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Economics of Crop Production

Explore the key components of profit in crop production, including crop yield, production costs, and selling price. Learn about fixed and variable costs, budgeting scenarios, and factors affecting fertilizer application decisions. Make informed choices based on economic returns in corn production.

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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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