Economic projections for the 1999 production year are for low corn and soybean prices. As we prepare for 1999, we need to review our operations and find ways to be as efficient as possible. One item every farmer must get a handle on is their costs of producing an acre of corn and soybeans. This will help setting realistic yield expectations and with future marketing business plans.

Since 1987, the Department of Agronomy and UWEX have been conducting the PEPS (Profits through Efficient Production Systems) contest. The average production costs and returns of 616 participants for the last five years are shown in Table 1. The contest is divided into three divisions: 1) corn, cash grain; 2) corn, dairy and livestock (rotation with alfalfa or manure application); and 3) soybean. Cost per acre is the total of seed, fertilizer, chemical, other, custom, drying, interest, equipment, and land costs. Cost per bushel is the cost per acre divided by yield. Return per acre is the quantity of yield times price with cost per acre then subtracted. Return per acre is the amount of money left over to pay for other items not easily accounted for by the contest such as overhead, utilities, improvements, management, building costs, taxes, etc. PEPS costs probably underestimate actual costs because all inputs are not accounted for completely. Also, contest participants tend to put the required 10-acre contest fields on their best soils with management inputs optimized (i.e. rotation and potential insect pressure considerations).

Average corn and soybean yields and moisture levels of PEPS participants fairly accurately reflect general trends reported by the Wisconsin Agriculture Statistics for the 1994 to 1998 production years (Table 1). Higher yields were recorded during 1994, 1997, and 1998. Corn moisture levels were greatest during 1996 and 1997 resulting in dying costs nearly double that of other years.

Seed costs in 1998 increased 37% for corn over 1994 costs and 28% for soybeans (Table 1). Fertilizer costs increased 46 to 48% for both corn and soybean, however, this is primarily due to higher yields and higher P and K removal rates. Variable equipment costs have increased 26 to 30% for both corn and soybeans. Land costs increased 11%.

In the corn divisions, depending upon year, the average maximum and minimum cost per acre is $215 to $254 in the cash grain division, and $187 to $229 in the dairy and livestock division (Table 1). Average costs per bushel have been $1.26 to $1.54 in the cash grain division, and $1.13 to $1.44 in the dairy and livestock division. Better efficiency (low cost per bushel) is seen in years with higher yields.

In the soybean division averaged over the five years, seed makes up 13% of the total input costs, chemical inputs are 16%, fertilizer inputs are 10% and land costs make up 34% (Table 1). Average costs per acre for soybean ranged from $172 to $198 and average cost per bushel ranged from $3.30 to $4.19. Average returns per acre ranged from $123 to $194. Better efficiency (low cost per bushel) occurs with higher yields.

Table 1. Average production costs and returns of PEPS contests conducted between 1994 and 1998.
Year	Number of Contestants	Yield	Moisture	Seed	Fertilizer	Chemical	Other	Custom	Drying	Interest	Variable Equipment	Fixed Equipment	Land	Cost per acre	Cost per bushel	Return per acre
Corn, Cash Grain Division
1994	43	178	20.5	$24.68	$41.03	$25.34	$3.57	$16.26	$18.09	$6.40	$13.24	$19.01	$55.52	$223.14	$1.26	$143.74
1995	47	143	19.6	$26.31	$41.57	$24.66	$3.32	$12.74	$11.55	$6.03	$13.88	$20.43	$54.62	$215.11	$1.52	$207.43
1996	21	158	24.4	$28.02	$43.99	$23.72	$4.87	$9.66	$28.25	$6.91	$15.10	$21.89	$55.75	$238.16	$1.54	$176.60
1997	25	172	25.2	$32.15	$51.42	$21.98	$3.69	$9.95	$33.57	$7.48	$13.48	$19.18	$60.91	$253.80	$1.47	$188.19
1998	35	192	19.3	$33.66	$56.40	$23.67	$5.43	$6.79	$14.97	$7.17	$18.34	$22.11	$64.07	$252.61	$1.32	$147.35
Corn, Dairy and Livestock Division
1994	52	172	22.5	$25.02	$29.88	$21.45	$4.29	$15.42	$0.00	$5.16	$18.57	$23.33	$49.14	$192.25	$1.13	$163.25
1995	34	140	21.8	$26.12	$29.43	$23.64	$3.23	$11.82	$0.00	$4.98	$16.38	$21.82	$49.47	$186.90	$1.36	$226.00
1996	28	136	25.1	$26.58	$28.62	$20.59	$3.44	$9.04	$0.00	$4.82	$18.92	$23.95	$51.96	$187.94	$1.44	$169.33
1997	16	161	25.8	$30.81	$30.59	$24.65	$2.39	$10.85	$0.00	$5.16	$15.33	$20.35	$53.98	$194.12	$1.21	$220.26
1998	23	190	20.7	$34.48	$46.19	$26.85	$3.43	$13.89	$0.00	$6.57	$21.21	$23.07	$53.08	$228.78	$1.22	$166.09
Soybean Division
1994	84	56	13.5	$21.82	$16.68	$28.39	$2.70	$13.69	$0.00	$4.30	$12.39	$18.51	$63.92	$182.40	$3.32	$123.61
1995	74	53	12.6	$21.78	$14.90	$29.64	$3.64	$9.44	$0.00	$4.14	$12.49	$18.54	$66.54	$181.12	$3.51	$165.55
1996	58	44	14.4	$23.84	$13.45	$35.20	$2.09	$7.24	$0.00	$4.25	$12.58	$19.05	$54.24	$171.94	$4.19	$125.83
1997	35	56	12.6	$25.28	$16.94	$30.41	$3.54	$7.76	$0.00	$4.43	$14.54	$19.55	$65.48	$187.93	$3.44	$194.26
1998	41	61	13.7	$28.00	$24.67	$29.33	$2.20	$10.63	$0.00	$4.99	$16.11	$18.43	$64.03	$198.40	$3.30	$143.85
Weighted Price per Bushel = 50% November Average Cash price + 25% March CBOT Futures price ($0.15 basis) + 25% July CBOT Futures price ($0.10 basis) November Average Cash price derived from Wisconsin Ag Statistics; CBOT Futures prices derived from December 1 close. Corn Prices ($/bu): 1994 = $2.06, 1995 = $2.95, 1996 = $2.63, 1997 = $2.57, 1998 = $2.08 Soybean Prices ($/bu): 1994 = $5.48, 1995 = $6.57, 1996 = $6.82, 1997 = $6.86, 1998 = $5.65