Glennis McClureNebraska Extension Educator

gmcclure3@unl.edu

1

Where Do Land Costs Fit Into Enterprise Budgets?

Presented by: Glennis McClure, UNL Ag Economics –

Farm & Ranch Management Analyst

OBJECTIVES

1) Land cost and its affect on cost of production.

2) Considering cost of production; rental rates and land management decisions.

Glennis McClureNebraska Extension Educator

gmcclure3@unl.edu

2

UNL Custom Rates Report https://agecon.unl.edu/custom-rates

UNL LIVESTOCK BUDGETS https://agecon.unl.edu/publications/budgets

UNL CROP BUDGETS https://cropwatch.unl.edu/budgets

82 crop budgets representing 15 crops for 2020

Modify the budgets using Excel to make them

work for you

Nebraska Crop Budgets

Glennis McClureNebraska Extension Educator

gmcclure3@unl.edu

3

Use in marketing and management

decisions

Determine production practices

and inputs used

Compare profitability of various

enterprises

Know Your Cost of Production

2020 Soybean Budgets (10) Yield Est.

Cash Cost

/bu

Economic

Cost /bu

Budget # Dryland

57 Dryland Conv Till 45 $5.54 $8.32

58 Dryland No-till 45 $5.38 $7.73

59 Dryland No-till 45 $5.41 $7.98

Dryland Average 45 $5.44 $8.01

Budget # Irrigated

60 Pivot Irr- Conv Till 67 $5.59 $9.01

61 Grav Irr - Ridge Till 70 $4.88 $7.93

62 Pivot Irr - No-till 75 $4.88 $7.74

63 Pivot Irr - No-till 64 $5.21 $8.55

64 Pivot Irr - No-till drilled 78 $4.45 $7.18

65 Pivot Irr - No-till drilled 78 $4.47 $7.20

66 Pivot Irr - No-till drilled 78 $4.48 $7.21

Irrigated Average 73 $4.85 $7.83

Glennis McClureNebraska Extension Educator

gmcclure3@unl.edu

4

Corn Budgets - Dryland Yield Est. Cash Cost /bu

Economic

Cost /bu

Budget # Dryland

15 Dryland Conv Till 100 $3.36 $4.74

16 Dryland Conv Till 110 $2.77 $3.96

17 Dryland Conv Till 160 $2.45 $3.80

18 Dryland Conv Till 170 $2.15 $3.39

19 Dryland No Till 135 $2.49 $3.39

20 Dryland No Till 180 $2.21 $3.34

21 Dryland No Till 140 $2.51 $3.37

22 Dryland No Till 185 $2.24 $3.34

23 Dryland No Till 145 $2.19 $3.04

24 Dryland No Till 195 $1.96 $3.01

25 Dryland Ecofallow 130 $2.33 $2.95

Dryland Corn Average 150 $2.42 $3.48

Corn Budgets - Irrigated Yield Est. Cash Cost /bu

Economic

Cost /bu

Budget # Irrigated

26 Irrigated Ridge Till 245 $2.26 $3.22

27 Irrigated Ridge Till 255 $2.08 $2.98

28 Irrigated Ridge Till 250 $2.29 $3.24

29 Irrigated Conv Till 195 $2.69 $3.37

30 Irrigated No Till 245 $2.22 $3.14

31 Irrigated No Till 250 $2.23 $3.12

32 Irrigated No Till 275 $2.02 $2.84

33 Irrigated No Till 275 $2.08 $2.90

34 Irrigated No Till 275 $2.09 $2.91

35 Irrigated Conv Till 235 $2.54 $3.59

36 Irrigated Conv Till 245 $2.33 $3.30

37 Irrigated Conv Till 195 $2.84 $3.55

38 Irrigated Conv Till 205 $2.61 $3.26

39 Irrigated Conv Till 240 $2.55 $3.57

Irrigated Corn Average 242 $2.35 $3.21

Glennis McClureNebraska Extension Educator

gmcclure3@unl.edu

5

Editing the currentUNL Crop Budgets

https://cropwatch.unl.edu/budgets

What’s in a Crop Budget?

