Posted by: usset001 | November 9, 2010

A fresh look at crop production costs in 2011

It is no secret that fuel and fertilizer prices have been tracking with grain prices and rising rapidly over the last few months. Late last week a colleague put pencil to paper to re-estimate production costs for corn and soybeans in 2011. Yikes! His updated projections for 2011 corn and soybean production costs are 11% higher than projections made in early August.

These figures are relevant. While there are a good number of producers who priced fall fertilizer early and at lower prices, there are also a good number of producers who waited to the last minute and paid much higher prices.

The accompanying charts tell the story. Cost figures for 2005-2009 come from the FINBIN data base, and represent real farm results for corn and soybean producers in southern Minnesota. The estimates for 2010 and projections for 2011 build on these figures. 2011 projections also assume $200 per acre in rent and average yields of 175 bushels per acre in corn and 50 bushels per acre in soybeans. Our definition of a break-even cost of production is the price needed to cover all costs, net of government payments ($20 per acre direct payments), and including a return to labor & management ($30-45 per acre).

Corn COP in 2011: Nearly $4 per bushel, up 40 cents from the last two years

Soybean COP: $9.16, up over $1 per bushel from 2009

While we did not calculate spring wheat productions costs, if we apply the same 11% increase seen in corn and soybeans, we find a break-even production cost of $5.60 per bushel, up from $5.10 in the last few years.

What’s driving the increase? The culprits are higher fuel and fertilizer costs and higher rent, with a moderated view of yield potential. I intend to revise my 2011 pre-harvest marketing plans for corn, soybeans and wheat. It’s no use worrying about earlier sales made (in retrospect) too cheap. The good news remains that most of next year’s crop is not priced and the market is showing pricing opportunities well above these revised and higher production costs.


Responses

  1. Looks like from the chart that the aberration was that 2010 corn costs did not rise. Fuel has risen but rent and fertilizer are a bigger driver of the cost rise here along with seed.

  2. […] Usset, Ed. Ed's World: Grain Marketing. 9 November 2010. 24 September 2011 https://edsworld.wordpress.com/2010/11/09/a-fresh-look-at-crop-production-costs-in-2011/. […]


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