Breakeven price calculator for crop production
Turn cost per acre into the price per bushel you have to beat.
Breakeven calculator
Breakeven calculator
Cost of production into a per-bushel breakeven.
What price per bushel covers my cost of production?
Cost of production is usually budgeted per acre and grain is sold per bushel, so the two numbers never meet without a conversion. The breakeven price is that conversion: total cost per acre divided by expected yield per acre gives the price a bushel has to bring for the crop to pay for itself.
It is the number every other marketing decision sits on top of. A bid is high or low relative to breakeven, not in the abstract, and a hedge either locks in something above it or it does not.
Worked example
- Total cost
- $750 per acre
- Expected yield
- 180 bu per acre
- Profit goal
- $0 per acre
- $750 per acre ÷ 180 bushels per acre = $4.1667 per bushel
At 180 bushels, every bushel has to bring $4.17 just to return the $750 an acre already spent. Anything below that sells the crop at a loss, however the bid compares with last year.
How it works
Total cost per acre should be everything the crop carries: seed, fertiliser, chemical, fuel, machinery, labour, drying, crop insurance, cash rent or a land charge, and a share of overhead. Leaving out land is the most common way a breakeven comes back too low, because rent is often the single largest line.
Expected yield is the sensitive input. Breakeven moves inversely with it, so a yield estimate that is ten per cent optimistic makes the breakeven roughly ten per cent too low, which is the difference between a bid that clears cost and one that does not. Running the calculation at a realistic yield and again at a poor one shows how much of the margin depends on the crop actually being there.
The profit goal is added to cost before dividing, so it becomes part of the price rather than something left over. A $50 an acre target on 180 bushels adds about 28 cents to the price the crop has to bring.
breakeven = (total cost per acre + profit goal per acre) ÷ expected yield per acreThe same $750 an acre at different yields
Cost held constant. Yield is doing all the work, which is why the estimate matters more than it looks.
| Yield (bu/ac) | Breakeven | With $50/ac profit |
|---|---|---|
| 140 | $5.36 | $5.71 |
| 160 | $4.69 | $5.00 |
| 180 | $4.17 | $4.44 |
| 200 | $3.75 | $4.00 |
| 220 | $3.41 | $3.64 |
Common questions
Should cash rent be included in cost of production?
Yes. Rent is a cost the crop has to cover, and on rented ground it is often the largest single line. Leaving it out produces a breakeven that looks achievable and is not. On owned ground the equivalent is a land charge: what the ground would have earned rented out.
Which yield should I use, APH or my own estimate?
Both, at different times. An insurance APH is a long-run average and is the sober number for planning. A current estimate reflects the crop actually standing. Running the calculation at both gives a range rather than a single figure, which is closer to the truth of it.
Does the breakeven include the basis?
No. This is a flat cash price per bushel. To compare it with a futures board price, subtract the basis at the delivery point you would actually sell into. A $4.17 breakeven against a 45 under basis means futures have to be near $4.62 for a cash sale to cover cost.
How does this differ from a cash flow breakeven?
A cost of production breakeven counts every cost including depreciation and a land charge. A cash flow breakeven counts only what has to be paid this year, so it is lower, and it answers a different question: not whether the crop was profitable but whether the operation can service what it owes.
Related
This tool is designed to help plan your overall portfolio and is not trading advice. You should carefully consider your portfolio, risk tolerance, and other metrics; Consult with your broker prior to making trading decisions