Corn Farmers Need to Crunch Numbers for 2008

Corn production costs such as fertilizer, seed, fuel and land are taking a big jump this year.

It's going to cost a lot more to produce a corn crop this year than many farmers may realize. "We are seeing a significant rise in the inputs we use to grow corn—especially fertilizer, fuel and land," says Gary Edwards, a farmer from Anamosa in eastern Iowa. Active in the Iowa Corn Growers Association, Edwards has figured his own crop production costs for 2008 using a spreadsheet.

People see today's prices of $4 per bushel for corn and think farmers are getting rich. But you have to look at the big increase in the cost to grow corn that has occurred during the past two years, he notes. Even with today's higher prices for grain, it's hard to cover the cost of corn production. What is amazing is that only a few years ago the market price was just $1.95 per bushel for corn.

Still hard to cover cost of production

"I don't know how we as farmers could go back to anything close to those low numbers for a corn price," he says. "The way input costs have shot upward now we're going to have to continue producing lots of corn per acre and we're going to have to capture these high market prices for our corn in order to break even."

Short supplies of fertilizer and fuel and big demand for these inputs and others are causing crop input costs to take giant leaps as commodity prices and farm incomes rise. Changes in crop acres and production practices have put an additional strain the supply chain. Cash rents have skyrocketed.

Edwards uses computer spreadsheets to help him calculate costs and make crop and profitability comparisons for inputs and crop rotations. First, he calls around to suppliers and obtains estimated prices for seed and for inputs such as nitrogen and P and K. He lists all of the costs—fertilizer, seed, fuel and land rental prices, crop insurance and other considerations on the spreadsheet. He lists these costs for corn on corn, corn on soybeans and for soybean production in three separate
columns. Then he calculates the total cost of production for each of those scenarios and makes comparisons.

Higher fertilizer costs lead the way

"I run the numbers several times and calculate different scenarios before I commit to anything," he says. "There are a lot of variables to consider but I try to compare and contrast and then make final decisions so that I can take advantage of ordering products during the winter to get early-pay price discounts."

As Edwards runs the numbers for 2008 he is careful to estimate crop inputs because he knows it will have a direct impact on profit margins. "Rental land prices and nitrogen are two costs that have risen, but overall, nearly everything has gone up," Edwards says. "It's very important for farmers to review their costs and make the right decisions which will help them be profitable in 2008."

"A majority of Iowa farmers have already made their crop rotation decisions, and have possibly applied fall fertilizer and purchased their seed. But for those who haven't done that yet, the price increases are a real sticker shock," says Steve Johnson, Iowa State University Extension farm management specialist.

Higher costs affecting profit margin

"Overall, we're looking at direct input cost increases of $30 to $50 per acre on corn and about $10 to $15 per acre on soybeans for 2008," Johnson says.

He expects fertilizer prices to be up by 35% over last year and he looks for costs to remain high this coming spring.

"Fertilizer, seed, fuel and land costs are affecting farmers' profitability and their cropping decisions," Johnson adds. "It will be critical for farmers to estimate their profit margins and manage their financial risks for 2008 crops. Having a good marketing plan for their crop is imperative."

For farmers who still need to make cost comparisons, ISU Extension offers electronic spreadsheets for developing production budgets, available under Decision Tools on the Ag Decision Maker Website, Look for the ISU publication "Estimated Costs of Crop Production in Iowa—2008" FM-1712 Revised. It's listed in the Ag Decision Maker section as File A1-20.

For more information on corn production costs contact the Iowa Corn Growers Association by calling 515-225-9242 or e-mail [email protected].

TAGS: Extension
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