Crop Revenue per Unit Area

Yield times price is the top line of every crop budget and the only line on it that two people are likely to agree on. It is also the line with the most leverage: both terms are multiplied rather than added, so a ten percent improvement in either moves revenue by the same ten percent, and a bad year in both compounds rather than averages. That multiplicative structure is why price and yield risk are usually managed together rather than separately.

The price to use is the price at the farm gate, and the gap between that and the headline bid is bigger than most budgets admit. Freight to the delivery point comes off, and on a long haul it is a substantial fraction of the value. Grading discounts come off — moisture, protein, falling number, damage, foreign material — and they are assessed on the whole load, not on the offending portion. Drying charges come off. Marketing levies and check-offs come off. A budget built on the elevator's posted bid is describing a crop delivered by teleportation in perfect condition.

On the yield side, the trap is moisture. Grain is priced at a standard moisture and paid for on dry-equivalent tonnes, so wet grain shrinks between the scale ticket and the cheque. Multiplying a wet yield by a dry-basis price overstates revenue by the shrink, which is a few percent on wheat and can be considerably more on corn taken off tough. The two figures have to be on the same basis, and it is worth writing down which basis on the top of the page.

Revenue is also broader than the grain in more cases than the equation suggests. Straw or stover sold off the field, aftermath grazing, a second cut, a seed multiplication premium, and any support or insurance payment tied to the acre all belong on the top line. Leaving them out understates the crop and, worse, distorts a rotation comparison whenever one crop in it has a by-product and another does not.