This growing season may be one of the most trying yet for producers in the agricultural industry. With an uncertain crop outlook and an unstable market, producers will need to intensely manage crop inputs to break even at current market prices.
The following table shows a comparison of break-even prices for Alabama row crops based on target yields for irrigated and nonirrigated production. For break-even projections, variable costs reflect the average production costs included in Alabama Extension’s 2020 major row crop budgets as well as an average land rent cost for irrigated or nonirrigated farmland.
Alabama Row Crop Breakeven Prices
|Irrigated Corn||Irrigated Cotton North||Irrigated Cotton South||Irrigated Peanuts||Irrigated Soybeans||Non-Irrigated Corn||Non-Irrigated Cotton North||Non-Irrigated Cotton South||Non-Irrigated Peanuts||Non-Irrigated Soybeans||Double-Crop Soybeans|
|Total Var Cost/acre||901.68||775.69||766.11||820.36||533.85||445.64||574.12||572.34||591.85||377.59||265.88|
|Breakeven Price (Var. Cost)||3.61||0.60||0.59||328.14||8.90||3.71||0.77||0.67||338.20||8.39||6.65|
|Breakeven Price (Total Cost)||4.55||0.83||0.82||435.00||12.24||4.37||0.98||0.87||412.42||9.89||8.12|
In determining the budgets, land rental rates were set at $125 per acre for irrigated land and $60 per acre for dryland. All other variable costs can be found in the specific row crop budgets in the Farm and Agribusiness Management section of the Alabama Extension website.
For most commodities, market prices will fall short of returns needed to cover variable costs of production even if yield expectations are met. Under current market conditions and the uncertainty of future demand, growers will need to focus on managing input costs throughout the season to cover expenses. Costs vary from producer to producer—even by field—so farmers should be more aware than ever of their production costs.
An article titled “Early Estimates of COVID-19 on U.S. Agricultural Commodity Markets, Farm Income and Government Outlays” by the University of Missouri’s Food and Agricultural Policy Research Institute (FAPRI) estimates that prices received for row crops will be 5 percent to 10 percent lower due to COVID-19. FARPI projects corn prices to be $3.35 per bushel, soybeans $8.27 per bushel, and cotton $55.50 per hundredweight. Alabama typically sees a positive basis for corn and soybeans in some areas of the state.
Row crop producers across the United States are expected to see receipts fall by $11.85 billion. Alabama producers, along with producers across the country, are facing a troubling future. In 2019, US farm income had just risen above the 2000–2018 average.
All agribusinesses associated with agriculture are also suffering, and the road ahead is uncertain.