Changing Proportional Distributions of Total Soybean Expenses
Over Time Within a State Research Verification Program
C. Robert Stark, Jr. and Kelly J. Bryant
University of Arkansas at Monticello School of Agriculture
/UA Southeast Research & Extension Center
P.O. Box 3508
Monticello, Arkansas 71656
Selected Paper prepared for presentation at the Southern Agricultural
Economics Association’s 2016 Annual Meeting, San Antonio, Texas,
February 6-9, 2016
Copyright 2016 by C. Robert Stark, Jr. and Kelly J. Bryant. All rights reserved. Readers may
make verbatim copies of this document for non-commercial purposes by any means, provided
that this copyright notice appears on all such copies.
ABSTRACT
The Arkansas Soybean Research Verification Program (AR SRVP) has provided demonstrations of optimal
management responses in soybean production for 30 years. This period has seen the adoption of early
soybean production systems and increasingly widespread use of various irrigation approaches.
Cooperating producers across the state have worked with county agents and state extension specialists
to produce crops under top management conditions and refine extension recommendations. Individual
field and cooperator agronomic and economic results have been published to benefit producers across
the state and beyond. While considerable attention has been given to total costs of production, limited
study has been made into the changes in distribution of these costs among expense categories. This
study examines changes in magnitude of expenses and percentage distributions among major expense
categories. Irrigated, early season soybean production system records are examined for a ten year
period to identify expense changes that have been experienced. The distribution of expenses by
commonly used categories is then calculated and compared to national results from periodic
USDA/NASS surveys. A better understanding of the distributional changes in expenses borne by
soybean producers can have benefits in crop enterprise decision making and facilitate financing
procedures for both producers and land owners.
KEY WORDS
Soybean, verification program, proportional expense distributions, threshold recommendations.
INTRODUCTION
The production of soybean in the United States has expanded dramatically in recent decades. This
growth is especially prominent in the Mid-South Area including Arkansas. A contributing factor to
acreage and production increases within the state has been the Arkansas Soybean Research Verification
Program (SRVP) funded by the Arkansas Soybean Promotion Board and coordinated through the
Cooperative Extension Service of the UA Division of Agriculture. Local County Extension Agents identify
potential cooperating producers within their county and jointly submit a specific field for entry in the
program. The field may be selected due to a unique existing condition that will require special
management or may simply be chosen for its demonstration potential. The SRVP coordinators promise
to visit the field as needed and provide management recommendations covering all aspects of crop
production throughout the cropping season. The producer agrees to follow the recommendations as
given. The overall goals are to follow standard extension service guidelines to maximize economic
profits. Records are kept of all practices and inputs used on each field. Yields are calculated by a team
comprised of the SRVP coordinators, county agents, and state soybean specialists. All data is provided
to an extension economist who generates the economic profitability of each field including breakeven
prices and categories of operating and ownership expenses. SRVP coordinators discuss the results with
each producer. An annual report is published each year and made available to county agents, industry
representatives, and all soybean producers. An extensive agronomic and economic database has been
assembled from the cooperating producers’ fields and provides historical insights into changes in
production practices that have occurred and their resulting economic impacts.
BACKGROUND and PREVIOUS STUDIES
The Arkansas SRVP database is not the only source of costs and returns information for the Mid-South.
Neighboring states of Louisiana and Mississippi previously conducted SRVP programs. Studies such as
Siemens, et al. (1978), Klemme (1983), and Brown et al. (1989) have focused on crop production costs
by tillage systems. An economic analysis of alternative cropping and row spacing systems by Oriade et
al. (1997) found enhanced net returns in narrow row systems. Whole-farm analysis of early-maturing
versus traditional varieties by Casey et al. (1998) indicated enhanced profits with the early varieties.
Heatherly and Spurlock (1999) (2001) found further agronomic and economic justifications for early
production systems that now dominate the Mid-South. Rotation system studies with other crops,
particularly rice, have generated mixed results with Watkins et al. (2004) finding conventional till
rotation soybean systems preferred by risk-averse rice producers over no-till, but Hignight et al. (2010)
and Hristovska, et al. (2013) seeing a preference for no-till rotation systems among producers with
similar risk attitudes. Other economic studies have more narrowly focused on herbicide rates (Shaw et
al. 2001; Hoverstad, et al. 2006), cover crops (Reddy 2003), integrated pest and crop management
(Massey 2008), and phosphorus fertilization (Riskin et al. 2013). Gains in Brazil and Argentina soybean
production have even led to debates concerning U.S. competitive advantage and analyses of soybean
production costs in the respective countries such as Huerta and Martin (2002).
