PRODUCE FOR LESS? Purdue ag economist Michael Langemeier suggests the breakeven price to produce a bushel of corn in 2024 could be about 10% lower than the breakeven price for the 2023 crop. Tom J. Bechman
Breakeven prices are helpful when making crop decisions and marketing crops. They vary substantially by soil type and farm. Without breakeven price information, it’s difficult for a producer to evaluate market opportunities or make crop rotation decisions as crop prices change.
The USDA marketing year price for corn is expected to decline from $6.50 per bushel for the 2022-23 marketing year to $4.75 per bushel in the 2023-24 marketing year. Moreover, supply-and-demand fundamentals indicate that the corn price this fall could be as low as $4 to as high as $5.25 per bushel.
These wide differences illustrate how important it is to know a farm’s breakeven price when evaluating forward-pricing strategies and developing scenarios pertaining topotential cash flows for theyear. This article uses enterprise budget information in the Purdue Crop Cost and Return Guide to estimate breakeven pricesfor corn and soybeansfor average- and high-productivity soils.
Determining enterprise budgets
Most enterprise budgets use economic costs rather than cash costs. This means that, in addition to cash costs and depreciation, opportunity costs are included. An opportunity cost represents the income that could havebeen earned if an input were sold or rented to someone else.
Opportunity costs for unpaid family and operator labor, owned machinery,and owned land need to be included in an enterprise budget. The bottom-line figure of earnings and losses represents an economic profit.
Because all inputs — including cash items, depreciation and opportunity costs — are paid over time at market rate, economic profit is zero. If economic profit is positive, input prices will be bid up, like what happened to cash rents during 2007-14,and economic profit will migrate toward zero. On the other hand, if profit is negative, input prices will decline, and economic profit will migrate toward zero.
2024 breakeven estimates
Using the2024Purdue crop budgets, the estimated breakevencornprice to cover all costsis$5.25per bushel for average-productivity soil and $4.90for high-productivity soil. Breakeven prices in 2024areexpected to beabout10% lower than those for 2023.
For full-season soybeans, the breakeven price to cover all costsis$12.40for average-productivity soil and $11.70for high-productivity soil,orabout5% lower than last year’sbreakeven prices.
It is important to note that the Purdue budget uses average production costs. It is not uncommon for production costs for individual farms to be 10% below or 10% above the production costs reported in the budgets. Thus, at a minimum, it is extremely important to determine production costs for individual farms.
Ideally, a producer should compute breakeven costs for each farm unit or tract. These computations do not make marketing decisionsor crop rotation decisionseasy, but they certainly provide important information that can be used when makingthesedecisions.
