(Editor’s note: John Hall works as a professional commodities analyst.)
Should farmers prioritize maximizing yields or maximizing profits? This fundamental question challenges Delaware agriculture as input costs continue climbing this growing season.
Hall questions whether the agricultural industry has taken the wrong approach. He notes that most farming conferences today concentrate on certification requirements rather than discussing financial returns. While pesticide experts draw large crowds when presenting new chemical products, they rarely mention treatment expenses.
Hall recalls a well-known weed specialist from years past who would chuckle when questioned about costs. With input expenses rising again this season, he believes it’s crucial to shift attention toward profitability.
A former colleague once established a corn competition that awarded high economic returns rather than just bushels per acre. Though it seemed like an excellent concept, the program ended when the organizer retired because he handled most of the financial calculations himself.
While yield competitions remain widespread today, Hall worries that farmers have become too focused on pushing production limits without considering profit margins. He emphasizes that production matters greatly, but fears this yield-first approach has created problems.
Over the next two weeks, Hall plans to examine two critical issues to support his argument. He encourages growers who haven’t prepared crop budgets to review their financial planning.
Using Iowa State University information, Hall calculated machinery expenses and combined them with fixed costs, reaching $733 per acre for 2026 corn production. This figure includes various operational items detailed in his analysis.
To determine projected per-bushel costs, farmers should divide this amount by anticipated yield. With 200 bushels per acre, the example shows $3.67 in variable costs per bushel.
Hall discovers that most producers stop their calculations at this point during discussions. However, he stresses that fixed costs must also be included in the total. His examples combine fixed expenses with cash requirements to determine business cash flow needs, assuming the farm provides the only income source. After reviewing his January 13th article, he realized family living expenses should be added to fixed costs.
The fixed cost items totaled $325,980 for a 1,000-acre operation to simplify calculations. Dividing this by acreage yielded $325 per acre. Like variable costs, he divided this by the expected 200-bushel yield, resulting in $1.63 per bushel. Total costs equal variable costs plus fixed costs: $3.67 + $1.63 = $5.30.
Comparing this to December 2026 corn futures prices reveals concerning numbers. On February 19th, December harvest futures traded at $4.68. Historically, annual price peaks often occur in February or March. Even adding positive basis to futures prices likely won’t reach the $5.30 break-even point, making 2026 prospects look dim.
Hall’s analysis shows total per-bushel costs at different yield levels: 240, 200, and 160 bushels per acre. The differences are significant. Since yield mapping consistently demonstrates soil variability across farms, he poses a challenging question:
Must farmers plant every available acre? He acknowledges this requires a major philosophical shift toward idling some ground, wondering how many operators would consider this approach.
Soybean economics present similar challenges. Hall’s January 20th column examined soybean budgets using Iowa State data. Their 2026 variable cost estimates include seed and chemicals at $230.95, labor at $44.33, and land at $286.00, totaling $561.28 per acre. Adding the same $325 fixed costs used for corn creates a total of $886.28. Using a 70-bushel yield, estimated costs reach $12.66 per bushel.
November soybean harvest futures traded at $11.16 on February 19th. Soybeans typically face negative basis, making $10.75 a realistic selling price.
Applying the same scenario used for corn analysis, an 85-bushel yield would cost $886 divided by 85, or $10.42 per bushel. This appears manageable, but lower yields create problems. A 55-bushel crop would cost $886 divided by 55, or $16.10 per bushel.
Achieving profitability in 2026 will prove difficult. Since higher yields showed the most promise, reducing variable costs may be challenging. However, some fixed costs and cash payment items might be eliminated. Machinery payments deserve first consideration, as most equipment loans require payments exceeding depreciation rates.
Eliminating equipment with high payments will be painful but might restore profitability. Having adequate cash for payments is essential for maintaining cash flow.
Hall concludes his budget discussion with this thought: Why plant marginal soils when yields are so vital for profitability?
Next week, he will examine supply and demand factors, which he expects will be even more concerning.
(Note: Hall researches material from Allendale, DTN, USDA, University Land Grants and other credible sources when compiling articles. This represents expert consensus rather than personal opinion. Those seeking marketing coaching or strategy discussions can contact him at [email protected] or call 410-708-8781.)
