Do you know the cost of your production?

By Gary Sliworsky
OMAF/MRA Rep.

Everyone needs to know their cost of production. The OMAF / MRA crop budgets are once again available as 2014 Field Crop Budgets (OMAF / MRA Publication 60)
www.omafra.gov.on.ca/english/busdev/facts/pub60.pdf.
They are also posted on the OMAF / MRA website as Ontario Enterprise Budgets (both in manual and as interactive Excel spreadsheet formats) at:
http://www.omafra.gov.on.ca/english/busdev/bear2000/Budgets/oeb.htm. In addition to the field crop budgets, the web version includes budgets for various fruits and vegetables as well as livestock Cost of Production Calculators. In total there are over 70 budgets available.
These budgets show default values for costs, yield and expected price. However, they are only useful to you when you put in your own real costs. Your own assumptions may be quite different from those shown. Expected prices for some crops and inputs are significantly different than the past couple years, so crop budgeting is essential to maximize your returns for the whole farm.
What should you include in your budget? It is good to look at the costs of growing the crop from planting to harvest, but are there other costs to consider. Should the cost of cover crops be attributed to this year’s crop or to next year’s crop, especially if it is a legume that will allow you to reduce nitrogen next year? If you apply
manure once every 3 years in the rotation, is that a cost to the current crop or should the cost be spread over the other crops according to where most of the nutrient and organic matter benefits will accrue? Should the cost of spreading the manure be attributed to the livestock enterprise or to the crop? These are decisions for you to make, but these costs must be accounted for somewhere.
Crop rotation is a benefit that adds another complexity to yield. For instance, having a rotation of corn-soybeans-wheat will likely increase yields 10-15% more than a continuous crop of corn or soybeans. Crop rotation is also a low cost way to spread out the workload on both you and your equipment. Adding red clover as a cover crop will add another 5-10% yield, especially for the corn crop. These effects are greater on clay soils than on loam soils. Include these aspects in determining your expected yield, especially on fields that do not get these benefits.
When deciding which crop to plant, expected yields are very important in calculating the bottom line. To determine your expected yield, look at your crop history. Some people suggest the last 6 years, which will usually include a good year, a bad year and four average years. Always use realistic expected yields and not just your best yields or area yields. In most cases you have good fields and poor fields, so consider the expected yield for each field individually.