Soybean Outlook and Cost Analysis for Nathan B. Smith and Amanda Smith

Transcription

1 Soybean Outlook and Cost Analysis for 2010 Nathan B. Smith and Amanda Smith The 2009 soybean crop is estimated to be a record setting year for yield and production records. Georgia and U.S. growers increased soybean plantings in 2009 in response to good prices relative to corn and other crops. Georgia growers followed 2008 by increasing soybean plantings again for Planted acres ended up at 470,000 acres, 40,000 more than the previous year. Harvested acres in Georgia are estimated at 450,000 acres. The November estimate of average yield for Georgia is 33 bushels per acre, one bushel short of the 2003 record. Total Georgia soybean production will result in a 15 year high of million bushels. Nationally, soybean acres grew by 1.8 million acres to a record 77.5 million acres. Harvested acres are estimated at 76.6 million. Following two years of below trend yields for the U.S., the national average yield will set a record at 43.3 bushels per acre. Total production is also a record at 3.32 billion bushels. Soybean futures have traded in a range between $9.00 and $10.50 per bushel since planting in Prices were not expected to trade this high as demand was expected to decrease as a result of the recession. However, Argentina experienced their worse drought in 50 years and China became a bigger export customer. USDA is projecting the season average price for 2009/10 to range between $8.20 and $10.20 per bushel. The midpoint of $9.20 per bushel would be 80 cents lower than the 2008 crop average season price. The lower price reflects anticipated weakening trade prospects and greater soybean production in the U.S. and South America. Total production is projected to exceed total consumption and thus increase carryover stocks in 2010 to 270 million bushels. Total consumption is projected to be billion bushels. Demand weakened with the slowing global economy and credit availability. Soybean crush was down last year as a result. Crush is expected to grow slightly to billion bushels as soyoil exports from South America have slowed due to demand for biodiesel. U.S. soybean exports, however, have surprisingly increased to billion bushels. China has doubled purchases from the U.S. due to the drop in supplies from South America. Argentina and Brazil increased plantings in 2009 and China is expected to switch it s purchased back to South America once harvest begins in Soybean prices are expected to fall when China decreases its U.S. purchases. Concerns for the 2010 crop year are an increase in U.S. and global stocks of soybeans. Production costs have moderated due to lower fertilizer and fuel prices. Fuel is expected to increase and chemical prices will likely remain high. Soybean acreage in the U.S. is expected to remain around 77 million or even slightly increase due to fewer wheat acres. Credit availability will be an overall concern for farming in 2010 but soybeans may benefit acreage wise due to lower cost of production. The cost enterprise analysis for soybeans in early December shows variable cost decrease of 12% for non-irrigated soybeans and 10% decrease for irrigated soybeans compared to soybean budgets from December 2009.

2 Seed, Fertilizer and Chemicals - Seed prices are expected to increase again in Fertilizer prices have softened from highs made in Nitrogen is expected to be in the 40 to 50 cent per pound price range, phosphorus is projected at 25 cents, while potassium is expected to decrease to 50 cents per pound. Lime has dropped some while gypsum has increased from last year. Chemical costs in general are on the rise and reflected in higher herbicide costs. Cost of Borrowed Funds The interest rate charged in the budget is dependent upon what lending institutions pay for funds they lend. Most loans are based on the prime rate plus 1 to 2 percent. The prime lending rate has dropped recently and farmers in good financial standing should be able to qualify for lower rate in 2010 on operating loans, estimated in the budget at 7.25%. Credit availability could be a concern for some growers as lenders will likely tighten limits and look to greater utilization of FSA guaranteed loans. Fuel and Energy Energy prices dropped due to lower demand and increased inventory in Fuel and oil prices are expected to rise moderately in 2010 as demand picks back up. The 2010 budgeted price is $2.50 per gallon verses $2.85 in the December 2008 budget which was revised to $2.25 in January The irrigated soybean budget charges an average of $9 per acre inch of water reflecting a 50/50 ratio of diesel and electric power sources. Labor and Operator labor rates remain at $11 per hour in the 2010 budget while machinery repairs are increased reflecting higher cost of equipment and parts. Asian Soybean Rust In the event of soybean asian rust infection, two or three fungicide applications may be necessary resulting in $10 to $30 per acre of additional chemical cost. Breakeven Yield and Price Note the Sensitivity Analysis table on the second page of the budgets. The table shows the return above variable cost with varying yields and prices. At the budgeted yield, non-irrigated soybeans require $7.25 per bushel to cover variable costs and irrigated soybeans require $5.24 per bushel to cover variable costs.

