| |
Corn-On-Corn Worksheet |
| |
| * Items in blue are for your inputs |
Cost |
Expense Item per Acre |
% of Total |
|
Seed |
11% |
138.00 |
Fertilizer |
9% |
15.00 |
Chemicals |
9% |
12.00 |
Fuel |
3% |
30.00 |
Crop Insurance |
5% |
0.00 |
Marketing |
0% |
10.00 |
Interest |
3% |
5.00 |
Miscellaneous |
1% |
$278.00 |
Total Production Costs |
41% |
200.00 |
Rent or Land Charge |
45% |
60.00 |
Machinery Costs |
14% |
$538.00 |
Total Cost of Production / Acre |
100% |
|
| |
|
$161.00 |
Needed Profit for a 30% Return on Investment |
|
|
| |
|
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Income |
|
740.00 |
185 |
bpa x |
4.00 |
Cash Price |
|
22.00 |
Direct Government Payment |
|
762.00 |
Total Income |
|
224.00 |
Profit |
|
42% |
Return On Investment |
|
|
|
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|
Hedge Recommendation: |
|
| |
|
|
Purchase Vertical Call Spreads on 30% of forward sales or Calls on the number of bushels sold above insurance guaranteed bushels.
(What are Vertical Call Spreads) |
|
| |
|
Vertical Call Spreads |
| Mo |
Yr |
Strike |
|
|
|
| Dec |
08 |
4.00 |
Call |
0.47 |
Bought |
| Dec |
08 |
5.00 |
Call |
0.21 |
Sold |
|
|
|
|
-0.26 |
Spread |
|
|
|
|
-0.02 |
Commission |
|
|
|
|
-0.28 |
Net Cost |
|
|
|
|
-0.08 |
Cost 0f 50% Coverage |
|
|
|
|
|
|
$4.00 |
Cash Price of Forward Contracts |
-0.08 |
Cost of % 50% coverage using Vert. Call Spreads |
| |
|
$3.92 |
x bpa |
185 |
$725.00 |
Crop Value |
|
|
|
|
$22.00 |
Direct Govt Payment |
|
|
|
|
$747.00 |
Total Income |
|
|
|
|
-$538.00 |
Total Cost/Acre |
| 38% |
Return On Investment |
$209 |
Profit * |
|
* Still have upside potential on 50% of cash forward sales |
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