Grain Profitability Projections

Transcription

1 Grain Profitability Projections Greg Halich CE Barnhart Dept. Agricultural Economics University of Kentucky Lexington, KY 40546

2 Corn and Soybean Prices New Crop Price Scenario: Corn Soybeans Low $3.00 $7.75 Current Est. $4.00 $10.00 High $5.00 $12.25 Agricultural Economics

3 Budget Assumptions Machinery and Labor: Fuel, Repairs, Deprecation, Labor. Based on Custom Machinery Rates. Increased 25%. Adjusted to $3.25 fuel price. Trucking 75 miles (one-way). Agricultural Economics

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7 Budget Assumptions Base Scenario Fertilizer: $/ton $/unit Urea (N) $475 $.52 DAP (P O ) 2 5 $570 $.42 Potash (K O) 2 $480 $.40 Agricultural Economics

8 Three Soil Productivity Levels Corn Yield Soybean Yield Corn/Soybean Yield Ratio 125 bu 39.0 bu bu 45.5 bu bu 51.5 bu 3.4 Agricultural Economics

9 Projected 2015 Costs (per acre) Inputs: Corn (150 bu) Soybeans (45.5 bu) Seed $95 $70 Nitrogen $88 $0 P, K, and Lime $56 $43 Pesticides $50 $40 Total Inputs $290 $153 Machinery and Labor $146 $92 Other: Drying Grain $17 $0 Crop Insurance $20 $20 Misc. $20 $20 Land Rent Variable Variable Operating Interest $7 $4 Total Other $64 $44 Total Costs $499 + Land Rent $290 + Land Rent Note: 75 mile one-way trucking included in machinery and labor costs.

10 Summary Revenues/Costs (per acre) Yield and Price: Corn Soybeans Expected Yield (rotation) Expected Price $4.00 $10.00 Grain Revenue $600 $455 Gov t Payment $0 $0 Total Revenue $600 $455 Total Costs (Less Land Rent) $499 $290 (Less Land Rent) $101 $165 Agricultural Economics

11 Baseline Scenario 2015 (per acre) $10.00 Soybeans (elevator) $4.00 Corn (elevator) $.52-N; $.42-P; $.40-K Corn Soybeans Rotation 125 bu corn $24 $108 $ bu corn $101 $165 $ bu corn $177 $219 $198 Note: Subtract land rent to get Net Return.

12 Critical Budget Assumptions 1. Does not include land rent. 2. Includes non-cash costs (e.g. depreciation/overhead, unpaid labor). 3. P and K application at removal rate. 12 Agricultural Economics

13 Low Price Scenario 2015 $7.75 Soybeans (elevator) $3.00 Corn (elevator) $.52-N; $.42-P; $.40-K Corn Soybeans Rotation 125 bu corn -$101 $20 -$ bu corn -$49 $63 $7 175 bu corn $2 $103 $52 Note: Subtract land rent to get Net Return.

14 High Price Scenario 2015 $12.25 Soybeans (elevator) $5.00 Corn (elevator) $.52-N; $.42-P; $.40-K Corn Soybeans Rotation 125 bu corn $149 $196 $ bu corn $251 $267 $ bu corn $352 $335 $343 Note: Subtract land rent to get Net Return.

15 Scenario Comparison 2015 (per acre) $.52-N; $.42-P; $.40-K Low Price Rotation Med Price Soybeans High Price Rotation 125 bu corn -$40 $66 $ bu corn $7 $133 $ bu corn $52 $198 $343 Note: Subtract land rent to get Net Return.

16 Fertilizer Price Effects (decrease in profit) Increasing Fertilizer Prices $100/ton (per acre) Corn Change Soybean Change Rotation Change 125 bu corn $17 $6 $ bu corn $19 $7 $ bu corn $21 $8 $15 Note: Increased costs due to $100/ton increase in N, P, and K prices.

17 Crop Insurance Corn $4.00 Soybeans $ % and 80% revenue guarantee. Agricultural Economics

18 Minimum Price Scenarios Related to Crop Insurance Est. Price Crop Insurance 70% Coverage 80% Coverage After Basis Corn $4.00 $2.80 $3.20 Soybeans $10.00 $7.00 $8.00

19 70% Crop Insurance Price Scenario $7.00 Soybeans (effective min) $2.80 Corn (effective min) $.52-N; $.42-P; $.40-K Corn Soybeans Rotation 125 bu corn -$126 -$9 -$ bu corn -$79 $29 -$ bu corn -$33 $64 $15 Note: Subtract land rent to get Net Return.