3 U.S. Soybean Situation Production Use End Stocks 3,500 3,000 2,500 Million Bushels 2,000 1,500 1,

4 Beg Stocks Production Imports TOTAL SUPPLY Crush Exports Seed Residual Ending Stocks U.S. Soybean Balance Sheet million bushels (Nov 11, 2009) TOTAL DISAPPEARANCE Season Average Farm Price 2007/ , ,260 1,801 1, , / , ,185 1,662 1, , / , ,465 1,695 1, , % of Last Yr SOUTH AMERICAN SOYBEAN PRODUCTION Brazil Argentina Paraguay Million Bushels

5 Soybean Cost Estimates Dryland Soybean, Conventional Seed Fertilizer Chemicals Inputs Fuel Labor Interest Variable Seed Fertilizer Chemicals Fuel $/Acre Soybean Cost Estimates Irrigated Soybean, Conventional Input Irrigation Labor Interest Variable $/Acre

6 ROUNDUP READY SOUTH GEORGIA, 2010 Expected Yield 30 Bushels YIELD: YOUR FARM Variable : Unit of Units $/Unit Cost/Acre $/Bushels Your Farm Seed Bag 1.00 $ $ $ 1.60 Inoculant Acre 1.00 $ 3.00 $ 3.00 $ 0.10 Lime Tons 0.33 $ $ $ 0.37 Fertilizer Nitrogen Lbs 0.00 $ 0.45 $ - $ - Phosphate (P2O5) Lbs $ 0.25 $ $ 0.33 Potash (K2O) Lbs $ 0.50 $ $ 1.33 Boron Lbs 0.50 $ 5.60 $ 2.80 $ 0.09 Weed Control Acre 1.00 $ $ $ 1.22 Insect Control Acre 1.00 $ 4.50 $ 4.50 $ 0.15 *Disease Control Acre 0.00 $ - $ - $ - : Preharvest Fuel Gallon 3.86 $ 2.50 $ 9.64 $ 0.32 & Maintenance Acre 1.00 $ 7.39 $ 7.39 $ 0.25 : Harvest Fuel Gallon 2.38 $ 2.50 $ 5.95 $ 0.20 & Maintenance Acre 1.00 $ 4.78 $ 4.78 $ 0.16 Labor Hrs 0.86 $ $ 9.48 $ 0.32 Crop Insurance Acre 1.00 $ $ $ 0.50 Land Rental Acre 1.00 $ - $ - $ - Interest on Operating capital Percent $ % $ 7.55 $ 0.25 Drying - 8 points Bushel $ - $ - Total Variable $ $ 7.19 : ESTIMATED COSTS AND RETURNS : Depreciation, Taxes, Insurance, and Housing Preharvest Acre 1.00 $ $ $ 0.71 Harvest Acre 1.00 $ $ $ 0.96 General Overhead % of VC $ % $ $ 0.36 Management % of VC $ % $ $ 0.36 Owned Land ; Taxes, Cash Payment, Etc. Acre 1.00 $ - $ - $ - Other 1.00 $ - $ - $ - Total $ $ 2.38 TOTAL COSTS AND PROFIT GOAL Total Excluding Land $ $ 9.57 **** YOUR PROFIT GOAL **** $ /Bu. $$-PRICE NEEDED FOR PROFIT-$$ $ /Bu. * Note: In the case of Asian Soybean Rust infection, add $10-$25 for fungicide sprays.

