However, producers may want to be more aggressive than normal in forward-pricing crops that provide acceptable profit.
Projected crop budgets generally show some return to labor and management for 2014, although the price of most crops declined significantly in 2013 and are not expected to improve, according to Andy Swenson, North Dakota State University Extension Service farm management specialist.
A reduction in total costs per acre provides a slight cushion to the impact of lower crop prices.
"The overall decline in costs was accomplished because of a 20 to 25 percent decrease in nitrogen and phosphorus fertilizer prices and lower fuel prices," Swenson says. "Crop insurance premiums should be lower because of a drop in the crop prices used to determine revenue guarantees. Also, seed prices are generally flat. However, the overall decrease in total costs is modest at around 4 percent for corn, wheat and other small grains, and canola because other costs have increased."
For example, the price of glyphosate herbicide is up significantly from last year, and machinery and repair costs are going steadily higher. Also, land costs were higher in most regions relative to those in the 2013 budgets, which did not fully capture the sharp increase that occurred.
Projected per-acre returns to labor and management for producing spring wheat and corn are generally positive but paltry. The range is from minus $13 to a positive $18 for corn and minus $8 to a positive $37 for spring wheat across nine regions of the state.
"Surprisingly, corn looks more profitable at $18 in the northwestern region than spring wheat at minus $8, while in the southeastern region, spring wheat at $37 projects better than corn at $14," Swenson says. "It is important to note that the projections do not account for variability in yields and prices. However, producers in the northwestern region know that there is more risk with corn yields and drying costs, and producers in the southeastern region know that there is more price risk because of spring wheat quality discounts."
Soybeans project solid per-acre returns to labor and management by averaging $63 outside of the western regions, while peaking at $84 in the southeastern region. Soybean labor and management returns are $21 and $28 in the southwestern and northwestern regions, respectively. However, those regions also have the greatest yield risk. Soybean plantings will increase in 2014.
Dry beans also look strong, with per-acre returns to labor and management averaging more than $100. This would indicate an increase in acreage. However, soybeans, which compete with dry beans for acreage, also are profitable, require less labor and management, and have less production risk. Dry beans have the largest per-acre advantage in net return, compared with soybeans at $70 in the northeastern region, which consists of Cavalier, Nelson, Ramsey and Towner counties.
Canola returns to labor and management range from $45 per acre in the northeastern region, which contains the largest canola-producing counties of the state, to minus $25 in the southeastern region.
Flax acreage should increase because per acre returns to labor and management are $71 in the northeastern region, $56 in the north-central region and nearly $50 in the southwestern and northwestern regions. The lowest return for flax is $19 in the southeastern and south-central regions.
Malting barley and rye project the highest returns of the small-grain crops. Malting barley per- acre returns to labor and management are around $50 to $60 in the northeastern, north-central, northwestern and south-central regions. However, if barley does not make malting quality and is sold for feed, the returns quickly turn negative at around minus $40 per acre. Rye, which is a small-acreage crop, returns more than $60 per acre in regions for which it is budgeted.
The north-central region shows the highest per-acre returns to labor and management for yellow field peas at $35. However, returns from yellow peas only average $5 throughout all other regions. Green field peas, which have more quality and price risk, look attractive and will gain acres. Green peas have returns ranging from $52 per acre in the northern valley and southeastern regions to $99 per acre in the north-central region.
Oil sunflowers show moderate returns to labor and management by ranging from $30 to $45 per acre in the western and central regions, but near the break-even point in other regions. Confectionery sunflowers project strong returns, especially in the north-central and south-central regions, where the return is about $140 per acre. Plantings should increase in these regions.
Based on budgets prepared for lentils in the western and north-central regions, projected lentil returns to labor and management should be about $30 per acre. Oats and millet are the only two crops that show very negative returns in all regions.
Some minor acreage crops project strong per-acre returns to labor and management. These crops are led by yellow mustard at $140, safflower in the western regions at $80 and buckwheat at around $55. However, these crops have a higher production risk.
Because of the volatility and downward trend in prices, Swenson believes that producers should be more aggressive than normal in forward-pricing crops that provide acceptable profit.
"The budget estimates for returns to labor and management do not take into consideration price and yield variability or risk," Swenson says. "A perfect apple-to-apples comparison of crops is not achieved in the report because different levels of labor, management and risk exist among crops.
