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![Page 1: Changing Costs of Crop Production Crop Advantage Series Osceola, IA Michael Duffy Extension Economist January 15, 2009.](https://reader030.fdocuments.net/reader030/viewer/2022032703/56649f535503460f94c77348/html5/thumbnails/1.jpg)
Changing Costs of Crop Production
Crop Advantage SeriesOsceola, IA
Michael DuffyExtension Economist
January 15, 2009
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Outline
• Background• 2009 estimates• Distribution of costs• Discussion
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Returns to Management for Farms in the Iowa Farm Business Association
-$70,000
-$20,000
$30,000
$80,000
$130,000
$180,000
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
*
High Third Low Third Average
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Corn Total Economic Cost Per Bushel, 2007Iowa Farm Business Association
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
< 100 100 - 400 401 - 800 801 - 1200 1201-1500 > 1500
Number of Row Crop Acres
Do
llars
Pe
r B
ush
el
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Total Economic Cost per Bushel by Cost Group, 2007 Iowa Farm Business Association
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
High Third Middle Third Low Third Total Group
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Soybean Total Economic Cost Per Bushel, 2007Iowa Farm Business Association
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
< 100 100 - 400 401 - 800 801 - 1200 1201-1500
>1500
Number of Row Crop Acres
Do
llars
Pe
r B
ush
el
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Soybean Total Economic Cost Per Bushel, 2007Iowa Farm Business Association
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
Low Third Mid Third High Third All Groups
Cost Group Category
Dol
lars
Per
Bus
hel
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Iowa Average Corn Price, 2006 - 2008
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
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Iowa Average Soybean Price, 2006 to 2008
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D*
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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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2009 Base Estimated Costs of Production per Bushel
$5.40$5.10
$4.88$4.48 $4.32 $4.21
$10.04$9.81 $9.64
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
Low Medium High
Cont Corn Corn/Sb Soybeans
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Estimated Total Cost per Bushel
$-
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
1999 2000 2001 2002 2003* 2004* 2005** 2006*** 2007*** 2008 2009
$-
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
Corn after Corn Corn after Beans Soybeans
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Estimated Total Costs of Production per Acre
$0
$100
$200
$300
$400
$500
$600
$700
$800
1999 2000 2001 2002 2003* 2004* 2005** 2006*** 2007*** 2008 2009
Corn after Corn Corn after Soybeans Soybeans
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Corn Seed Costs per Acre
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00
$100.00
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Estimated Cost Actual Costs FBA
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Fertilizer and Lime Costs per Acre
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
$180.00
$200.00
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Estimated costs Actual costs FBA
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Machinery Costs per Acre for Corn
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Estimated costs Actual costs FBA
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Soybean Seed Costs per Acre
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
ISU FBA
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Soybean Herbicide Costs per Acre
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
$45.00
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
ISU FBA
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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/a1-21.pdf
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
$ pe
r B
ushe
l
Season-average Price Cost
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Iowa Soybean Prices vs. Costs
Source: USDA-NASS and Duffy and Smith, http://www.extension.iastate.edu/agdm/crops/pdf/a1-21.pdf
0.00
2.00
4.00
6.00
8.00
10.00
12.00
$ pe
r B
ushe
l
Season-average Price Cost
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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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Iowa Average Land Values
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
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Current Percentage Changes in Land Values, 7th Federal Reserve District
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
IL IN IA MI WI 7th District
3rd Q, 08 Oct to Oct
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Percentage Increase in Iowa Land Values from March 2008 to September 2008, RLI
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
C EC NC NE NW SC SE SW WC State
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Iowa Cash Rent per Acre Based on ISU Survey
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
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Average Rent to Value in Iowa
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
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Land Values and Seed, Chemical and Fertilizer Costs
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
1970
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
La
nd
va
lue
s
$0
$50
$100
$150
$200
$250
$300
Se
ed
, c
he
mic
al
an
d f
ert
iliz
er
Land values Seed, chemicals and fertilizer
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Percent Change from Previous Year for Seed, Chemicals and Fertilizer and Land Values
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
Input costs Land costs
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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• Don’t 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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Web sites
• Ag Decision Maker: www.extension.iastate.edu/agdm/
• My site:
www.econ.iastate.edu/faculty/duffy/