS, net returns for corn increased early in the period because of an increase in the production of corn-based ethanol. Corn acreage and yields remained high after the expansion leading to oversupply and lower returns. Until 2018, net returns for soybeans exceeded those of corn. Because of international competition and high yields, wheat prices and returns declined over the decade.
Figure 1. Estimated annual returns for corn, soybeans, and wheat, 2009-2019
Looking Ahead
Harvest of this year’s corn and soybean crop has begun, and thoughts will soon turn to planning for 2021. Producers are encouraged to use crop budgets prepared by Ohio State University Extension, available at: https://farmoffice.osu.edu/farm-mgt-tools/farm-budgets. These Excel-based budgets provide a listing of variable and fixes costs for various yield scenarios, along with a column for producers to insert their predicted yields.
In addition to the OSU Extension budgets, you may be interested in completing a complete farm financial analysis at the beginning of 2021. See the OSU Extension Farm Business Analysis and Benchmarking Program (https://farmprofitability.osu.edu/) for additional information.
There are many uncertainties, including weather, market demand, costs, prices, and government payments. Large government payments have been made recently, but there is no guarantee as to whether additional payments will be made in 2021.
Talk to your lender, accountant, and Extension Educator as you prepare for the 2021 growing season.