Tom Hall, Senior Agronomist, Rooster Strategic Solutions

If you’re a farmer, knowing the breakeven price can mean the difference between staying in business or finding another occupation. And if you work with farmers, knowing the breakeven price gives you insight into a farmer’s level of risk tolerance to make upgrades and try new products.

A simple rule of thumb: the 10-6-4 rule. This is an easy way to estimate farm profitability. If the price of soybeans, wheat, or corn exceeds $10 per bushel, $6 per bushel, or $4 per bushel respectively, most producers are in a position to turn a profit. This obviously isn’t the case for all farmers because breakeven is determined by a number of specific factors. But from our experience 10-dollar soybeans, 6-dollar wheat, and 4-dollar corn is a path to profitability for the vast majority of growers.

Knowing this can give you new ways to look at price charts. For instance, take a look at this corn futures graph from the Wall Street Journal:

Notice that a month ago corn producers were facing a price of $3.25 per bushel. The University of Illinois estimate the cost of production ranges from $3.23 to $3.80. There are a few fortunate growers with highly productive soils and the aid of government payments/insurance who can turn a profit with corn priced this low.

Now, notice the amazing run that corn prices have made over the last 60 days, shooting up to nearly $4.25 per bushel. This gives you an idea on how volatile pricing can be, and how gut-wrenching it can be for your clients and customers.

So, with corn trading where it is, wheat at $6.21 and soybeans at $10.86 as of this week, all the major indexes are above our 10-6-4 rule, solidly in the profit zone for most farmers. On the flip side, feeding livestock is becoming more expensive and beef and hog prices – $123 and $66 respectively – are not showing the price recovery seen in the grain markets. In short, the picture of profitability is mixed. But in 2020, any good news is worth celebrating.