2019 Nebraska Crop Income Projections

As the 2018 harvest finishes across Nebraska, it is time to think about next year. Nebraska Extension releases 78 crop budgets near the end of each year to help farmers plan financially for the coming growing season. This article will use the 2019 budgets to project returns for the 2019 corn, soybean, wheat and milo crops. The analysis will not include farm commodity program payments because a new or extended Farm Bill has not been passed by congress. This article will demonstrate a three-step projection method (Yield Estimate, Commodity Price Projection, Direct Cost and Overhead) to highlight how one can do their own crop income projection.

Step 1

The first step in the analysis is to decide what yield to use in the financial projections. The best approximation for future yield is to use either trend line yield for a state or Actual Production History (APH) for a farm. For Nebraska, the average corn yield would be 185 bushels per acre (bpa), soybeans 58, wheat 47 and milo 92 based on the past four year state average yields. National Agricultural Statistics Service (NASS) makes available data to calculate the state average yield. https://www.nass.usda.gov/Quick_Stats/Lite/index.php  A Nebraska Extension Cropwatch article charted the Nebraska state trend-line yields using NASS data https://cropwatch.unl.edu/2018/soybean-and-corn-yield-and-acreage-trends. Of course, many irrigated corn yields will be in excess of 200 bpa so the calculations will use average and 240 bpa for irrigated corn. In this case, APH can be used to project yield.

Step 2

The second step in projecting revenue is to decide on price to calculate revenue. Gross revenue (yield times price) is just as difficult to project accurately, but we can use prices now offered for 2019 crop sales. The revenue projection will use prices offered for forward contract sales at harvest 2019. These are listed in Table 1 below.

Table 1: 2019 Harvest Prices, Red Cloud NE, Cooperative Producers Inc., 30 October 19

Crop Price Sale Month
Corn $3.55 October 2019
Soybean $7.70 October 2019
Milo $3.35 October 2019
Wheat $4.60 July 2019

 

Step 3

Table 2 below calculates projected return to land and management using several 2019 Nebraska Extension Budgets, the third step. The return to land and management calculation is the residual income available to pay for use of land and to pay the operator that produces the crop.

Table 2: 2019 Projected Crop Income

Categories, Income, Expense Corn, Irr, 240 Bu, No Till Corn, 185 bu, No Till Corn, western dryland, No Till Soybeans, Irr, 60 bu, Milo, 105 Bu Wheat, 55 Bu
Yield per Acre 240 185 110 60 105 55
Price per Bu $3.55 $3.55 $3.55 $7.70 $3.35 $4.60
Gross Crop Revenue $852.00 $656.75 $390.50 $462.00 $351.75 $253.00
Seed $110.00 $75.00 $62.00 $56.00 $12.40 $27.00
Fertilizer $115.00 $74.00 $63.00 $0.00 $46.00 $54.00
Crop Protection $75.00 $52.00 $53.00 $33.00 $62.00 $11.00
Hauling $26.00 $21.00 $14.00 $7.00 $11.00 $7.00
Storage $29.00 $22.00 $15.00 $8.00 $13.00 $7.00
Drying $14.00 $10.00 $0.00 $0.00 $0.00 $0.00
Scouting $9.00 $9.00 $9.00 $7.00 $7.00 $7.00
Crop Insurance $25.00 $24.00 $17.00 $25.00 $9.00 $11.00
Total Direct Costs $403.00 $287.00 $233.00 $136.00 $160.40 $124.00
Mach lease/hire $10.00 $19.00 $7.00 $30.00 $2.00
Machine repairs $27.75 $20.00 $18.00 $36.00 $22.00 $11.00
Fuel & oil $55.00 $8.00 $7.00 $58.00 $13.00 $6.00
Mach Deprec $40.00 $30.00 $42.00 $39.00 $39.00 $33.00
Labor $20.00 $20.00 $10.00 $18.00 $17.00 $6.00
Total Power Cost $152.75 $97.00 $84.00 $181.00 $93.00 $56.00
Total Overhead* $102.00 $96.00 $62.00 $102.00 $35.00 $42.00
Total Production Costs $657.75 $480.00 $379.00 $419.00 $288.40 $222.00
Return to Operator & Land $194.25 $176.75 $11.50 $43.00 $63.35 $31.00
* Includes Property Taxes.