7 Sensitivity Analysis of SOYBEANS, NON-IRRIGATED NET RETURNS ABOVE VARIABLE COSTS PER ACRE Varying Prices and Yield (Bushels) -25% -10% Average +10% +25% Bu/Acre $7.50 $ (46.98) $ (13.23) $ 9.27 $ $ $8.00 $ (35.73) $ 0.27 $ $ $ $8.50 $ (24.48) $ $ $ $ $9.00 $ (13.23) $ $ $ $ $9.50 $ (1.98) $ $ $ $ ESTIMATED LABOR AND MACHINERY COSTS PER ACRE PREHARVEST OPERATIONS Heavy Disk27' with Tractor ( hp)-mfwd Disk Harrow32' with Tractor ( hp)-mfwd Disk Bed (Hipper)6R-36 with Tractor ( hp)- MFWD Plant - Rigid6R-36 with Tractor ( hp)-2wd Spray (Broadcast)60' with Tractor ( hp)-2wd Total Preharvest Fuel,,, & Labor $ 7.39 $ HARVEST OPERATIONS Header - Soybean18' Flex with Combine ( hp)240hp $ 3.84 $ Grain Cart500 bu with Tractor ( hp)-2wd $ 0.94 $ 2.55 Total Harvest Fuel,,, and Labor $ 4.78 $ 28.72

8 SOYBEANS, STRIP-TILLAGE, NON-IRRIGATED ROUNDUP READY SOUTH GEORGIA, 2010 Expected Yield 30 Bushels YIELD: YOUR FARM Variable : Unit of Units $/Unit Cost/Acre $/Bushels Your Farm Seed Bag 1.00 $ $ $ 1.60 Cover Seed Bu $ $ $ 0.55 Inoculant Acre 1.00 $ 3.00 $ 3.00 $ 0.10 Lime Tons 0.33 $ $ $ 0.37 Fertilizer Nitrogen Lbs 0.00 $ 0.45 $ - $ - Phosphate (P2O5) Lbs $ 0.25 $ $ 0.33 Potash (K2O) Lbs $ 0.50 $ $ 1.33 Boron Lbs 0.50 $ 5.60 $ 2.80 $ 0.09 Weed Control Acre 1.00 $ $ $ 1.45 Insect Control Acre 1.00 $ 4.50 $ 4.50 $ 0.15 Disease Control* Acre 1.00 $ - $ - $ - : Preharvest Fuel Gallon 3.06 $ 2.50 $ 7.65 $ 0.25 & Maintenance Acre 1.00 $ 5.62 $ 5.62 $ 0.19 : Harvest Fuel Gallon 2.38 $ 2.50 $ 5.95 $ 0.20 & Maintenance Acre 1.00 $ 4.78 $ 4.78 $ 0.16 Labor Hrs 0.75 $ $ 8.22 $ 0.27 Crop Insurance Acre 1.00 $ $ $ 0.50 Land Rental Acre 1.00 $ - $ - $ - Interest on Operating capital Percent $ % $ 8.21 $ 0.27 Drying - 8 points Bushel $ - $ - Total Variable $ $ 7.82 : ESTIMATED COSTS AND RETURNS : Depreciation, Taxes, Insurance, and Housing Preharvest Acre 1.00 $ $ $ 0.53 Harvest Acre 1.00 $ $ $ 0.96 General Overhead % of VC $ % $ $ 0.39 Management % of VC $ % $ $ 0.39 Owned Land ; Taxes, Cash Payment, Etc. Acre 1.00 $ - $ - $ - Other 1.00 $ - $ - $ - Total $ $ 2.27 TOTAL COSTS AND PROFIT GOAL Total Excluding Land $ $ **** YOUR PROFIT GOAL **** $ /Bu. $$-PRICE NEEDED FOR PROFIT-$$ $ /Bu. * Note: In the case of Asian Soybean Rust infection, add $10-$25 for fungicide sprays.

9 Sensitivity Analysis of SOYBEANS, STRIP-TILLAGE, NON-IRRIGATED NET RETURNS ABOVE VARIABLE COSTS PER ACRE Varying Prices and Yield (Bushels) -25% -10% Average +10% +25% Bu/Acre $7.50 $ (65.97) $ (32.22) $ (9.72) $ $ $8.00 $ (54.72) $ (18.72) $ 5.28 $ $ $8.50 $ (43.47) $ (5.22) $ $ $ $9.00 $ (32.22) $ 8.28 $ $ $ $9.50 $ (20.97) $ $ $ $ ESTIMATED LABOR AND MACHINERY COSTS PER ACRE PREHARVEST OPERATIONS Spin Spreader5 ton with Tractor ( hp)-2wd Disk Harrow32' with Tractor ( hp)-mfwd Spray (Broadcast)60' with Tractor ( hp)-2wd ST Plant-Rigid6R-36 with Tractor ( hp)-mfwd Spray (Broadcast)60' with Tractor ( hp)-2wd Total Preharvest Fuel,,, & Labor $ 5.62 $ HARVEST OPERATIONS Header - Soybean18' Flex with Combine ( hp)240hp $ 3.84 $ Grain Cart500 bu with Tractor ( hp)-2wd $ 0.94 $ 2.55 $ - $ - $ - $ - Total Harvest Fuel,,, and Labor $ 4.78 $ 28.72

