Profits To Rise With Input Costs

Last week we reported that Rabobank was projecting higher input prices for 2009. A new University of Illinois also expects increased input costs, but says your growers will still make money (barring any major yield drops) — good news for your business.

The Illinois study finds that soaring energy prices will yield sharp increases for corn and soybean production next year, cutting into grower profits and stretching already high food costs.

Costs to get crops in the ground will jump by about a third in 2009, fueled by fertilizer prices expected to surge 82 percent for corn and 117 percent for soybeans, says Gary Schnitkey, an agricultural economist who conducts the annual survey of input costs. Along with fertilizer, grain growers also will see hefty cost increases next year for inputs ranging from seed to fuel for tractors and other machinery, according to the study.

With commodity prices high, the increased production costs should merely trim farm profits rather than sinking balances into the red, says Schnitkey, who predicts growers will likely post solid earnings again in 2009.

The study projects non-land production costs for corn will total $529 an acre next year, up 36 percent from 2008 and nearly 85 percent higher than the average of $286 per acre from 2003 to 2007. At $321 an acre, soybean input costs are projected to rise 34 percent from 2008 and more than 78 percent from the 2003-07 average of $180 an acre.

Schnitkey says the per-acre costs are based on high-producing farmland in central Illinois, but corn and soybean growers across the country will see similar increases.

Assuming cash-rent fees of $200 an acre, the study projects a break-even price of $3.82 a bushel for corn in central Illinois, based on an average yield of 191 bushels an acre. Soybeans would break even at $9.65 a bushel, based on yields of 54 bushels per acre.

Schnitkey says 2009 prices should be significantly above break-even prices. Based on futures markets, corn should sell for about $6 a bushel next year, with soybeans in the $13 to $14 range.

Input prices will have doubled in just a few years and that’s a major investment for growers. “If something bad happens that hurts yields, their downside risk is much higher now,” he says.

