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Publication 60
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| Author: | John Molenhuis - Business Analysis and Cost of Production Program Lead/OMAFRA |
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| Creation Date: | 4 January 2008 |
| Last Reviewed: | 09 April 2009 |
These crop budgets are a simple format for estimating expenses. The sample costs are only a guide to illustrate a method of preparing your projections. They are based on many assumptions, including seeding rates, levels of fertilizer use, etc. Due to regional differences, there may be considerable variation in results.
To project your breakeven price after total costs, enter your farm figures in the spaces provided. The resulting estimate will assist you in choosing your crop mix, and setting target prices and marketing strategies for your farm.
Electronic versions of these crop budget worksheets can be found by going to the www.ontario.ca/agbusiness website and choosing Cost of Production Budgets.
Crop budgets are a management tool to estimate costs and evaluate cropping alternatives. The sample costs are not averages or recommended treatments. The budgets comprise treatments derived from crop advisors in the areas where the crops are commonly grown. There will be differences due to growing region, cropping practices, individual needs and yield expectations. The budgets, unless indicated otherwise, are based on conventional tillage practices. Seed costs, except for the Bacillus thuringiensis (Bt) and Roundup Ready (RR)® Corn, Spring Canola and Soybeans, are non-genetically enhanced varieties. The budgets developed for Bt or RR® varieties do not represent an endorsement of these products. They are included due to the current predominance of these production systems in field crop operations. Roundup Ready varieties are registered products of Monsanto Canada Inc.
Identity Preserved (IP) crops require budgeting for any extra expenses
and revenue - for example increased seed, weed control, storage and equipment
cleaning costs. Some of the budgets provide a line item for this.
Interest rates were calculated at 7.25 per cent for the period between
planting and harvest.
These budgets will be most meaningful if you use your expected yields and specific costs in developing production plans. Sample costs were taken from the 2008 Ontario Enterprise Budgets. The crop insurance premiums shown are the producer premiums at the highest coverage level and, at the floating-price, if available.
The estimated costs for machinery are derived from agricultural engineering formulas and Ontario average custom rates. The Ontario average custom rates are allocated across the six machinery-related expenses. It is recommended that you use your records to derive your costs. Experience is the best guide to help budget machinery costs. Prior year's statements of income and expenses can provide information on equipment repairs, maintenance, and fuel costs. The portion of those costs that relate to crop production can be divided by the acres of crop produced to arrive at a cost per acre.
Overhead expenses are a major part of the total cost of doing business. In addition to the depreciation of machinery, include depreciation on all related tools and storage buildings. Land costs would include property tax and any other land related costs. Other overhead expenses should include insurance, professional fees, office, vehicles and storage. In all cases, divide overhead expenses by the acreage of crop to express costs on a per acre basis. Return on investment is an opportunity cost to you - the rate of return that you expect or want on your invested capital.
If there are significant debt commitments for land and equipment, an alternative method of budgeting overhead expenses is to use the debt servicing requirements. In this case, use the actual interest and principal payment commitments, rather than depreciation and expected return on invested capital.
"Total Revenue" is the yield you expect multiplied by the price you expect. Yield information is most accurate if based on your experience with the land and techniques you will be using. If you do not have such records, check with AGRICORP or a local farm supply dealer. They can help you develop plans and reasonable expectations for your crops.
"Gross Margin" is the difference between total operating expenses and total revenue. "Operating Expenses" (seed, fertilizer, fuel, repairs) change with the crop grown and the production blend used. "Fixed or (overhead) Costs" will show little or no change whether one crop or another is grown. "Gross Margin" is a quick and easy measure for comparing relative profitability among your cropping choices.
Table 1. Adjustment for Nitrogen Requirement to Crops Following a Legume Crop
| Type of Crop | N Requirement Reduction (kg/ha) for all Crops | |
|---|---|---|
| Corn | Other Crops | |
|
Less than 1/3 legume
|
0
|
0
|
|
1/3 to 1/2 legume
|
55
|
55
|
|
1/2 or more legume
|
110
|
110
|
|
Perennial legumes seeded/ploughed in same year
|
80
|
451
|
|
Soybean and field bean residue
|
30
|
0
|
A full listing of publications and order forms are available on the OMAFRA website www.ontario.ca/omafra. Publications can also be ordered by calling 1-888-466-2372 from within Ontario, (519) 826-3700 from outside the province or by email at products@ontario.ca
OMAFRA has excellent tools and information to help manage your farm business. Follow the links to the Agricultural Business Management section of www.ontario.ca. Results of the 2003 Custom Farmwork and Equipment Rental Rates survey are available here. The Ontario Enterprise Budgets, also found on the OMAFRA website, has budgets for cost of production, including field crops, posted with two display options. You can download a Budgeting Tool Excel file, modify the numbers to reflect your operation and then the file will complete the calculations. The Budgeting Tool also lets you assess the potential affect of production and marketing risk factors and risk management strategies. Or you can view, then print Manual Budget Forms that have a Sample Cost and a Your Farm column to input numbers manually in hard copy.
The Field Crop Budgets are updated by John Molenhuis, Business Analysis and Cost of Production Program Lead, OMAFRA, Brighton (john.molenhuis@ontario.ca) and Brian Hall, Edible Beans and Canola Specialist, OMAFRA, Stratford (brian.hall@ontario.ca).
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