How close can Northern Michigan farmers come to raising $2 per bushel corn? Part 1
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EmailCombining low land cost, careful rotation planning, maximizing manure nutrient inputs and yield can result in lower costs for corn production.
Each year, Michigan State University Extension farm management educators and specialists provide estimated budgets for crop production and many other valuable farm management tools. These items are available online at Saginaw Valley district farm management educator Dennis Stein’s website. A good budget for corn production following a legume is included there with selected cash costs as follows (adjusted to 2014 figures):
|
Revenue sources |
Quantity |
Unit |
Price per unit ($) |
Total per acre ($) |
|
Grain |
145 |
Bu. |
4.50 |
652.50 |
|
Total revenue |
|
|
|
652.50 |
|
Cash expenses |
|
|
|
|
|
Seed |
30,000 |
Kernels |
293.30 |
110.00 |
|
Fertilizer |
|
|
|
|
|
Nitrogen |
95.5 |
Lbs |
0.40 |
38.20 |
|
P2o5 |
55 |
Lbs |
0.45 |
24.75 |
|
K2o |
70 |
Lbs |
0.36 |
25.20 |
|
Lime |
|
|
|
0 |
|
Herbicides |
1 |
|
36.00 |
36.00 |
|
Insecticides |
|
|
|
0 |
|
Fungicides |
|
|
|
0 |
|
Fuel, oil, lube |
5 |
Gal |
3.80 |
19.00 |
|
Repairs |
1 |
|
29.00 |
29.00 |
|
Utilities |
1 |
|
13.50 |
13.50 |
|
Trucking |
145 |
Bu |
0.25 |
36.25 |
|
Marketing |
145 |
Bu |
0.05 |
7.25 |
|
Drying |
20 |
% moisture |
0.045 |
39.38 |
|
Total cash expenses |
|
|
|
378.53 |
|
Revenue above selected cash expenses |
|
|
|
273.97 |
|
Family and regular hired labor hours |
|
|
|
3.5 |
To get a more accurate picture of the true costs of corn production, additional expenses must be considered. There is $273.97 available revenue from the budget above to cover any additional expenses.
Additional estimated expenses, including:
- Insurance: $5
- Labor: 3.5 hours X $13.50/hour = $47.25
- Interest: $14.97
- Land rent: $175
- Land taxes: 0 (assuming rented land)
- Principal payment: 0 (assuming rented land)
- Depreciation: $50.00
Total additional estimated expenses: $292.22
With these figures, corn production following a legume will result in a net loss of $18.25 per acre. What could be adjusted to improve the bottom line for a Menominee County corn grower, for example?
Reduce land rent
The rent of $175 per acre included in the example budget is much higher than typical land rent in Menominee County. We will substitute $50 per acre.
Reduce nitrogen requirement
Shorten the length of alfalfa rotation. This will result in more frequent availability of the residual nitrogen from alfalfa. By shortening the alfalfa rotation to three years instead of five years, average annual nitrogen fertilizer costs can be reduced. We can’t subtract anything from the example budget as a result of shortening the alfalfa rotation because the budget is based on corn following legume. However, the shortened rotation will allow for a more dependable reduction of corn nitrogen input costs from year-to-year. It will also increase the average annual establishment cost for the alfalfa stand.
Maximize plant nutrient value of manure inputs. Most Menominee County corn growers have manure available. Improvements could involve testing manure for plant nutrient content, calibrating manure spreaders, improving manure incorporation practices and improving manure application recordkeeping. If you score an A+ on these items already, then not much can be gained, but some attention to detail could help reduce fertilizer costs.
We will reduce the fertilizer costs in the example budget, which does not include manure application, of $88.15 by $65 per acre to account for nutrients in manure application and elimination of fertilizer application costs. However, we will have to add an estimated $45 per acre to account for manure pumping, hauling and spreading. This results in a $20 cash expense reduction in the example budget.
Increase corn yield
Based on the five-year average of yields attained in MSU corn hybrid trials located in Menominee County, 153 bushels per acre is a realistic yield goal. In the example budget, we will substitute 153 bushels per acre.
The adjustments to the example budget are as follows:
- Total revenue increases from $652.50 (145 bushels at $4.50 per acre) to $688.50 (153 bushels at $4.50 per acre).
- Cash expense for fertilizer is reduced by $20 from savings associated with manure nutrients.
- “Revenue above selected cash expenses” is recalculated at $688.50 - $358.53 = $329.97.
- Land rent decreases from $175 per acre to $50 per acre, reducing “additional cash expenses” from $292.22 to $167.22.
When the revised “additional estimated expenses” are subtracted from the revised “revenue above cash expenses:” $329.97 - $167.22 = $162.75 profit. This figure already accounts for 3.5 hours of labor per acre.
To estimate the cost of production per bushel, the cash and additional expense are added then divided by yield in bushels per acre. For our revised Menominee County corn budget:
$358.53 + $167.22 = $525.75 / 153 bushels = $3.44 per bushel, including all variable and fixed costs
If only the selected cash expenses are included: $358.53 / 153 = $2.34/bushels. Not quite $2 per bushel, but close. Your farm’s cost and incomes will vary from the budget presented. It is valuable for each farm to develop their own enterprise budget.
Part 2 will explore additional ways to lower corn production costs for our example Menominee County farm.
