By Barry Ward, Leader, Production Business Management, College of Food, Agricultural and Environmental Sciences, Ohio State University Extension
Higher input costs and higher crop prices have been the theme for the last several months. Higher production costs in 2021 gave way to even higher costs for the 2022 production year. Factors affecting both supply and demand have continued to drive commodity crop prices higher. The result of all of this change is a positive margin outlook for 2022 commodity crops.
Production costs for Ohio field crops are forecast to be higher than last year with higher fertilizer prices leading the way. Variable costs for corn in Ohio for 2022 are projected to range from $578 to $708 per acre depending on land productivity. The trend line corn yield (183.7 bpa) scenario included in the corn enterprise budget shows an increase in variable costs of 44%.
Variable costs for 2022 Ohio soybeans are projected to range from $311 to $360 per acre. Variable costs for trend-line soybeans (56.5 bpa) are expected to increase 40% in 2022 compared to 2021.
Wheat variable expenses for 2022 are projected to range from $249 to $321 per acre. The trend line wheat yield (74 bpa) scenario included in the wheat enterprise budget shows an increase in variable costs of 50%.
Returns will likely be positive for most producers depending on crop price change throughout the rest of the year. Grain prices used as assumptions in the 2022 crop enterprise budgets are $7.00 per bushel for corn, $14.25 per bushel for soybeans and $7.50 per bushel for wheat. Projected returns above variable costs (contribution margin) range from $450 to $835 per acre for corn and $333 to $606 per acre for soybeans. Projected returns above variable costs for wheat range from $195 to $345 per acre although significant crop price increases since last fall (when the price was set for this enterprise budget) will likely cause wheat to be more profitable than these return projections indicate.
Return to Land is a measure calculated to assist in land rental and purchase decision making. The measure is calculated by starting with total receipts or revenue from the crop and subtracting all expenses except the land expense. Returns to Land for Ohio corn (Total receipts minus total costs except land cost) are projected to range from $260 to $619 per acre in 2022 depending on land production capabilities. Returns to land for Ohio soybeans are expected to range from $205 to $462 per acre depending on land production capabilities. Returns to land for wheat (not including straw or double-crop returns) are projected to range from $100 per acre to $239 per acre assuming a planting-time price of $7.50/bushel. If a current forward harvest price for wheat of $11.50 per bushel is used, the Return to Land is in a much higher range of $325 to $576 per acre depending on land production capabilities.
Total costs projected for trend line corn production in Ohio are estimated to be $1,054 per acre. This includes all variable costs as well as fixed costs (or overhead if you prefer) including machinery, labor, management and land costs. Fixed machinery costs of $78 per acre include depreciation, interest, insurance and housing. A land charge of $207 per acre is based on data from the Western Ohio Cropland Values and Cash Rents Survey Summary. Labor and management costs combined are calculated at $105 per acre. Details of budget assumptions and numbers can be found in footnotes included in each budget.
Total costs projected for trend line soybean production in Ohio are estimated to be $678 per acre. (Fixed machinery costs: $62 per acre, land charge: $207 per acre, labor and management costs combined: $60 per acre.)
Total costs projected for trend line wheat production in Ohio are estimated to be $593 per acre. (Fixed machinery costs: $36 per acre, land charge: $207 per acre, labor and management costs combined: $52 per acre.)
Data used to compile these enterprise budgets includes research, surveys, market data, economic modeling, calculations and experience of authors.
Current budget analyses indicates very favorable returns for all three primary commodity crops but crop price change and harvest yields may change this outcome. These projections are based on OSU Extension Ohio Crop Enterprise Budgets. Newly updated Enterprise Budgets for 2022. have been completed and posted to the Farm Office website: https://farmoffice.osu.edu/farm-mgt-tools/farm-budgets.