10 SOYBEANS, IRRIGATED ROUNDUP READY SOUTH GEORGIA, 2010 Expected Yield per Acre 55 Bushels YIELD: YOUR FARM Variable : Unit of Units $/Unit Cost/Acre $/Bushels Your Farm Seed Bag 1.00 $ $ $ 0.87 Inoculant Acre 1.00 $ 3.00 $ 3.00 $ 0.05 Lime Tons 0.33 $ $ $ 0.20 Fertilizer Nitrogen Lbs 0.00 $ 0.45 $ - $ - Phospate (P2O5) Lbs $ 0.25 $ $ 0.18 Potash (K2O) Lbs $ 0.50 $ $ 0.73 Boron Lbs 0.50 $ 5.60 $ 2.80 $ 0.05 Weed Control Acre 1.00 $ $ $ 0.67 Insect Control Acre 1.00 $ 4.50 $ 4.50 $ 0.08 Disease Control* Acre 1.00 $ $ $ 0.51 : Preharvest Fuel Gallon 3.86 $ 2.50 $ 9.64 $ 0.18 & Maintenance Acre 1.00 $ 7.39 $ 7.39 $ 0.13 : Harvest Fuel Gallon 2.38 $ 2.50 $ 5.95 $ 0.11 & Maintenance Acre 1.00 $ 4.78 $ 4.78 $ 0.09 Irrigation** Inch 5.00 $ 9.00 $ $ 0.82 Labor Hrs 0.86 $ $ 9.48 $ 0.17 Crop Insurance Acre 1.00 $ $ $ 0.22 Land Rental Acre 1.00 $ - $ - $ - Interest on Operating capital Percent $ % $ $ 0.18 Drying - 8 points Bushel $ - $ - Total Variable $ $ 5.24 : ESTIMATED COSTS AND RETURNS : Depreciation, Taxes, Insurance, and Housing Preharvest Acre 1.00 $ $ $ 0.39 Harvest Acre 1.00 $ $ $ 0.52 Irrigation Acre 1.00 $ $ $ 1.82 General Overhead % of VC $ % $ $ 0.26 Management % of VC $ % $ $ 0.26 Owned Land ; Taxes, Cash Payment, Etc. Acre 1.00 $ - $ - $ - Other 1.00 $ - $ - $ - Total $ $ 3.25 TOTAL COSTS AND PROFIT GOAL Total Excluding Land $ $ 8.49 **** YOUR PROFIT GOAL **** $ /Bu. $$-PRICE NEEDED FOR PROFIT-$$ $ /Bu. * Note: In the case of Asian Soybean Rust infection, add $10-$25 for fungicide sprays. **Average of diesel and electic irrigation application costs. Electric is estimated to be $6/application and diesel is estimated to be $12/application at $2.50/gallon diesel.

11 Sensitivity Analysis of SOYBEANS, IRRIGATED NET RETURNS ABOVE VARIABLE COSTS PER ACRE Varying Prices and Yield (Bushels) -25% -10% Average +10% +25% Bu/Acre $7.50 $ $ $ $ $ $8.00 $ $ $ $ $ $8.50 $ $ $ $ $ $9.00 $ $ $ $ $ $9.50 $ $ $ $ $ ESTIMATED LABOR AND MACHINERY COSTS PER ACRE PREHARVEST OPERATIONS Heavy Disk27' with Tractor ( hp)-mfwd Disk Harrow32' with Tractor ( hp)-mfwd Disk Bed (Hipper)6R-36 with Tractor ( hp)-mfwd Plant - Rigid6R-36 with Tractor ( hp)-2wd Spray (Broadcast)60' with Tractor ( hp)-2wd Total Preharvest Fuel,,, & Labor $ 7.39 $ HARVEST OPERATIONS Header - Soybean18' Flex with Combine ( hp)240hp $ 3.84 $ Grain Cart500 bu with Tractor ( hp)-2wd $ 0.94 $ 2.55 Total Harvest Fuel,,, and Labor $ 4.78 $ 28.72

