Lower expected grain prices and lower expected crop insurance revenue guarantees mean farmers will need to judiciously watch costs to turn a profit. Growers can use the plethora of budgets in Iowa State University’s Estimated cost of Crop Production-2014 to help project costs. The spreadsheets make it easy to update the projections with hard numbers as expenses occur. Farmers can use costs per bushel the spreadsheets generate to establish market price targets.
Cost for seed, fertilizer, herbicides and insecticides plus crop insurance are straight forward.
Default land costs in the spreadsheets are estimated cash rent equivalents. Cash outflow needed to access land can differ greatly. On land that’s bought and paid for, cash needed to cover land cash flow may be real estate taxes. Cash flow needed to cover principal and interest payments may be a lot higher.
A huge number of assumptions backup the machinery costs used in the budgets. Fixed machinery costs include: depreciation, interest on capital invested, repairs, taxes, insurance and housing. You can back those out of your records. But doing so will take a while. You’ll need to choose whether to figure economic depreciation or tax depreciation. Fast depreciation write offs can make those two differ greatly. Once you get totals, you need to allocate them per acre.
You will generate machinery operating costs as the season progresses. When you lock in those costs, you can update your projections and breakevens.
In the mid-1970s I was on the staff at the University of Florida. A colleague spent time at Oklahoma State University. We insisted that our colleague bring Okie State’s newly developed budget generator back with him. We had visions of creating budgets almost as quickly as you make instant coffee.
He came back. He did not bring the budget generator. The reason—keeping the input-output coefficients and machinery costs current that were needed to run the budget generator was high maintenance. Those are numbers you need to develop for your operation to make any cost calculating and breakeven price estimating spreadsheet worth running.
We're featuring the spreadsheet as our Farm Futures spreadsheet-of-the-month. You can download it by visiting the link above..
Do you have a spreadsheet that's made a difference on your operation that you'd be willing to share with with other readers? Drop us a line at FarmFutures@farmprogress.com with a description of the spreadsheet. We'll pay $75 if we feature your farmer-written noncommercial program as our Spreadsheet of the Month.