Changing Costs of Crop Production Crop Advantage Series

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Changing Costs of Crop Production Crop Advantage Series Osceola, IA Michael Duffy Extension Economist

Changing Costs of Crop Production Crop Advantage Series Osceola, IA Michael Duffy Extension Economist January 15, 2009

Outline • • Background 2009 estimates Distribution of costs Discussion

Outline • • Background 2009 estimates Distribution of costs Discussion

Costs for 2009 • Extremely hard to predict this year – Pre-paid vs. spot

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

Baseline assumptions • • • Diesel $2. 50 N $. 68, P $. 90

Baseline assumptions • • • Diesel $2. 50 N $. 68, P $. 90 K $. 72 LP $1. 90 Corn seed; $250 Soybeans Land; $178 $205 $232 Yields; continuous corn 125 – Rotated corn 140 – Soybeans 45 $45/50 lb 145 160 180 50 55

The Rise and Fall of Fertilizer Prices Source: http: //www. fertilizerworks. com/html/market/ The. Market.

The Rise and Fall of Fertilizer Prices Source: http: //www. fertilizerworks. com/html/market/ The. Market. pdf

Ammonia Prices Source: http: //www. fertilizerworks. com/html/market/ The. Market. pdf

Ammonia Prices Source: http: //www. fertilizerworks. com/html/market/ The. Market. pdf

Iowa Corn Prices vs. Costs Source: USDA-NASS and Duffy and Smith, http: //www. extension.

Iowa Corn Prices vs. Costs Source: USDA-NASS and Duffy and Smith, http: //www. extension. iastate. edu/agdm/crops/pdf/a 1 -21. pdf

Iowa Soybean Prices vs. Costs Source: USDA-NASS and Duffy and Smith, http: //www. extension.

Iowa Soybean Prices vs. Costs Source: USDA-NASS and Duffy and Smith, http: //www. extension. iastate. edu/agdm/crops/pdf/a 1 -21. pdf

Impact of Cost Changes • $. 50 increase in diesel adds $. 02 to

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

Impact of Cost Changes • A $25 change in rents leads to a $.

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.

Conclusions • Input prices have risen dramatically and will show increased volatility • Some

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

Conclusions • Evaluate seed and seeding rates carefully • Try for flexible lease arrangements

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

Conclusions • Know your costs of production • Make cuts and changes where they

Conclusions • Know your costs of production • Make cuts and changes where they will do you the most good • Follow a good marketing plan

Web sites • Ag Decision Maker: www. extension. iastate. edu/agdm/ • My site: www.

Web sites • Ag Decision Maker: www. extension. iastate. edu/agdm/ • My site: www. econ. iastate. edu/faculty/duffy/