1. 2012 Crop Budgets: Corn, Soybeans, Wheat? Alan Miller and Craig Dobbins Purdue University is an Equal Opportunity/Equal Access institution.

2. Changes from Jan 2011 Corn price up $.36, beans down $.72, wheat down $1.31 Input prices & variable costs up significantly Cash rents up significantly

8. Variable Costs (Average Cropland) Crops 2010 $/acre 2011 $/acre 2012 $/acre % ∆ 11 to 12 Continuous Corn355415478+15% Rotation Corn342397460+16% Rotation Soybeans183200244+22% Wheat149181216+19% Double Crop Soybeans156174203+17%

9. Variable Cost Changes Rotation Corn (Average Cropland) Cost Component 2011 $/acre 2012 $/acre % ∆ 11 to 12 Fertilizers151166+10% Seed99118+19% Pesticides3538+9% Drying fuel2632+23% Machine fuel2330+30% Machinery repairs1417+21% Hauling15 - Interest1113+18% Insurance, Misc.2331+35%

10. Variable Cost Changes Rotation Soybeans (Average Cropland) Cost Component 2011 $/acre 2012 $/acre % ∆ 11 to 12 Fertilizers6978+13% Seed5973+24% Pesticides2729+7% Machine fuel1013+30% Machinery repairs1012+20% Hauling55- Interest67+17% Insurance, Misc.1427+92%

11. Contribution Margins, 2010 – 2012 (Average Cropland) Crops 2010 $/acre 2011 $/acre 2012 $/acre % ∆ 11 to 12 Continuous Corn271422413–3% Rotation Corn326495490–1% Rotation Soybeans287443364–18% Wheat194394267–32% Double Crop Soybeans122206157–25%

12. Contribution Margin by Crop, 2012 Crops Low Yield ($/acre) Average Yield ($/acre) High Yield ($/acre) Rotation Corn345490663 DC Wheat/Soybeans320424554 Continuous Corn280413571 Rotation Soybeans254364473 Wheat229267333

13. Contribution Margin by Rotation, 2012 1 Crops in Rotation Low Yield ($/acre) Average Yield ($/acre) High Yield ($/acre) Corn – Wheat/DC Beans333457608 Soybean – Corn – Corn315448600 Corn – Soybeans300427568 Corn – Corn280413571 1 Sum 2012 contribution margins for individual crops, then divide by years in rotation.

14. Total Costs Per Bushel 2010 – 2012 1 Rotation Low YieldAverage YieldHigh Yield $/Bushel 101112101112101112 Rotation Corn 4.314.675.193.894.194.723.543.804.28 Rotation Beans 10.5611.0512.389.409.7311.108.759.0310.32 1 Overhead costs based on corn–bean rotation on 3000 acre farm.

15. Returns Above Total Costs Per Acre, 2010 - 2012 Acres & Rotation Low YieldAverage YieldHigh Yield $/Acre 101112101112101112 1000-acre corn-bean -4381331918212077279210 3000-acre corn-bean -81156450212147114315243

18. Projected Margins are Vulnerable to Yield or Price Declines Market revenue declines 10% for average yield crops Contribution margin for corn drops $95/acre (–19%) Contribution margin for beans drops $61/acre (-17%) Contribution margin for wheat drops $48/acre (-18%)

19. Earnings are Vulnerable to Yield/Price Declines & Cash Rent Increases If market revenue declines 10% for average yield crops, then earnings for 3000-acre corn-bean rotation on average land decline 54% Cash rent increases decrease earnings 10% rent increase decreases earnings 13% 20% rent increase decreases earnings 25% 30% rent increase decreases earnings 38%

20. How Far Down to Earnings Breakeven? A 19% drop in market revenue on average corn-bean rotationequates revenues and total costs A 23% increase in total costs on corn-bean rotation equates revenues and costs Note that the increase in projected total cost per acre from 2011 to 2012 is roughly14% A 10% increase in rent increases total cost 3%

21. Management Implications –Input prices will increase sending variable costs higher –Overhead costs will increase in response to strong contribution margins –Potential for economic profit in excess of $100 per acre for rotation corn and beans on average land in Indiana –Budget reflects very strong demand for corn which may influence rotation decisions –Risk of margin squeeze/margin decline likely will be significant

22. Questions, Comments Purdue University is an Equal Opportunity/Equal Access institution.

24. Variable Cost Changes Wheat (Average Cropland) Cost Component 2011 $/acre 2012 $/acre % ∆ 11 to 12 Fertilizers97114+18% Seed3948+23% Pesticides78+14% Machine fuel1418+29% Machinery repairs1012+20% Hauling66- Interest57+40%

25. Variable Cost Changes Double Crop Soybeans (Average Cropland) Cost Component 2011 $/acre 2012 $/acre % ∆ 11 to 12 Fertilizers4551+13% Seed6884+24% Pesticides2526+4% Dryer Fuel44- Machine fuel1013+30% Machinery repairs1012+20% Interest46+50%