Cotton, Corn, and Soybean Net Return Comparison Decision Aid

The Cotton, Corn and Soybean Net Return Comparison Decision Aid is a spreadsheet-based decision tool developed to assist row crop producers in Louisiana in making production decisions based on expected net return comparisons between production of cotton, corn and soybeans, using alternative expectations related to variable production costs, expected crop yields and expected crop market prices. The decision tool contains five Excel worksheets which compares net returns above variable production costs for three alternative sets of crop production choices: (1) cotton versus corn, (2) cotton versus soybeans, and (3) corn versus soybeans.

Net returns above variable production costs are the appropriate values to use in making production decision comparisons among crops in the short run period of one crop year. For a given crop production year, fixed production expenses, including primarily equipment depreciation and interest, would not change as a result of which crops are produced in that year. Variable production costs are defined as those production expenses which would change based upon which crops are planted for production in that year.Land rent, if applicable, would also be included as a production cost in the net return calculation, due to the fact the many of the cropland leases are on a crop share basis and would change in value based upon the level of crop yield and market price. Therefore, net returns above variable production costs and land rent charges are calculated and the differences between these values gives an estimate of the net return advantage of one crop over the other at assumed levels of cost, yield and price.

Information required to be entered by the user for each crop includes: (a) variable production cost per acre, (b) expected crop yield per acre, and (c) crop share rent percentage or cash rent payment per acre. Data values which can be entered/changed by the user are in blue text. In addition, the user can change the range of cotton prices, cotton yields, corn prices and soybean prices evaluated by changing the first value (highlighted in blue) listed for each crop in the worksheet. The worksheet calculates net returns above variable costs and land rent for each crop and shows the difference between the two net returns in the table. Therefore, the values shown in the table can be interpreted as the advantage in net returns per acre for one crop (whose market prices are listed along the left side of the table) compared to the other crop (whose market prices are listed along the top of the table. For the range of market price combinations for which the crop on the left has a net return advantage over the other crop, those cell values with positive net return differences will be shaded in yellow.As values for variable cost, yield and rent are changed, the corresponding net return differences and highlighted cells with a net return advantage will change accordingly.

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1/11/2019 1:09:34 PM
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