Remember the “Know Your Numbers” campaign promoting testing for cholesterol and blood pressure information? It was good information for personal health. Farmers need to know a different number for healthy farm profitability.

Understanding a farm’s breakeven number is important for several reasons, says Gary Schnitkey, University of Illinois. First, breakeven price comes into play from a marketing perspective. “It’s good to know the price point where you can lock in a profit,” he says. The breakeven number is also important for calculating cash flow.

Schnitkey uses the 2017 Illinois Crop Budgets to calculate a “fairly consistent” breakeven number for most Illinois farms. He projects the corn breakeven price at $3.80 to $3.90 and soybeans at $9.25 to $9.30. 

Schnitkey adds that cash-rent rates will impact farm breakeven numbers. He expects cash-rent rates to follow the 2015-16 trend and drop by roughly $10 per acre this year. Schnitkey’s projected breakeven numbers are calculated using $170 per acre for cash rent, a typical rate for average ground. His breakeven numbers are calculated over cost and do not include a return for living expenses. That’s a significant factor to consider for farming operations supporting families.

Finally, the breakeven price may also help decide which crop will provide the highest return: corn or soybeans. Schnitkey looks ahead at fall delivery prices and typical yields compared to the projected breakeven prices: For this year, soybeans are above the breakeven number, while corn falls below.

Crunching a breakeven number
Schnitkey recommends downloading the 2017 Illinois Crop Budgets report and customizing the line items in a spreadsheet to create a farm-specific breakeven price.

Farmers’ breakeven numbers may reveal what they already expected: It’s time to cut expenses. Schnitkey recommends evaluating machinery costs, and then moving to big input expenses such as seed, fertilizer and insecticides.

What do farmers commonly overlook when calculating their farm’s breakeven number? Overhead costs. Schnitkey says expenses like labor, building repairs, depreciation and insurance all need to be accounted for in the bottom line. “Those costs aren’t directly tied to the land, but they need to be covered,” he explains.

Average yield numbers also influence farm breakeven numbers. Farmers with highly productive farms and consistently high yields will have a lower breakeven price. Schnitkey advises using a yield number that’s achievable based on past performance and adjusting breakeven prices based on actual performance after harvest. 

2017 crop budget

Gary Schnitkey, University of Illinois, prepares crop budgets for northern, central and southern Illinois. The chart below illustrates the crop budget for central Illinois. To calculate your breakeven number, use the factors listed in the 2017 crop budget to create a farm-specific breakeven price. Find farm budgets for northern and southern Illinois on farmdoc.com.