Breakeven prices are helpful when making crop decisions and marketing crops. They vary substantially by soil type and farm. Without breakeven price information, it’s difficult for a producer to evaluate market opportunities or make crop rotation decisions as crop prices change.
The USDA marketing year price for corn is expected to decline from $6.50 per bushel for the 2022-23 marketing year to $4.75 per bushel in the 2023-24 marketing year. Moreover, supply-and-demand fundamentals indicate that the corn price this fall could be as low as $4 to as high as $5.25 per bushel.
These wide differences illustrate how important it is to know a farm’s breakeven price when evaluating forward-pricing strategies and developing scenarios pertaining to potential cash flows for the year. This article uses enterprise budget information in the Purdue Crop Cost and Return Guide to estimate breakeven prices for corn and soybeans for average and high-productivity soils.
Using the 2024 Purdue crop budgets, the estimated breakeven corn price to cover all costs is $5.25 per bushel for average-productivity soil and $4.90 for high-productivity soil. Breakeven prices in 2024 are expected to be about 10% lower than those for 2023.
For full-season soybeans, the breakeven price to cover all costs is $12.40 for average-productivity soil and $11.70 for high-productivity soil, or about 5% lower than last year’s breakeven prices.
It is important to note that the Purdue budget uses average production costs. It is not uncommon for production costs for individual farms to be 10% below or 10% above the production costs reported in the budgets. Thus, at a minimum, it is extremely important to determine production costs for individual farms.
Ideally, a producer should compute breakeven costs for each farm unit or tract. These computations do not make marketing decisions or crop rotation decisions easy, but they certainly provide important information that can be used when making these decisions.
EDITOR’S TAKE:
Although this article is only a guide based on averages, it provides some basis to calculate breakeven costs for the coming crop year. It also encourages farmers/ranchers to develop their own breakeven calculations for each production unit. While the examples here focus only on corn and soybeans, such calculations would also be done for livestock and any other farm/ranch enterprise. Like any business, it’s difficult to know if you’re making a profit or not unless you first know your breakeven cost. In 2024 we know margins are going to be tighter for many ag enterprises. That underscores the importance of knowing the breakeven point and, thus, the difference between realizing a profit or a loss. Most farmers/ranchers are very astute at figuring out how to lock in a profit, which ensures they can still purchase those trucks from your lot. So, be sure you always have your inventory on AgTruckTrader.com®!
