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2012 Crop Budgets Update: Insights on Variable Costs and Contribution Margins

This webinar, hosted by Alan Miller and Craig Dobbins from Purdue University on February 21, 2012, focuses on the updated crop budgets for 2012, analyzing changes in variable costs across various crops including corn, soybeans, and wheat. The presentation reveals critical insights regarding contribution margins from 2010 to 2012 and emphasizes the impact of rising input prices on farming operations. It also discusses management implications and risks associated with fluctuating prices and variable costs, providing valuable information for farmers and agricultural professionals.

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2012 Crop Budgets Update: Insights on Variable Costs and Contribution Margins

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  1. 2012 Crop Budgets Update Alan Miller and Craig Dobbins Learning Tuesday Webinar February 21, 2012 Purdue University is an Equal Opportunity/Equal Access institution.

  2. Yield Relationships Changed

  3. Variable Costs (Average Cropland)

  4. Variable Cost ChangesRotation Corn (Average Cropland)

  5. Variable Cost ChangesRotation Soybeans (Average Cropland)

  6. Variable Cost ChangesWheat (Average Cropland)

  7. Variable Cost ChangesDouble Crop Soybeans (Average Cropland)

  8. Contribution Margins, 2010 – 2012 (Average Cropland)

  9. Contribution Margin by Crop & Yield, 2012

  10. Contribution Margin by Rotation, 20121 1Sum 2012 contribution margins for individual crops, then divide by years in rotation.

  11. Variable Costs Per Bushel 2010 – 20121

  12. Fixed Costs Change, 2011 – 2012 (3000 Acre Farm Size)

  13. Cost Structure – Rotation Corn 2012 Fixed costs are for 3000 acre farm. Assumes fixed costs are shared equally between corn and beans.

  14. Cost Structure – Rotation Beans 2012 Fixed costs are for 3000 acre farm. Assumes fixed costs are shared equally between corn and beans.

  15. Total Costs Per Bushel 2010 – 20121 1Overhead costs based on corn–bean rotation on 3000 acre farm.

  16. Source: Keep in Mind Family Living When Doing Crop Budgets, farmdocDAILY, February 17, 2012.

  17. Returns Above Total Costs Per Acre, 2010 – 2012

  18. Management Implications • Input prices increase sending variable costs higher • Overhead costs will increase in response to strong contribution margins – machinery overhead, family living/labor expenses, and land rent • Potential for economic profit • Budget reflects strong demand for corn which may influence rotation decisions • Risk of margin squeeze/margin decline likely will be significant because of price volatility

  19. Questions, Comments Purdue University is an Equal Opportunity/Equal Access institution.

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