If you follow the commodity markets to any degree, the Georgia crop enterprise budgets for 2013 won’t come as much surprise.
Based on “return to land and management per acre,” considering both variable and fixed costs, the ranking of spring-planted row crops is as follows: corn ($273), soybeans ($180), cotton ($84) and peanuts (-$118).
Break-even prices for the four crops are $4.64 per bushel, $9.01 per bushel, 69 cents per pound, and $433 per ton respectively.
Speaking at the recent Georgia Peanut Farm Show held in Tifton, University of Georgia Extension Economist Amanda Smith said that while prices are low and costs are generally on the rise, the one bit of good news for peanuts is that overall costs are expected to be down in 2013.
All cost categories are estimated to be either up or the same except for seed and crop insurance.
Seed prices should come down significantly given shelled prices have dropped below 50 cents per pound.
A figure of 75 cents per pound is used in the peanut budget for 2013 as a starting point. If realized, that would be a drop in seed price by a third, or represent a $46 per acre savings using a 130-pound per acre seeding rate.
Assuming the peanut projected price for crop insurance drops from $576 ($691 max) per ton, premiums should drop in 2013 reflecting less liability insured.
The base budget yield for irrigated and non-irrigated peanuts is raised for 2013, reflecting increased average yields throughout the U.S. Peanut Belt.
The irrigated budget yield is increased from 4,200 pounds per acre to 4,500 pounds per acre, and the non-irrigated yield is raised from 2,900 pounds per acre to 3,200 pounds per acre.
“These are significant increases on an average basis, however, higher yield potential of newer varieties led to raising expectations for 2013,” says Smith
Returns to irrigated and non-irrigated production will be lower in 2013 despite expected lower costs overall. The drop in seed and insurance cost is not enough to offset a drop in price if growers were to average $400 to $450 per ton in 2013.
Compared to corn, peanut prices need to be $476 for non-irrigated and $539 per ton for irrigated to have equal returns above variable costs (land rent not included).
To equal cotton returns, peanut prices need to average $433 and $454 for non-irrigated and irrigated peanuts respectively.
Peanuts need to average $426 and $478 to equal non-irrigated and irrigated soybeans. These estimates assume 76-cent cotton, $6.25-corn and $12.50-soybeans.
Peanut seed cost is lowered by 32 percent in this year’s budgets, from $1.10 per pound price last year in the expectation of lower demand, lower shelled prices, and higher availability of seed. Price is projected at 75 cents per pound for 2013 in the peanut budgets.
However, given shelled prices are trading in the 46 to 47-cent range, the seed price could drop closer to 65 cents per pound. Fertilizer prices are kept the same for peanuts.
“Many peanut growers have maintained soil nutrient levels and thus are not using fertilizer on peanuts other than gypsum and lime.
Chemical costs in general have been on the rise for brand name products, but the alternative of generics such as chlorothalonil and tebuconazole are widely utilized by growers,” according to Georgia Extension economists. Total chemical cost is projected to be up by 4 percent.
The interest rate charged is dependent upon what lending institutions pay for funds they lend. Traditionally, loans are based on the prime rate plus 1 to 2 percent.
As the prime lending rate has dropped recently, banks have adjusted the margin with some going to three points above prime. Farmers in good financial standing should be able to qualify for 6.5 percent or below.
Energy prices have fluctuated up and down with the economy, weather and Sandy’s impact on refining. Fuel and oil prices are expected to be slightly higher 2013. The budgeted price for diesel was $3.75 per gallon.
The irrigated peanut budget charges an average of $12.13 per acre inch of water reflecting a 50/50 ratio of diesel and electric power sources.
Operator labor rates are raised to $12 per hour in the 2013 budget, raising the labor cost 4.3 percent. Repair and maintenance costs are raised 6.25 percent reflecting the higher cost of equipment and parts.
At the budgeted yield of 3,200 pounds per acre, non-irrigated peanut requires $344 per ton to cover variable costs (without land rent) for conventional and $348 per ton strip tillage.
Irrigated peanuts require $299 per ton to cover variable costs for conventional and $296 per ton for strip-tillage.
In order to cover all costs excluding a land charge, the breakeven price is $459 for strip-tillage and $470 per ton for conventional in non-irrigated peanut and $435 for strip-tillage and $449 per ton for conventional in irrigated peanuts.
By adding a land rent figure of $185 for irrigated and $60 for non-irrigated, the breakeven above variable cost goes up to $384 and $387 per ton for conventional and strip-tillage respectively.
The irrigated breakeven above variable cost becomes $383 and $381 for conventional and strip-tillage.
Total cost breakevens including the land rent figure rises to $494 and $483 for non-irrigated conventional and strip-tillage, and $523 and $510 per ton for irrigated conventional and strip-tillage.
University of Georgia computer spreadsheet enterprise budgets can be found at http://www.caes.uga.edu/?tiny=n2ce9b; printable budgets at http://www.caes.uga.edu/?tiny=q806mu; and a crop comparison tool at http://www.caes.uga.edu/?tiny=p5uo8o.