I recently had the opportunity to sit down with a room of Haywood County producers and go through our UT crop budgets and solicit comments and additions to our budgets. This is a workshop that we have been doing for the last 11 years and is one that has been beneficial to all involved. One thing is evident this year; producers are very concerned on what it is going to cost to control glyphosate resistant weeds. We made several changes or increases in the budgets including weed control, fuel (diesel prices have risen), and labor. We also included crop insurance costs and I have since refined that with actual quotes. With the amount of expense involved in the crop and the crop values that can be guaranteed, producers should evaluate the revenue crop insurance products. The base prices have been set and are $13.29 bushel for soybeans, $6.01 bushel for corn, and $1.23 a pound for cotton. Sign up for crop insurance ends March 15 in Tennessee.

The majority of the producers I talked to that day and since have for the most part decided on their crop mix for 2011. It does not look like they are going to deviate much from their normal production scheme with a few exceptions. If they are cotton producers, they are going to raise more cotton; if they raise grains, they are going to have more corn at the expense of soybeans. If a producer can raise any crop they want, they will have a mix of the crops but probably be heavier in corn and cotton. With uncertainty in the weather, a good diversified mix in either crops or at least maturity levels and varieties is warranted.

Farmers need to develop their own budgets on their unique operation and tie that together with their crop acreage in a whole farm plan. Extension Farm Management Specialist with the University of Tennessee Extension and other universities are available to assist in developing this farm plan. The farm budget is important in this process and from time to time can be used in making cropping decisions. The UT Extension annual budgets as well as archived budgets can be found on-line at http://economics.ag.utk.edu/budgets.html  or at your local County Extension office.  These budgets should be used as a guide as it is unlikely that farmers will have the exact same yields and inputs and definitely not the same selling prices or input prices. Land costs are not included in our budgets, but I have used in the following table a 25% share as an example. Farmers should use their own rental rates or land payments as applicable. The table below uses commodity prices current as March 2, 2011 and is based on input from Haywood County producers. I do update this table on a monthly basis at http://economics.ag.utk.edu/outlook.html . Producers should take into account a season average price for their entire crop including what they have forward priced or hedged. However, looking at current prices can give insight into how prices affect profitability and what the market is telling us to plant on a given day.

2011

Estimated Net Returns per Acre

1         Variable costs are seed, fertilizer, chemicals, fuel, repairs, and labor. Crop insurance cost is included. Based on input from producers.

2         Land costs are based on 25% of gross revenue.

Yields and prices are estimates only to be used in planning purposes. Cotton price estimate includes the loan rate plus an estimated loan equity payment and seed and hauling allowance. Producers should use their yields and prices estimates in their budgets. Technology and seed selection will vary among individual producers. This budget example assumes the following: Cotton – Bt II or Wide Strike RR Flex; Corn –RR; Soybeans – RR.

In assisting producers in making informed decisions regarding their cropping plans, examining the returns above variable costs is useful. This method is used when there is very little equipment changes being made and fixed costs are not changing. If the farm is making operational changes then a whole farm plan should be examined. If the farm is share rented, that particular share should be considered as a cost. Producers should use their own farm average yields, price outlook, and their inputs. Looking at different yields and prices can be most useful when determining the financial risk and profit potential.

As has been evident the last few years and throughout time, a sound cropping plan should include crop diversification – different crops, different varieties, and rotation. At today’s price level, it does not take much of a change in yield to favor one crop over another. Producers who have a successful production plan should stick to that plan at least on their core acres. That would probably leave 15% – 25% of a producer’s acreage to be somewhat flexible and more dependent on conditions before planting such as fertilizer prices, commodity prices, etc. If you need assistance in developing your cropping plan, contact your local County Extension office.