• Budget #24 Dryland Corn – Eastern Nebraska

No Till, After Beans, 195 bushel yield

Compare to –

• Budget #39 Irrigated Corn – Statewide Pivot Land Value

Continuous corn, 240 bushel yield

Glennis McClureNebraska Extension Educator

gmcclure3@unl.edu

6

Change Land Costs in the Budgets

Want to adjust the land value?

• Go to the General Variables tab

• Corn budget #24 is Dryland Eastern land value at $5,765

• Change that line to the value you want.

********************************************************************************

If cash rent scenario, then 0 out the land value.

Unhide lines in the materials and services area, note cash rent and enter that amount into the total.

Cash rent is a cash cost so you want to get it in with cash expenses.

Cost of Production and Rental Arrangements?

•Affects cost of production for operator

•Landlord receives fixed revenue for the period

•Rule of Thumb?

Fixed Cash Rent –set amount per

acre for the year

•Actual rent depends on yield and price

•Risks are shared

•Some cost of production considered

Flexible Cash Lease

Glennis McClureNebraska Extension Educator

gmcclure3@unl.edu

7

Cost of Production and Rental Arrangements?

• Landlord receives share of crop + USDA payments

• Typical 50/50

• Owners share in inputs, drying, storing and marketing

Crop-share Lease

• Operator supplies labor and equipment to till, plant, fertilize, control pest, harvest and hauling

• Operator receives a fixed payment for operations

• Landowner pays all other expenses

• Landowner owns the crop, USDA payments and markets it

Custom Farming Contract

Glennis McClureNebraska Extension Educator

gmcclure3@unl.edu

8

Ag Budget Calculator Phase 1

Enter Field Operation

Power UnitImplementMaterials & Services

15

1st Field Operation

Spray Burndown

Herbicide

Field Sprayer

JD Tractor

2nd Field Operation

Plant Bulk Soybeans

12 row planter

Big Red tractor

3rd Field Operation

Post Spray Herbicide

Custom Hire

Glennis McClureNebraska Extension Educator

gmcclure3@unl.edu

9

Phase 1 Report: Similar to Current Budgets Part 1 & 2

Yet Customize for YOU!

Glennis McClureNebraska Extension Educator

gmcclure3@unl.edu

10

Phase 1 Report: Similar to Current Budgets Part 1 & 2

Yet Customized for YOU!

Glennis McClureNebraska Extension Educator

gmcclure3@unl.edu

11

Beyond Phase 1 of the Program

• Add projected enterprise revenue

• Allocate general farm expenses

• Generate cash and economic enterprise reports, breakeven, and sensitivity analysis

• Create a cash flow report

Money doesn’t buy happiness

But it can buy a combine

Have you ever seen a sad person driving a combine?

Glennis McClureNebraska Extension Educator

gmcclure3@unl.edu

12

Nebraska Strong Financial Services“Nebraska Strong Financial Services helps improve financial decision-making, promoting survival of farm and ranch operations in Nebraska”

Services Whole Farm Analysis Enterprise Analysis Cash Flow Projections Long Range Budgeting Benchmarking across

All major cost items, like seed and fertilizer

Marketing Yields

Benefits Improvement in accuracy of farm/ranch financial performance Comparison with similar operations to identify areas for

improvement Evaluation of alternative business scenarios before making the

investment decision Discuss identified areas of possible improvement with relevant

U of Nebraska Extension/Faculty

Department of Agricultural Economics

Contact:

Pedro MasiFinancial AnalystDept of Ag. EconomicsPh: 402-472-0919pmasigodoy2@unl.edu

Cory WaltersAssociate ProfessorDept of Ag. EconomicsPh: 402-472-0366cwalters7@unl.edu