12 SOYBEANS, STRIP-TILLAGE, IRRIGATED ROUNDUP READY SOUTH GEORGIA, 2010 Expected Yield 55 Bushels YIELD: YOUR FARM Variable : Unit of Units $/Unit Cost/Acre $/Bushels Your Farm Seed Bag 1.00 $ $ $ 0.87 Cover Seed Bu $ $ $ 0.30 Inoculant acre 1.00 $ 3.00 $ 3.00 $ 0.05 Lime Tons 0.33 $ $ $ 0.20 Fertilizer Nitrogen Lbs 0.00 $ 0.45 $ - $ - Phosphate (P2O5) Lbs $ 0.25 $ $ 0.18 Potash (K2O) Lbs $ 0.50 $ $ 0.73 Boron Lbs 0.50 $ 5.60 $ 2.80 $ 0.05 Weed Control Acre 1.00 $ $ $ 0.83 Insect Control Acre 1.00 $ 4.50 $ 4.50 $ 0.08 Disease Control* Acre 1.00 $ $ $ 0.51 : Preharvest Fuel Gallon 3.06 $ 2.50 $ 7.65 $ 0.14 & Maintenance Acre 1.00 $ 5.62 $ 5.62 $ 0.10 : Harvest Fuel Gallon 2.38 $ 2.50 $ 5.95 $ 0.11 & Maintenance Acre 1.00 $ 4.78 $ 4.78 $ 0.09 Irrigation** Inch 4.00 $ 9.00 $ $ 0.65 Labor Hrs 0.75 $ $ 8.22 $ 0.15 Crop Insurance Acre 1.00 $ $ $ 0.22 Land Rental Acre 1.00 $ - $ - $ - Interest on Operating capital Percent $ % $ $ 0.19 Drying - 8 points Bushel $ - $ - Total Variable $ $ 5.46 : ESTIMATED COSTS AND RETURNS : Depreciation, Taxes, Insurance, and Housing Preharvest Acre 1.00 $ $ $ 0.29 Harvest Acre 1.00 $ $ $ 0.52 Irrigation Acre 1.00 $ $ $ 1.82 General Overhead % of VC $ % $ $ 0.27 Management % of VC $ % $ $ 0.27 Owned Land ; Taxes, Cash Payment, Etc. Acre 1.00 $ - $ - $ - Other Total $ $ 3.18 TOTAL COSTS AND PROFIT GOAL Total Excluding Land $ $ 8.64 **** YOUR PROFIT GOAL **** $ /Bu. $$-PRICE NEEDED FOR PROFIT-$$ $ /Bu. * Note: In the case of Asian Soybean Rust infection, add $10-$25 for fungicide sprays. **Average of diesel and electic irrigation application costs. Electric is estimated to be $6/application and diesel is estimated to be $12/application at $2.50/gallon diesel.

13 Sensitivity Analysis of SOYBEANS, STRIP-TILLAGE, IRRIGATED NET RETURNS ABOVE VARIABLE COSTS PER ACRE Varying Prices and Yield (Bushels) -25% -10% Average +10% +25% Bu/Acre $7.50 $ 9.17 $ $ $ $ $8.00 $ $ $ $ $ $8.50 $ $ $ $ $ $9.00 $ $ $ $ $ $9.50 $ $ $ $ $ ESTIMATED LABOR AND MACHINERY COSTS PER ACRE PREHARVEST OPERATIONS Spin Spreader5 ton with Tractor ( hp)-2wd Disk Harrow32' with Tractor ( hp)-mfwd Spray (Broadcast)60' with Tractor ( hp)-2wd ST Plant-Rigid6R-36 with Tractor ( hp)-mfwd Spray (Broadcast)60' with Tractor ( hp)-2wd Total Preharvest Fuel,,, & Labor $ 5.62 $ HARVEST OPERATIONS Header - Soybean18' Flex with Combine ( hp)240hp $ 3.84 $ Grain Cart500 bu with Tractor ( hp)-2wd $ 0.94 $ 2.55 Total Harvest Fuel,,, and Labor $ 4.78 $ 28.72