combine in cornfield

Drop in land, some inputs expected in 2018

Know crop input costs and breakeven price to create sound marketing strategy.

Land and input costs for corn and soybean production are expected to decline in 2018, according to estimates by Iowa State University Extension economists.

The research, released in ISU Extension and Outreach publication “Estimated Costs of Crop Production in Iowa, 2018,” FM 1712, shows soybean costs falling by $10 per acre from 2017 levels and corn production dropping by $5 per acre. All cost estimates in the report look at average cost for farms in Iowa.

The total cost per bushel of soybeans is projected at $9.46 for the herbicide-tolerant variety and $9.41 for nonherbicide-tolerant beans, at an expected yield of 50 bushels per acre. Total cost per bushel of corn following soybeans is $3.48 (180 bushels per acre) and $4.07 for corn following corn (165 bushels per acre).

News mix of good, bad
The drop in breakeven prices is attributed to a moderate decline in herbicide, fertilizer, lime and seed prices, as well as lower expected cash rent costs. These drops, however, are barely expected to offset increases in machinery, labor, insecticide and crop insurance costs. This is especially true for corn as diesel fuel, and gas prices are expected to increase fuel costs by $13 to $14 per acre.

“This year appears to be a mix of good news and bad news,” says Alejandro Plastina, ISU Extension economist. “The cost of some inputs is going down, while labor and fuel costs are going up. The net result is a very small percent reduction in costs for 2018.”

Cost of production has declined significantly since 2012, with total corn costs dropping 19% and soybean production falling 14%. These reductions in cost, however, are dwarfed by falling prices. The price per bushel of corn is down 53% since 2012 and soybean prices have dropped 35%.

Know breakeven price
Stagnant prices and continued tight margins make it even more critical for farmers to know their breakeven price and to have a sound marketing strategy, Plastina says.

“For this information to be useful, these budgets need to be adapted to the real costs experienced by a farming operation,” he says. “An accurate breakeven price is based on both costs and expected yields. This is a critical piece of information to have in order to create a marketing strategy.”

Ag Decision Maker file A1-20 has Decision Tools that can help farmers better calculate their operation’s cost of production. Since actual costs vary considerably from farm to farm, the spreadsheets, which you can edit and plug in your own numbers, can aid you in understanding your crop production budgets for 2018, he says.

“If farmers don’t know their breakeven price, then it is really hard for them to determine when to sell their crops,” Plastina says. “Everyone is seeking a higher sales price and if you don’t know when that price is enough to cover costs, then you are always waiting for the next round of price increases to come, which might not happen, and you’ve missed an opportunity to sell for a price that will cover costs.”

Source: Iowa State University

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