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New Crop Returns Calculator Helps Find Costs, Breakevens

23 November 2012
Alberta Agriculture, Food and Rural Development

CANADA - Alberta Agriculture and Rural Development (ARD) has a new Crop Returns calculator to help producers with profit based marketing and risk management decisions. This new downloadable Excel calculator helps farmers estimate crop breakeven prices and financial returns in a flexible, easy-to-use format.

“More effective marketing and risk management decisions are often the result of better knowledge of a farm’s production costs and breakeven selling prices,” says Bruce Viney, risk management specialist, ARD, Olds.

“Some very effective marketing strategies suggest that when prices get up high enough to offer good profits, cash sales, contracts or hedges will be made. But where does a manager set the price targets so that the profit objectives are achievable yet still protect profitability? For some producers, crop returns can be an important tool for helping with these profit calculations. The Crop Returns calculator uses proven methods for estimating production costs and grain farming enterprise financial returns.”

Crop Returns uses a partial budget or enterprise analysis approach that calculates results from a producer’s own variable and fixed costs. While using a farm’s own unique cost structure is highly recommended, the calculator comes complete with some example numbers for producers to use in order to get a quick feel for the program. The variable and fixed cost format is the same as that used in ARD’s popular Crop Choice$ program, only without the statistical power and operating complexities. The calculator is designed to give quick and useful results after just a few minutes of use.

When producers use their own unique numbers, Crop Returns will calculate cash-cost driven gross margins as well as contribution margins. These are important in the crop planning process. For estimating profitability during the growing season, projected return-to-equity and break-even selling prices can be calculated for up to eight user-defined crops. Various crop sharing arrangements can also be specified by the user to show and compare total expenses, production values and different risk levels.

“In addition to assessing the risk associated with different land tenures, Crop Returns uses sensitivity analysis to show the variability of the returns for each crop, and users can immediately see the effects that different final yields can have on break evens,” notes Viney. “Simply by adjusting projected selling prices and yields up and down, good and bad case scenario financial returns can be calculated in a crop by crop and on a whole grain farm level.”

To assist producers in drilling down to their own specific per acre costs, additional calculators are included. Crop Returns includes a very unique and powerful fertilizer cost calculator worksheet that calculates fertilizer costs from user specified N-P-K-S requirements. A least-cost blend of fertilizer is also calculated using the specified requirements and the individual ingredient costs. In addition to estimating per acre total fertilizer costs, results include the dry blend formulations and individual ingredient use in pounds per acre and total tonnes. A financial calculator page is also included to assist with loan payment estimations.

“Much of the power of the Crop Returns program comes from the fact that it is simple, easy to use and adaptable to nearly all grain farming operations,” adds Viney. “Instructional notes are included in many cells to explain the calculation logic and to guide the user to quick results. Using this tool to calculate expected costs, returns and breakevens will assist in making better marketing and management decisions.”

TheCropSite News Desk

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