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Economics of Crop Production

Economics of Crop Production. The Three Components of Profit. Crop Yield Production Cost Selling Price Received. Production Costs. Fixed Costs: Land, Labor, Machinery & Management – Little or no change Variable Costs: Seed, Chemicals & Fuel – Change little with yield

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Economics of Crop Production

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  1. Economics of Crop Production

  2. The Three Components of Profit • Crop Yield • Production Cost • Selling Price Received

  3. Production Costs • Fixed Costs: • Land, Labor, Machinery & Management – Little or no change • Variable Costs: • Seed, Chemicals & Fuel – • Change little with yield • Fertilizer, Harvesting & Drying – • Change the most

  4. Corn Budget – 135 bu/acre yield • Gross income @ $4.00/bu = $540.00 • Total variable cost = $405.22 • Return above variable cost = $134.78 • Total fixed cost = $117.06 • Total cost = $522.28 • Return to land, management risk = $17.72

  5. Corn Budget – 90 bu/acre yield • Gross income @ $4.00/bu = $360.00 • Total variable cost = $341.59 • Return above variable cost = $18.41 • Total fixed cost = $110.26 • Total cost = $451.85 • Returns to land, management Risk=$-91.85

  6. When to fertilize??? • Fertilize if You’ll Get a RETURN on Your Investment

  7. Response to Fertilizer Depends on: • Cultural Practices Used • Soil Productivity • Soil Test Level • Method of Fertilizer Application

  8. Corn Response to N Rate, 5 Year Average Yield on 3 soils

  9. Maximum Yield 160 bu/acre at 160 lbs N/acre 153 bu/acre at 125 lbs N/acre 143 bu/acre at 100 lbs N/acre M.M Alley (2003)

  10. Fertilize the Most Productive Soils the Heaviest

  11. Economic return from 40 lb increments of fertilizer N applied to continuous corn (3-yr average)+ + Assumes $0.60/lb N and $6.00/bu corn. Source, Bundy (1987)

  12. Economic return from 40 lb increments of fertilizer N applied to continuous corn (3-yr average)+ + Assumes $0.50/lb N and $3.50/bu corn

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