Profitability Outlook - Probably one of the factors that producers look at closest is the profitability outlook of each crop. Making a projection on profitability outlook is not an exact science as this does have several moving parts. Prices, yields, and input cost all have to be considered.

With prices, I usually start at what is being currently offered for harvest delivery, however, I think it is also important to look at a projected season-average price with a range both lower and higher.  For yields, I would use a 3 to 5 year average as a starting point and like prices look at higher- and lower-than-average yields. Producers should use their own cost of production but as a start can use their Extension’s crop budgets.

In assisting producers in making informed decisions regarding their cropping plans, examining the returns above variable costs is useful. This method is used when there is very little equipment changes being made and fixed costs are not changing. If the farm is making operational changes then a whole farm plan should be examined. If the farm is share rented, that particular share should be considered as a cost.

As has been evident the last few years and throughout time, a sound cropping plan should include crop diversification – different crops, different varieties, and rotation. We don’t know what crops and or prices will be the bumper crop or best price. Producers who have a successful production plan should stick to that plan at least on their core acres. That would probably leave 15 percent to 25 percent of a producer’s acreage to be somewhat flexible and more dependent on conditions before planting.

From the above numbers it is evident to me that on the average we could be looking at a tough year and many analysts have prices projected much lower than I am using. This will put additional pressure on achieving above average yields and managing cost at the same time. If you need assistance in developing your cropping plan, contact your local County Extension office. Look here for Tennessee crop budgets.