The 2023 Purdue Crop Cost and Return Guide, which is available for free download from the Center for Commercial Agriculture website, gives estimated costs for planting, growing and harvesting a variety of crops, as well as estimated contribution margins and earnings.  The guide is updated frequently as grain futures prices change and the costs of inputs, such as seed, fertilizer, pesticides and fuel, fluctuate.  This paper discusses estimates made in mid-December.

The guide presents cost and return information for low, average, and high productivity soils.  The discussion in this paper will focus on the estimates for average productivity soil.  Table 1 presents crop budget information for continuous corn, rotation corn, rotation soybeans, wheat, and double-crop soybeans for average productivity soil.  Double-crop soybeans are typically planted after wheat so it is typical to combine the contribution margin for these two crops when comparing to continuous corn, rotation corn, and rotation soybeans.  The yield estimates reflect trend yields for Indiana for each crop.  The contribution margin, obtained by subtracting total variable cost from market revenue, ranges from $206 per acre for continuous corn to $476 per acre for wheat/double-crop soybeans.  The contribution margins for rotation corn and rotation soybeans on average productivity soil are $318 and $389 per acre, respectively.  The contribution margin is used to cover overhead costs such as machinery ownership costs, family and hired labor, and cash rent.  Failure to adequately cover these overhead costs typically puts downward pressure on cash rent and land values.

Table 1. 2023 Purdue Crop Budget for Average Productivity Soil.

See ID-166-W for more detail, December 2022 Estimates.

From 2007 to 2013, the contribution margin for rotation corn on average productivity soil was higher than the contribution margin for rotation soybeans.  The average difference in the contribution margin was $38 per acre during the 2007 to 2013 period.  The situation was considerably different from 2014 to 2022.  The average difference in the contribution margin during this period was an advantage for soybeans of $54 per acre.  The projected difference in contribution margins between corn and soybeans for 2023 is $71 per acre in favor of rotation soybeans.

Figure 1. Fertilizer, Seed, Pesticide, and Cash Rent Cost per Acre Rotation Corn in Indiana

Figure 1 illustrates the trends in fertilizer, seed, pesticide, and cash rent costs for rotation corn on average productivity soil from 2014 to 2023.  Fertilizer costs in 2023 are expected to be similar to those in 2022, but $137 ($0.73 per bushel) higher than costs in 2021.  Compared to the previous peak in 2013, fertilizer costs per acre are up $141 per acre ($0.67 per bushel).  Cash rent per acre in 2023 is expected to be $255 per acre ($1.39 per bushel) or $26 per acre higher than the most recent peak in 2014.  Herbicide and seed costs are expected to be similar to 2022 levels.

Figure 2. Variable Cost, Overhead Cost, and Gross Revenue per Acre Rotation Corn in Indiana

Gross revenue (market revenue plus government payments), variable cost, and overhead cost per acre for rotation corn on average productivity soil is illustrated in figure 2.  Government payments are expected to zero in 2023.  Variable cost per acre in 2023 is expected to be $80 higher than it was in the 2022 budget, which represents a 12.1 percent increase.  Variable cost per bushel in 2023 is estimated to be $4.02.  Fixed cost (overhead cost) per acre is projected to be $387, which is higher than the previous peak of $375 in 2015.  The breakeven price needed to cover variable and fixed costs varied from $4.89 to $4.98 per bushel from 2013 to 2015.  In 2016 and 2017, the breakeven price declined to approximately $4.55 per bushel.  The breakeven prices in 2018 and 2019 were approximately $4.45 per bushel, respectively.  Breakeven prices in 2020 and 2021 were approximately $4.20 and $4.45, respectively.  The projected breakeven price for 2022 was $5.59 per bushel, which was 25.5 percent higher than the 2021 breakeven price.  In 2023, the breakeven price is expected to increase another 9.5 percent, reaching $6.13 per bushel.  Gross revenue for rotation corn in 2023 is expected to be $1,058 per acre or 7 percent lower than gross revenue in 2022.  Combining the expected gross revenue for 2023 with total production costs (variable plus fixed costs) results in an expected loss for rotation corn of $69 per acre.

Figure 3. Fertilizer, Seed, Pesticide, and Cash Rent Cost per Acre Rotation Soybeans in Indiana

Figure 3 illustrates the trends in fertilizer, seed, pesticide, and cash rent costs for rotation soybeans from 2014 to 2023.  Fertilizer and herbicide costs in 2023 are expected to similar to costs in 2022, but substantially higher than those experienced from 2014 to 2021.

Gross revenue (market revenue plus government payments), variable cost, and overhead cost per acre for rotation soybeans on average productivity level is illustrated in figure 4.  Government payments are expected to be zero in 2023.  Variable cost per acre in 2023 is projected to be $373 per acre ($6.66 per bushel), or approximately 13.4 percent higher than they were in 2022.  Like corn, fixed cost per acre peaked in 2015 at $375, and is projected to be $387 per acre in 2023.  The breakeven price needed to cover variable and fixed costs is expected to increase from $12.49 in 2022 to $13.57 per bushel in 2023, which represents an 8.6 percent increase.  The expected profit in 2023 for rotation soybeans is $2 per acre.

Figure 4. Variable Cost, Overhead Cost, and Gross Revenue per Acre Rotation Soybeans in Indiana

The breakeven prices for rotation corn and rotation soybeans discussed above were for average productivity land.  For high productivity land, the breakeven prices for rotation corn and rotation soybeans are expected to be $5.62 and $12.64 per bushel, respectively.  Though the difference in relative profits is smaller than it was on average productivity land, rotation soybeans are expected to be more profitable than rotation corn on high productivity land.  The breakeven prices for low productivity land are expected to be $6.72 and $14.98 per bushel for corn and soybeans, respectively.  Rotation soybeans are expected to be more profitable than rotation corn on low productivity soil.

In summary, despite substantially higher production costs, it is not out of the realm of possibility to see positive margins in 2023, particularly for rotation corn and soybeans produced on high productivity ground.  The higher cost structure along with relatively tight margins, increases the importance of carefully scrutinizing input and crop decisions.  Producers are encouraged to create crop budgets and in general improve their record keeping.