• By Michael Deliberto •
The economic impact on direct farm-level production costs from replanting soybeans can result in an increase in the number of bushels that will be required to offset the incurred production expenses associated with replanting field operations.
The severity of this will depend on the type of soybean technology employed, as differences in the prices for seed, seed treatments and seeding rate can influence the replanting costs and, hence, the number of additional bushels required at harvest to offset those costs.
The following economic analysis employs a general farm management approach to calculate the breakeven yield required to cover the increase in replanting costs across alternative soybean price levels. Under the assumption that the farm’s yield is expected to be 55 bushels per acre, estimated total variable production costs for Roundup Ready soybeans under irrigation are $377.51 per acre.
The breakeven yield under these imposed conditions is calculated to be 34.32 bushels per acre, assuming a $11 per bushel price. The breakeven price is calculated to be $6.86 per bushel. This can be interpreted to the extent that a producer would need to receive in excess of $6.86 per bushel to cover the total variable production costs per acre.
Planting costs (e.g., machinery, fuel, and labor) are comprised of a planter, tractor and seed. Planter costs are estimated to be $4.76 per acre in addition to the $42 seed cost to total $46.76 per acre. If a producer determines that a field must be replanted, the total variable costs for the growing season will increase from $377.51 to $424.27 per acre, reflective of the aforementioned replanting costs.
Normal production conditions are assumed. The breakeven yield under these imposed conditions is calculated to be 38.57 bushels per acre, assuming a $11 per bushel price. This in an increase of approximately 5 bushels (4.25 bushels) per acre to offset the increase in production costs while the $11 price is held constant. The breakeven price is calculated to be $7.71 per bushel, an increase of 85 cents per bushel.
When the market price is varied from $13 to $9 per bushel (yield of 55 bushels per acre held constant), it is observed from Figure 1 that as price decline, more production is required to cover the increase cost of replanting.
Figure 2 illustrates the required increase in breakeven yields from replanting a 55 bushel per acre potential field across multiple price levels. As the soybean market price declines the required increase in breakeven yield also increases from 3.6 ($13 price) to 5.2 bushels per acre ($9 price).
In some situations, input suppliers may offer a rebate on the purchase of soybean seed for replanting. For example, if a supplier offered a 50% rebate on the cost of seed, the addition seed cost would total $21 per acre (plus the $4.76 planting cost).
Therefore, the total variable costs for the growing season will increase from $377.51 to $403.27 per acre. The breakeven cost of production (via the seed rebate option) increases $0.47 from $6.86 to $7.33 per bushel. This in an increase of approximately 3 bushels (2.34 bushels) per acre to offset the increase in production costs at an $11.00 price per bushel.
Following the concept illustrated in Figure 2, under this rebated seed offer, the required increase in breakeven yield ranges from 1.98 ($13 price) to 2.86 bushels per acre ($9 price).
For more information on soybean enterprise budgets, please visit the LSU AgCenter Website.
Dr. Michael Deliberto is an assistant professor, Department of Agricultural Economics and Agribusiness in the LSU AgCenter. He may be reached at MDeliberto@agcenter.lsu.edu.