By Andy Swenson
The North Dakota State University Extension Service has updated the Crop Compare program, which is a spreadsheet designed to compare cropping alternatives.
The program provides a tool for producers to check the changing scenarios until final planting decisions are made this spring.
The program uses the direct costs and yields from the 2017 projected crop budgets for nine regions of North Dakota, but producers are encouraged to enter the expected yields and input costs for their individual farm.
The user designates a reference crop and enters its expected market price. Depending on the region, a broad selection of nine to 18 crops are compared. The program provides the prices for competing crops that would be necessary to provide the same return over variable costs as the reference crop.
“Producers can compare these break-even prices to expected market prices to see which crop is most likely to compete with the reference crop,” says Andy Swenson, NDSU Extension farm management specialist. “Grain prices can move quickly. The program provides a tool for producers to check the changing scenarios until final planting decisions are made this spring.”
It should be noted that an underlying assumption is that fixed costs, such as machinery ownership, land and the owner’s labor and management, do not vary among crop choices and therefore do not need to be included in the analysis.
“In practice, there may be differences in fixed costs that should be considered,” says Swenson.
“For example, there may be additional labor, management and risk associated with a competing crop. If all the labor and management is provided by the owner-operator, it would be considered a fixed cost and could be excluded. However, the producer should add some cost if he or she would only want to produce the crop when an adequate reward would be received for the extra time and management required relative to the reference crop.”
A similar rationale could be used if a competing crop is considered higher risk.