IT IS IMPORTANT THAT WE LEARN TO MANAGE OUR STRESS LEVELS

AND RECOGNIZE HIGH STRESS LEVELS IN OTHERS

NEBRASKA RURAL RESPONSE HOTLINE: 1-800-464-0258

NATIONAL SUICIDE PREVENTION LIFELINE: 1-800-273-TALK (8255)

AGRICULTURE IS A STRESSFUL OCCUPATION

Glennis McClureNebraska Extension Educator

gmcclure3@unl.edu

13

Glennis McClure

UNL Ag Economics

402.472.0661

gmcclure3@unl.edu

Dryland

Unit Power Imp. Power Imp.1 Spray Spring Burndown Herbicide 1 0.95 0.21 0.29 0.60 0.90 1.08 4.032 Spray Fertilizer 1 0.95 0.21 0.29 0.16 0.90 2.71 5.223 Plant No-Till 1 3.00 0.88 0.95 3.26 2.96 4.53 15.584 Spray Herbicide 1 0.95 0.21 0.29 0.60 0.90 1.08 4.035 Spray Herbicide 0.5 0.47 0.10 0.14 0.30 0.45 0.54 2.006 Spray Insecticide Custom7 Combine Dryland Corn 1 3.44 3.43 7.56 1.20 8.08 4.63 28.348 Cart 195 bu 3.48 0.99 1.20 1.78 3.75 1.05 12.259 Truck Custom10 Dry Grain Custom

Total for Field Operations 13.24 6.03 10.72 7.90 17.94 15.62 71.45

Materials & Services Rate Unit Total Glyphosate 5# w/Surfactant 1 50% 32 ounce 0.12 1.882,4-D Ester LV4 1 50% 1.0 pint 2.00 1.0021-0-0-24S 1 50% 1.7 pound 0.35 0.3032-0-0 2 100% 130 lbs N 0.40 52.00Corn Bt, ECB, & RIB 3 100% 27.1 k seed 3.13 84.6910-34-0 3 100% 6 gallon 2.45 14.70Acuron 4 100% 2.5 quart 17.50 43.75Crop Oil Concentrate 4 100% 1.6 pint 1.25 2.0021-0-0-24S 4 100% 2.5 pound 0.35 0.88Armezon Pro 5 50% 14 ounce 1.33 9.30Atrazine 90 DF 5 50% 0.5 pound 3.00 0.75Crop Oil Concentrate 5 50% 1 pint 1.25 0.63UAN 5 50% 3 pint 0.19 0.28

* Spray 6 30% 1 acre 7.00 2.10* Brigade 2EC 6 10% 5.12 ounce 0.98 0.50* Mustang Maxx 6 10% 2 ounce 1.41 0.28

Haul Grain Bushels 9 20% 195 bushel 0.11 4.29Dry 2 Points Removed 10 30% 195 bushel 0.08 4.68Scouting Dryland Corn 100% 1 acre 7.00 7.00

7.00 7.00

Total Materials & Services 238.01*Insecticide for Spider mites and Western Bean Cutworm respectively.Total listed costs for Field Operations and Materials and Services 309.46

Interest on Operations Capital 275.90$ 5.50% for 6.0 mo. 7.59Total Operating and Use Related Ownership Costs 317.05

Overhead (accounting, liability insurance, vehicle cost, office expense) 20.00Real Estate Opportunity^ 5,765$ 3.00% 172.95Real Estate Taxes 5,765$ 1.35% 77.83Total Cost per Acre Including Overhead 587.83

