“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 Service 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,” Swenson says. “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. The Crop Compare program is available on the Web at http://www.ag.ndsu.edu/farmmanagement/tools.
Source:ndsu.edu