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Corn and Soybean Projected Profitability 2013 October 18, 2012

Corn and Soybean Projected Profitability 2013 October 18, 2012. Greg Halich 859-257-8841 Greg.Halich@uky.edu. 311 CE Barnhart Dept . Agricultural Economics University of Kentucky Lexington, KY 40546. Budget Assumptions. Input w/Greatest Impact on Profit? Fertilizer Cost.

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Corn and Soybean Projected Profitability 2013 October 18, 2012

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  1. Corn and Soybean Projected Profitability 2013October 18, 2012 Greg Halich 859-257-8841 Greg.Halich@uky.edu 311 CE Barnhart Dept. Agricultural Economics University of Kentucky Lexington, KY 40546

  2. Budget Assumptions Input w/Greatest Impact on Profit? • Fertilizer Cost. → Let’s look at fertilizer prices.

  3. Budget Assumptions Retail Fertilizer Prices: • Urea spiked in spring 2012 → Down last few months. • Anhydrous relatively stable. • DAP and Potash down last year.

  4. Budget Assumptions

  5. Budget AssumptionsFertilizer Quantity (per acre) 125 bu corn: → 150 units N → 50 units P2O5 → 44 units K2O 39.1 bu soybeans: → 27 units P2O5 → 43 units K2O

  6. Budget AssumptionsFertilizer Quantity (per acre) 150 bu corn: → 160 units N → 60 units P2O5 → 53 units K2O 45.5 bu soybeans: → 32 units P2O5 → 50 units K2O

  7. Budget Assumptions Land Rent: • Highly variable. • Not included in the budgets. → Subtract from net revenue.

  8. Budget Assumptions Machinery and Labor: • Fuel, Repairs, Deprecation, Labor. • Based on Custom Machinery Rates. → Increased 25%. • Adjusted to $3.75 fuel price. • Trucking – 60 miles (one-way).

  9. Budget Assumptions Other: • $2.50/gallon LP 3 pts removed. • Direct Payment $20/acre.

  10. Three Soil Productivity Levels

  11. Following Costs Increase with Yield: • Fertilizer • Machinery and Labor • Drying (corn)

  12. Critical Budget AssumptionsSummary Does not include land rent. Includes “non-cash” costs (e.g. depreciation/overhead, unpaid labor). P and K application at removal rate.

  13. What if Commodity Prices Change? How will this impact profit? → Let’s look at two scenarios.

  14. Putting Input Prices in Context Fertilizer: • Corn price drop necessary to equal $100/ton fertilizer price increase? → $.10/bu • What is typical volatility in corn price in an avg. week? • Marketing crop far more important than input prices right now.

  15. Summary and Discussion Commodity Price Outlook: • Prices up from year ago. • Current price levels very profitable. • Concentrate on marketing crop. → Not worrying about input prices. • How exposed are you with the low commodity price scenario?

  16. Flex Lease Program Cover the following topics: • Lease rate dynamics. • Flex lease basics. • Flex lease examples.

  17. 2012 Flex Lease Meetings • Henderson • Christian • Graves • Wayne • Hopkins • Hardin • Taylor • Simpson

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