Changing Costs of Crop Production

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Changing Costs of Crop Production

• Crop Advantage Series
• Osceola, IA
• Michael Duffy
• Extension Economist
• January 15, 2009

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Outline

• Background
• 2009 estimates
• Distribution of costs
• Discussion

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Costs for 2009

• Extremely hard to predict this year
• Pre-paid vs. spot
• Changes in world and domestic demand
• Changes due to financial crisis
• New varieties and traits
• Energy markets

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Baseline assumptions

• Diesel 2.50
• N .68, P .90 K .72
• LP 1.90
• Corn seed 250 Soybeans 45/50lb
• Land 178 205 232
• Yields continuous corn 125 145 165
• Rotated corn 140 160 180
• Soybeans 45 50 55

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The Rise and Fall of Fertilizer Prices
Source http//www.fertilizerworks.com/html/market
/ TheMarket.pdf
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Ammonia Prices
Source http//www.fertilizerworks.com/html/market
/ TheMarket.pdf
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Iowa Corn Prices vs. Costs
Source USDA-NASS and Duffy and Smith,
http//www.extension.iastate.edu/agdm/crops/pdf/a
1-21.pdf
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Iowa Soybean Prices vs. Costs
Source USDA-NASS and Duffy and Smith,
http//www.extension.iastate.edu/agdm/crops/pdf/a
1-21.pdf
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Impact of Cost Changes

• .50 increase in diesel adds .02 to corn and
  .06 to soybeans
• 50 increase in corn seed adds .13
• .25 increase in nitrogen adds .32 and .20 for
  low yield CC and RC, .28 and .17 for medium
  yield and .24 and .16 for high yield

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Impact of Cost Changes

• A 25 change in rents leads to a .20, .17 and
  .14 change for CC based on low, medium and high
  yield land.
• The change is .18, .15 and .14 for rotated
  corn and .55, .50 and .44 for soybeans.

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Conclusions

• Input prices have risen dramatically and will
  show increased volatility
• Some signs world prices have softened but not
  likely to be seen until current high priced
  stocks are used
• Take soil tests and only use what is necessary
• Remember nitrogen credits and apply what will be
  optimum given the circumstances

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Conclusions

• Evaluate seed and seeding rates carefully
• Try for flexible lease arrangements
• Consider all the pest management options
  available
• Dont simply cut back without carefully
  evaluating the consequences you have to spend
  money to make money
• Consider all the risk management options
  available

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Conclusions

• Know your costs of production
• Make cuts and changes where they will do you the
  most good
• Follow a good marketing plan

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THANK YOU
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Web sites

• Ag Decision Maker www.extension.iastate.edu/agdm/
  
• My site
• www.econ.iastate.edu/faculty/duffy/