 

The calculations in Table 2 are best estimates taking into account current price offers and a Nebraska Extension survey of crop production costs. Projected returns range from $11.50 per acre for dryland corn to $194.55 per acre for irrigated corn. But, what if 2019 harvest prices end up near those we have for the 2018 crop. Table 3 below calculates returns to land and management in that case.

Table 3: 2019 Projected Crop Income, low harvest prices

   
Categories, Income, Expense Corn,Irr, 240 Bu, No Till   Corn, 185 bu, No Till Corn, western dryland, No Till Soybeans, Irr, 60 bu, Milo, 105 Bu Wheat, 55 Bu
Yield per Acre 240   185 110 60 105 55
Price per Bu $3.20   $3.20 $3.20 $7.40 $3.02 $4.42
Gross Crop Revenue $768.00   $592.0 $352.00 $444.00 $317.1 $243.1
 
Seed $110.00   $75.00 $62.00 $56.00 $12.40 $27.00
Fertilizer $115.00   $74.00 $63.00 $0.00 $46.00 $54.00
Crop Protection $75.00   $52.00 $53.00 $33.00 $62.00 $11.00
Hauling $26.00   $21.00 $14.00 $7.00 $11.00 $7.00
Storage $29.00   $22.00 $15.00 $8.00 $13.00 $7.00
Drying $14.00   $10.00 $0.00 $0.00 $0.00 $0.00
Scouting $9.00   $9.00 $9.00 $7.00 $7.00 $7.00
Crop Insurance $25.00   $24.00 $17.00 $25.00 $9.00 $11.00
Total Direct Costs $403.00   $287.0 $233.00 $136.00 $160.40 $124.00
 
Mach lease/hire $10.00   $19.00 $7.00 $30.00 $2.00
Machine repairs $27.75   $20.00 $18.00 $36.00 $22.00 $11.00
Fuel & oil $55.00   $8.00 $7.00 $58.00 $13.00 $6.00
Mach Deprec $40.00   $30.00 $42.00 $39.00 $39.00 $33.00
Labor $20.00   $20.00 $10.00 $18.00 $17.00 $6.00
Total Power Cost $152.75   $97.00 $84.00 $181.00 $93.00 $56.00
 
Total Overhead* $102.00   $96.00 $62.00 $102.00 $35.00 $42.00
 
Total Production Costs $657.75   $480.0 $379.00 $419.00 $288.4 $222.0
 
Return to Operator & Land $110.25   $112.0 -$27.00 $25.00 $28.70 $21.10
 
 
* Includes Property Taxes.  

 

Some crops in Table 3 show very low returns to land ownership and to the farmer producing the crop. In the case of dryland corn, negative returns. The Return to Operator and Land calculation is after property taxes are paid. This calculation then is the amount left to pay for land ownership and the operators labor and management. News reports indicate fertilizer and fuel costs likely to be higher in 2019 compared to 2018. Fuel prices began to rise in summer 2018 and fertilizer prices followed the same timeline. Seed corn prices are the same or slightly lower than 2018 with herbicide and insecticide prices a mixed bag. The input survey conducted in the 2019 Nebraska Extension budgets preparation confirmed the above observations lending credence to this analysis.  https://cropwatch.unl.edu/budgets

Summary

The take away from this analysis is three-fold. Risk management is an important factor for 2019 income. Risk management would incorporate crop insurance and a marketing plan that captures prices now offered on at least a significant portion of 2019 crops. A second part to the risk management plan will be to lock in crop production costs so that farmers can make estimates of 2019 crop costs. Working with and communicating with landlords about the financial picture is a best practice for farmers. Tenants may want to change rental contracts to a flexible lease. Landlords will appreciate the desire to move to that type lease if they have a full understanding of the financial projections. Third, these projections are the first step in cash flow planning for 2019. Cash flow planning allows farmers to communicate with their lender before the 2019 crop year and helps in the lending and production decisions.