Cash Cost per bushel ^Ownership and RE Opportunity not included in cash costs. 1.96Cost of production per bushel 3.01

cash expense @

Dryland (Eastern) per acre @per acre @

Crop InsuranceScouting

AdditiveAdditiveHerbicideHerbicideAdditiveAdditiveCustom

InsecticideInsecticide

CustomCustom

Herbicide

Operation Index

Percent Acres

Applied

Application Applied Price

HerbicideAdditiveFertilizer

SeedFertilizer

Herbicide

Your Estimate

Repairs Ownership^

TotalYour

Estimate

2020 Budget 24-Corn, Bt, ECB, & RIB, Eastern Nebraska, No Till, after Beans, 195 bushel Yield

Field OperationsTimes or Qty

Labor @ $25.00 /Hr

Fuel @ $2.27 and Lube

Pivot Irrigated Diesel, 800 GPM 35 PSI, 13 acre/inches

Unit Power Imp. Power Imp.1 Disk 1 2.52 1.98 0.60 1.36 5.40 1.22 13.082 Field Cultivation 1 1.83 1.43 0.63 1.43 1.97 1.62 8.913 Spray Herbicide 1 0.95 0.21 0.29 0.60 0.90 1.08 4.034 Plant 1 3.00 0.71 0.95 2.91 2.96 4.05 14.585 Row Crop Cultivation 1 2.50 0.83 0.86 0.44 2.69 1.52 8.846 Row Crop Cultivation 0.25 0.63 0.21 0.22 0.11 0.67 0.38 2.227 Spray Insecticide Custom8 Spray Custom9 Spray Herbicide Custom10 Pivot E 125' Lift w/fertigation 13 ai 15.05 37.06 3.80 23.38 6.66 12.83 98.7811 Combine Irr Corn 1 4.23 4.22 9.31 1.94 9.95 4.63 34.2812 Cart 240 bu 4.29 1.22 1.48 2.20 4.61 1.29 15.0913 Truck Custom14 Dry Grain Custom

Total for Field Operations 35.00 47.87 18.14 34.37 35.81 28.62 199.81

Materials & Services Rate Unit Total Balance Flexx 3 100% 4 ounce 5.00 20.00Bicep II Magnum 3 100% 2.1 quart 13.75 28.88Corn SmartStax RIB Complete 4 100% 33.3 k seed 3.63 120.7110-34-0 4 100% 6 gallon 2.45 14.70Spray 9 100% 1 acre 7.00 7.00DiFlexx DUO 9 100% 32 ounce 0.82 26.2532-0-0 (Applied by R2) 10 100% 215 lbs N 0.40 86.00Spray 7 10% 1 acre 7.00 0.70Brigade 2EC 7 10% 5.12 ounce 0.98 0.50Spray 8 20% 1 acre 7.00 1.40Headline AMP 8 20% 10 ounce 2.58 5.16Haul Grain Bushels 13 100% 240 bushel 0.11 26.40Dry 2 Points Removed 14 20% 240 bushel 0.08 3.84Scouting Irrigated Corn 100% 1 acre 12.00 12.00

9.00 9.00

Total Materials & Services 31,200 seeds per acre, 80,000 per bag, 5% Refuge 362.54

Total listed costs for Field Operations and Materials and Services 562.35Interest on Operations Capital 497.92$ 5.50% for 6.0 mo. 13.69

Total Operating and Use Related Ownership Costs 576.04Overhead (accounting, liability insurance, vehicle cost, office expense)Overhead (accounting, liability insurance, vehicle cost, office expense) 20.00Real Estate Opportunity^ 5,970$ 3.00% 179.10Real Estate Taxes 5,970$ 1.35% 80.60Total Cost per Acre Including Overhead 855.74

Cash Cost per bushel ^Ownership and RE Opportunity not included in cash costs. 2.55Cost of production per bushel 3.57

FungicideCustom

ScoutingCustom

HerbicideHerbicide

SeedFertilizer

FertilizerHerbicide

CustomInsecticide

Custom

Herbicide

per acre @

Crop Insurance

cash expense @

Pivot (State) per acre @

Operation Index

Percent Acres

Applied

Application

2020 Budget 39-Corn, SmartStax RIB Complete, Conventional Tillage, Continuous, 240 bushel Yield

Applied Price

Your Estimate

Field OperationsTimes or Qty

Labor @ $25.00 /Hr

Fuel @ $2.27 and Lube

Repairs

TotalYour

Estimate

Ownership^