Leave a Reply

Featured Stories
Eric SfiligojMonsanto Hears The WHO
March 27, 2015
Another challenge to the safety of glyphosate, and the responses from supporters and opponents, calls to mind a classic Dr. Seuss story. Read More
Spreaders17 Fertilizer Spreaders For 2015
March 25, 2015
Manufacturers shoot for versatility and accuracy in this year's crop of fertilizer spreaders. Read More
Crop InputsWorld Health Organization Report Contradicts Scientific Findings On Glyphosate
March 23, 2015
A new report from the World Health Organization has classified glyphosate with a “2A” rating as a probable carcinogen, a Read More
HerbicidesMARCH MADNESS: Industry Rallies Around Glyphosate Safety Amid Troubling Report
March 20, 2015
A newly published report from the International Agency for Research on Cancer (IARC) classifies the herbicide glyphosate as a "2A-rated possible carcinogen" and the ag industry responds by circling the wagons. Read More
Top 100 Articles
CropLife 100BRANDT Commemorates National Ag Day
March 20, 2015
The Illinois agriculture community gathered at BRANDT global headquarters on March 18 to celebrate National Ag Day behind this year's theme Sustaining Future Generations. Read More
Wheat Growers, North Central Farmers Elevator Pursue Merger
CropLife 100Wheat Growers, North Central Farmers Elevator Pursue Merger
March 3, 2015
Two CropLife 100 retailers — South Dakota Wheat Growers (ranked No. 11) and North Central Farmers Elevator (No. 19) — have entered into a Letter of Intent to unify the two companies into a newly named cooperative. Read More
Growmark Group
CropLife 100GROWMARK In 2015: Back, To The Future
March 2, 2015
The nation’s third largest ag retail organization is simultaneously moving forward while remembering its past. Read More
CropLife 100Pinnacle Expands Sanders Brand In The South
February 27, 2015
Pinnacle has acquired Hopkins Seed and Chemical in Qulin, MO, which expands the company's Sanders brand to nine Southern states. Read More
CropLife 100Pinnacle Launches New Providence Agriculture Location In Indiana
February 27, 2015
Pinnacle Agriculture Holdings — ranked No. 6 on the CropLife 100 — has established a new retail location in New Castle, IN, which will operate as part of Pinnacle's Providence Agriculture brand. Read More
Carl Casale of CHS
CropLife 100Cooperative CHS Returns $518 Million To Owners
February 23, 2015
The 2015 cash return to owners is based on CHS net income of $1.1 billion, the company's second highest on record. Read More
Latest News
Industry NewsINCOTEC Board Member To Retire
March 31, 2015
JanWillem Breukink has decided to retire from his position on INCOTEC’s Board of Directors, effective April 1, 2015. This was Read More
MicronutrientsAgrium Deals Michigan Micronutrient Facility To Cameron…
March 31, 2015
Cameron Chemicals, Inc. has announced today that it has entered into a definitive agreement with Agrium Inc. to purchase the Read More
Industry NewsH.J. Baker Creates, Fills New Pacific Northwest Sales P…
March 30, 2015
H.J. Baker announced today that Gary Bingham has joined the company’s Crop Performance Division to further deepen its sales portfolio Read More
Algal blooms
StewardshipStudy: Algae From Clogged Waterways Could Be Used As Bi…
March 30, 2015
Water-borne algal blooms from farm fertilizer runoff can destroy aquatic life and clog rivers and lakes, but scientists are reporting Read More
Young corn plants
Stewardship4R Nutrient Stewardship Summit Coming To DC
March 30, 2015
The annual 4R Nutrient Stewardship Summit will be held on May 12 in Washington DC. The summit will include a full Read More
FungicidesSyngenta Suing Willowood Over Azoxystrobin Fungicide
March 27, 2015
Syngenta announced today that it has sued agrochemical maker Willowood, LLC., for patent and copyright infringement, as well as unfair Read More
ManagementRetail Week: The Future Of Mycogen Seeds; The 4Rs At Na…
March 27, 2015
Editors Eric Sfiligoj and Matt Hopkins discuss recent trips, including a look at the future of Mycogen Seeds at Dow Read More
Eric SfiligojMonsanto Hears The WHO
March 27, 2015
Another challenge to the safety of glyphosate, and the responses from supporters and opponents, calls to mind a classic Dr. Seuss story. Read More
Industry NewsMonty’s Plant Food Expands Sales Team
March 27, 2015
Monty’s Plant Food Company, a leader in natural soil enhancement and  plant fertility products, has hired Andrew Bullock as a Read More
Crop InputsSyngenta Louisiana Plant Poised For 2015 Production
March 26, 2015
As the 2015 planting season gets underway, growers across the country will need crop protection products to combat pests and Read More
Lake Erie Nutrient Stewardship
LegislationOhio Lawmakers Finalize Phosphorus Restrictions
March 25, 2015
State lawmakers on Wednesday finalized new rules designed to curb toxic algal blooms on Lake Erie, calling the regulations a major step forward in addressing the problem. Read More
Spreaders17 Fertilizer Spreaders For 2015
March 25, 2015
Manufacturers shoot for versatility and accuracy in this year's crop of fertilizer spreaders. Read More
Industry NewsMonty’s Hires Mid-South Product Consultant
March 25, 2015
Monty's Plant Food Co. has hired Matt Woodring as a Product Consultant for portions of Central Kentucky and Tennessee.    Read More
StewardshipMapShots Integrates With DriftWatch
March 23, 2015
Growers and agricultural providers using AgStudio FARM and AgStudio PRO can now view vital information about specialty crops and apiaries through a recent integration with the DriftWatch Specialty Crop Site Registry from FieldWatch, Inc. Read More
Crop InputsWorld Health Organization Report Contradicts Scientific…
March 23, 2015
A new report from the World Health Organization has classified glyphosate with a “2A” rating as a probable carcinogen, a Read More
Eric SfiligojSeed Treatment Stays Necessary
March 20, 2015
Grower-customers looking to scale back spending in 2015 won’t consider seed treatment, say experts. Read More
HerbicidesMARCH MADNESS: Industry Rallies Around Glyphosate Safet…
March 20, 2015
A newly published report from the International Agency for Research on Cancer (IARC) classifies the herbicide glyphosate as a "2A-rated possible carcinogen" and the ag industry responds by circling the wagons. Read More
ManagementRetail Week: Precision survey, a technology acquisition…
March 20, 2015
Editors Paul Schrimpf and Eric Sflilgoj discuss recent travel, the upcoming precision adoption survey, and an unusual sighting at a Read More