METHODS
This study examines soybean expense proportions over a ten year time period as found in the Arkansas
Soybean Research Verification Program fields. SRVP fields can be regarded as among the most intensely
managed fields in the Mid-South and representative of economic possibilities for the area. The SRVP
database shows yields that, when combined with a market price, can generate total crop revenue.
Expenses are categorized into seed, fertilizers and nutrients, herbicides, insecticides, other chemicals,
custom applications, fuel, repairs and maintenance, labor, interest, other pre-harvest inputs/fees, and
post-harvest expenses. Operating expenses and total expenses per yield unit indicate market prices per
unit required for each field, but were not included in this analysis. Annual market prices utilized in this
study were calculated from Arkansas statewide cash market averages distributed by Stark (various
issues) from primary data published in the USDA Arkansas Daily Grain Report, LR_GR_111. Operating
expense levels within the listed categories, were examined, by year, to identify any obvious trends over
the 10 year study period. Trend lines with equations were estimated for selected expense items that
exhibited sizeable changes over the period. Recognition of changing proportions within Total Operating
Expenses can benefit producers as they make management decisions of production systems, inputs, and
associated crop varieties.
RESULTS
Total Operating Expenses for producers enrolled in the Arkansas Soybean Research Verification Program
increased by more than 50% from 2006-2007 levels to 2009 and following seasons. Average TOE was
approximately $160 in 2006-2007, but has not been below $260 per acre since 2009. The major
contributors to this increased expense appears to be seed and chemicals. Average seed expenses rose
from the mid-$30 range to almost $80 per acre in 2015. Graphically, this change is illustrated with a
strong upward trend line and a statistical R2 of 0.835 (Figure 1). Herbicide expenses increased
dramatically from the 2006-2008 level, but have stabilized in recent years around $34-39 per acre
(Figure 2). Adding insecticide and fungicide expenses into the mix reveals that total chemical expense
continues to exhibit a general upward trend (Figure 3). Fertilizer and fuel expenses have been rather
volatile, but have not established a clear trend (Figures 4 and 5).
An examination from the proportional perspective reveals a somewhat different picture. Looking at the
percentages of total operating expense by category shows that seed made up the largest single expense
category in 2015 at 29.77% (Table 2). Fuel, herbicides, and fertilizer are all in the 12-15% range. Fuel,
the proportional leader in 2006, has fallen approximately 10% over the period. Seed expense and total
chemical expense are slowly climbing as a proportion of total operating expense (Figures 6 and 7).
Herbicide expense appeared to peak during 2009-2011 and now hovers in the 13-14% range (Figure 8).
The implications for soybean producers are important as they face the future. Current dramatic declines
in fuel prices may not be as significant of a benefit as first imagined. Producers should instead examine
their seed and overall chemical expenditures when formulating production plans for the coming
seasons. Implementing strategies that can maximize seeding efficiency while reducing chemical use
provide greater promise of benefits for soybean producers throughout the mid-south.
Table 1
YEAR
EXPENSE
ITEM
Seed
Fertilizer
Herbicides
Insecticides
Other
Chemicals
Custom
Applications
2015
2014
2013
2012
2011
2010
2009
2008
(Average Dollar Amounts By Item and Year)
2007
2006
79.07
33.64
34.62
6.52
6.53
69.96
54.28
36.30
6.19
5.97
69.24
34.27
38.92
2.81
3.82
58.25
36.93
37.44
8.83
5.74
65.98
51.77
49.51*
60.49
76.55
37.13*
59.52
41.20
43.22
5.14
6.94
32.20
46.12
16.98
2.96
0.00
31.07
18.09
14.58
4.24
3.70
34.18
13.19
18.11
3.72
3.10
9.50
11.00
11.79
18.89
16.93
15.03
27.67
13.14
7.93
7.26
Fuel
Repairs &
Maintenance
39.85
18.91
42.46
18.26
61.75
16.15
58.99
17.45
36.19
11.00
39.96
10.44
21.81
8.61
60.35
9.52
43.04
11.07
41.82
10.95
Labor
Interest
Other
Expenses
Post-Harvest
9.82
2.88
5.73
9.29
8.01
6.88
6.71
6.05
8.65
8.52
8.79
11.86
11.47
6.10
4.79
12.13
8.02
7.41
1.29
7.44
5.60
7.55
8.12
5.01
7.55
18.49
14.85
15.84
14.55
12.03
12.58
0.00
0.00
6.69
7.92
TOTAL
OPERATING
265.55 277.22 271.13 272.74 261.98 269.70 237.13 197.99 161.01
EXPENSES
*Represents average total chemical use for fields in 2010 and 2011, i.e. Herbicides, Insecticides, and
Other Chemicals.