20 80% Crop Insurance Price Scenario $8.00 Soybeans (effective min) $3.20 Corn (effective min) $.52-N; $.42-P; $.40-K Corn Soybeans Rotation 125 bu corn -$76 $30 -$ bu corn -$19 $74 $ bu corn $37 $116 $76 Note: Subtract land rent to get Net Return.

21 PLC Corn $3.70 Soybeans $ % base acres 90% payment yield 76.5% multiplier Agricultural Economics

22 Baseline Scenario 2014 (per acre) $10.00 Soybeans (elevator) $3.40 Corn (elevator) Change with PLC Corn Soybeans Rotation 125 bu corn $29 $0 $ bu corn $34 $0 $ bu corn $40 $0 $20 Note: per base acre

23 Baseline Scenario 2015 (per acre) $10.00 Soybeans (elevator) $4.00 Corn (elevator) Change with PLC Corn Soybeans Rotation 125 bu corn $0 $0 $0 150 bu corn $0 $0 $0 175 bu corn $0 $0 $0 Note: per base acre

24 Low Price Scenario 2015 $7.75 Soybeans (elevator) $3.00 Corn (elevator) Change with PLC Corn Soybeans Rotation 125 bu corn $67 $20 $ bu corn $80 $23 $ bu corn $94 $26 $60 Note: per base acre

25 ARC (County) 85% base acres 86% program crop revenue benchmark 10% payment range 76 86% coverage Agricultural Economics

26 Est. ARC Coverage Woodford County 2014 Corn Soybeans Olympic Avg Yield Olympic Avg Price $5.28 $12.27 Olympic Avg Revenue $756 $559 Revenue Guarantee (start) $650 $480 Revenue Guarantee (end) $574 $424 Effective Start Price $4.54 $10.55 Effective End Price $4.02 $9.32

27 Baseline Scenario 2014 (per acre) $10.00 Soybeans (elevator) $3.40 Corn (elevator) Change with ARC with Olympic Avg. Yields Corn Soybeans Rotation 125 bu corn $64 $21 $ bu corn $64 $21 $ bu corn $64 $21 $43 Note: per base acre

28 Baseline Scenario 2015 (per acre) $10.00 Soybeans (elevator) $4.00 Corn (elevator) Change with ARC with Olympic Avg. Yields Corn Soybeans Rotation 125 bu corn $64 $21 $ bu corn $64 $21 $ bu corn $64 $21 $43 Note: Assumed 160 bu corn and 50 bu soybeans 2015; per base acre

29 Low Price Scenario 2015 (per acre) $7.75 Soybeans (elevator) $3.00 Corn (elevator) Change with ARC with Olympic Avg. Yields Corn Soybeans Rotation 125 bu corn $64 $47 $ bu corn $64 $47 $ bu corn $64 $47 $56 Note: Assumed 160 bu corn and 50 bu soybeans 2015; per base acre

30 Comparison PLC and ARC Rotation Base Price PLC Base Price ARC 125 bu corn $15 $ bu corn $17 $ bu corn $20 $43 Note: per base acre

31 Comparison PLC and ARC Rotation Low Price PLC Low Price ARC Base Price PLC Base Price ARC 125 bu corn $44 $56 $0 $ bu corn $52 $56 $0 $ bu corn $60 $56 $0 $43 Note: per base acre

32 Expected Gross Profit with ARC Program (2015) $.52-N; $.42-P; $.40-K $3.00 Corn $7.75 Soybeans $4.00 Corn $10.00 Soybeans 125 bu corn -$26 $ bu corn $21 $ bu corn $66 $209 Note: Assume 25% base acreage Subtract land rent to get Net Return.

33 Expected Gross Profit ARC Program + 80% Crop Ins. (2015) $.44-N; $.45-P; $.40-K $3.00 Corn $7.75 Soybeans $4.00 Corn $10.00 Soybeans 125 bu corn -$6 $ bu corn $44 $ bu corn $93 $209 Note: Subtract land rent to get Net Return.

34 Expected Gross Profit ARC Program + 80% Crop Ins. High Fixed Costs (+$40/acre) (2015) $.44-N; $.45-P; $.40-K $3.00 Corn $7.75 Soybeans $4.00 Corn $10.00 Soybeans 125 bu corn -$46 $ bu corn $4 $ bu corn $53 $169 Note: Subtract land rent to get Net Return.

35 Expected Gross Profit ARC Program High Fixed Costs (+$40/acre) (2015) $.44-N; $.45-P; $.40-K $3.00 Corn $7.75 Soybeans $4.00 Corn $10.00 Soybeans 125 bu corn -$66 $ bu corn -$19 $ bu corn $26 $169 Note: Subtract land rent to get Net Return.

36 Discussion potential for significant losses New Farm Bill programs will limit losses ARC appears better than PLC Machinery Costs Cash Rents Agricultural Economics