Budgets Vs. Reality: A Look at Crop Revenues
With the new crop planting beginning, or right around the corner for the Corn Belt, much has been made of 2015 crop budgets which show significant loss potential for row crop farm operators. As we pointed out in an earlier post, the budgeted losses are bigger than any in the last 20+ years. We are frequently asked how budgeted values have corresponded to actual outcomes. While budgets are great tools and very useful in planning and understanding how producers will make planting decisions, it is quite likely that the actual outcomes achieved will be substantially different than those forecast at planting. Price and yield deviations from budget are one of the biggest drivers of these differences.
We thought it would be interesting to look at the relationship between budgeted and actual revenues over time. Specifically, we compared actual market year average (MYA) prices and county level yields to those found in the Purdue crop budgets. This should provide some indication of how prices and yields vary relative to budgeted values. The results carry the caveats that farm level yields can be more or less variable than the county average and that there is no guarantee that a farmer will receive a price that matches the state-level marketing year average (MYA) price. These caveats aside, the results of the analysis provide some insight into how actual outcomes correspond to pre-plant crop budgets.