160.93
Table 2
YEAR
EXPENSE
ITEM
Seed
Fertilizer
Herbicides
Insecticides
Other
Chemicals
Custom
Applications
2015
2014
2013
2012
2011
2010
2009
2008
(Percentage of Total Operating Expenses by Year)
2007
2006
29.77% 25.24% 25.54% 21.36% 25.18% 22.43% 25.10% 16.27% 19.30% 21.24%
12.67% 19.58% 12.64% 13.54% 19.76% 28.38% 17.37% 23.29% 11.23% 8.20%
13.04% 13.09% 14.35% 13.73% 18.90%* 13.77%* 18.23% 8.57% 9.06% 11.25%
2.45% 2.23% 1.04% 3.24%
2.17% 1.50% 2.64% 2.31%
2.46%
2.15%
1.41%
2.11%
2.93%
0.00%
2.30%
1.93%
3.58%
3.97%
4.35%
6.93%
6.46%
5.57%
11.67%
6.63%
4.93%
4.51%
Fuel
15.01% 15.32% 22.78% 21.63%
Repairs &
Maintenance 7.12% 6.59% 5.96% 6.40%
13.82%
14.81%
9.20%
30.48% 26.73% 25.98%
4.20%
3.87%
3.63%
4.81%
6.87%
6.81%
Labor
Interest
Other
Expenses
Post-Harvest
3.70%
1.08%
3.35%
2.95%
2.52%
2.56%
2.24%
2.57%
2.02%
4.05%
3.74%
4.62%
3.48%
5.05%
3.11%
2.16%
3.12%
3.14%
3.22%
4.53%
4.25%
5.12%
0.65%
4.69%
4.69%
6.96%
5.36%
5.84%
5.33%
4.59%
4.66%
0.00%
0.00%
4.15%
4.92%
TOTAL
OPERATING
265.55 277.22 271.13 272.74 261.98
269.70 237.13 197.99 161.01
EXPENSES
*Represents average total chemical % for fields in 2010 and 2011, i.e. Herbicides, Insecticides, and Other
Chemicals.
160.93
Figure 1
Seed
90.00
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
y = -5.2311x + 84.768
R² = 0.835
2015 2014 2013 2012 2011 2010 2009 2008 2007 2006
Figure 2
Herbicides
60.00
50.00
40.00
30.00
20.00
10.00
0.00
2015 2014 2013 2012 2011 2010 2009 2008 2007 2006
Figure 3
TOTAL CHEMICAL EXPENSES
60.00
50.00
y = -3.1319x + 57.529
R² = 0.5147
40.00
30.00
20.00
10.00
0.00
2015 2014 2013 2012 2011 2010 2009 2008 2007 2006
Figure 4
Fertilizer
90.00
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
2015 2014 2013 2012 2011 2010 2009 2008 2007 2006
Figure 5
Fuel
70
60
50
40
30
20
10
0
2015 2014 2013 2012 2011 2010 2009 2008 2007 2006
Figure 6
Seed
35.00%
30.00%
y = -0.0095x + 0.2835
R² = 0.5631
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2015 2014 2013 2012 2011 2010 2009 2008 2007 2006
Figure 7
All Chemicals
25.00%
y = -0.0049x + 0.193
R² = 0.1659
20.00%
15.00%
10.00%
5.00%
0.00%
2015 2014 2013 2012 2011 2010 2009 2008 2007 2006
Figure 8
Herbicides
20.00%
15.00%
10.00%
5.00%
0.00%
2015 2014 2013 2012 2011 2010 2009 2008 2007 2006
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