{"id":3471,"date":"2024-04-17T14:14:39","date_gmt":"2024-04-17T19:14:39","guid":{"rendered":"https:\/\/agrilife.org\/agecon\/?p=3471"},"modified":"2024-04-17T14:14:39","modified_gmt":"2024-04-17T19:14:39","slug":"high-plains-ag-week-4-17-2024-corn-and-sorghum-budgets-in-2024","status":"publish","type":"post","link":"https:\/\/agrilife.org\/agecon\/high-plains-ag-week-4-17-2024-corn-and-sorghum-budgets-in-2024\/","title":{"rendered":"High Plains Ag Week 4\/17\/2024 – Corn and Sorghum Budgets in 2024"},"content":{"rendered":"
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Field crops in Burleson County on July 30, 2021. (Laura McKenzie\/Texas A&M AgriLife Marketing and Communications)<\/p><\/div>\n

The 2024 crop and livestock budgets<\/a> for most districts have been published on the AgriLife Extension Economics<\/a> website. \u00a0In this post, we look at the expected costs and returns for corn and sorghum enterprises in the High Plains.<\/p>\n

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Projected Costs and Returns in 2024<\/h3>\n

Budgets for corn and sorghum indicate that both variable costs and revenues will decrease this year relative to 2023.\u00a0 Table 1 illustrates this for corn and sorghum enterprises in Extension District 1.\u00a0 Budgets for similar commodities in Extension District 2 follow similar trends.<\/p>\n

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Table 1. Revenue and Variable Costs for Corn and Sorghum Enterprises in the 2023 and 2024 Extension Budgets<\/p><\/div>\n

In most of the budgets, revenue decreases because of lower expected commodity prices this year.\u00a0 For example, the prices of corn and grain sorghum decrease by 17% and 20%, respectively, relative to 2023.\u00a0 Variable costs are slightly lower in 2024 based on lower expected fertilizer and chemical prices.\u00a0 The exceptions to this trend are the budgets for sorghum sudangrass in District 1 which show a fifty percent increase in revenue.<\/p>\n

The price decreases seen in these budgets are the result of normal market forces at work.\u00a0 Grain prices increased in 2020, 2021, and 2022 because of drought and other temporary market shocks.\u00a0 In April and May 2022, grain prices reached their peak, just after Russia first invaded Ukraine.\u00a0 Since then, grain prices have decreased back to a level that is closer to their historical average.<\/p>\n

Overall, the expected decreases in revenue in the 2024 budgets outweigh the expected reductions in variable costs.\u00a0 As a result, expected net returns for these crops are less in 2024 than in 2023 (Table 2).\u00a0 Still, returns above variable costs remain positive for every enterprise listed in Table 2 except dryland sorghum. \u00a0With one exception, enterprises with positive returns above total costs in 2023 are still profitable in 2024.<\/p>\n

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Table 2. Expected Returns to Corn and Sorghum Production<\/p><\/div>\n

As you use these budgets to make decisions, keep in mind the rule of thumb for economic decision making.\u00a0 Focus on returns above variable costs if you have already incurred fixed costs.\u00a0 If an enterprise can cover its variable costs of production, you are better off producing something and using the revenue you earn to pay at least part of your fixed costs.<\/p>\n

Breakeven Prices for 2024<\/h3>\n

One important value to be aware of in an enterprise budget is the commodity\u2019s breakeven price.\u00a0 This is the price at which you can expect revenue to exactly equal costs, given the expected level of production in the budget.\u00a0 Table 3 lists the prices necessary to break even on both variable costs and total costs for corn and sorghum enterprises in District 1 in 2024.<\/p>\n

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Table 3. Expected Breakeven Prices for Corn and Sorghum Enterprises<\/p><\/div>\n

Normally, the risk of loss is greater when a commodity\u2019s breakeven price is close to its expected price.\u00a0 Using sprinkler irrigated corn as an example, the expected yield in the budget is 225 bushels and variable costs are $884.04\/acre.\u00a0 Given this yield and variable cost, this enterprise breaks even on variable cost at a price of $3.93.\u00a0 At this yield and the budget total cost, this enterprise breaks even on total cost at a price of $5.29.\u00a0 Considering the expected price in the budget is $5.35, this enterprise should easily break even on its variable cost.\u00a0 On the other hand, a price of $5.35 is very close to the break-even price for total costs.\u00a0 If either price or yield is less than expected, sprinkler irrigated corn may not break even on its total costs.<\/p>\n

Final Comments on the Budgets<\/h3>\n

Keep in mind that the numbers in these budgets are general guidelines for corn and sorghum enterprises and will not represent every operation perfectly.\u00a0 To build a budget that better represents your operation, you can use the following options:<\/p>\n