NDSU Extension Service, Published March 19 2012
Crop prices attractive, but input costs up for 2012FARGO - Market prices for the major commodities have declined somewhat from the peak of last summer but remain strong for new crop sales going into spring planting, according to Dwight Aakre, North Dakota State University Extension Service farm management specialist.
The safety net prices, as reflected in the base price for multiperil crop insurance policies, are $5.68 per bushel for corn, $12.55 per bushel for soybeans and $7.84 per bushel for hard red spring wheat. While these provide a strong safety net, these prices are down from 2011 by 5.5 percent, 6.9 percent and 20.7 percent, respectively.
The price for inputs, with few exceptions, is increasing for the 2012 crop.
"The price of corn seed has increased about 6 percent, wheat about 16 percent and soybean seed about 17 percent from 2011," Aakre says. "For wheat and corn, the single most expensive input other than land usually is fertilizer. Urea is up 23 percent, anhydrous ammonia up 4 percent, MAP (phosphate) down 1 percent and potash up 12 percent, compared with last year."
The increase in cost for fertilizer for soybeans is minor, compared with wheat and corn. On a per- acre basis, the fertilizer bill for wheat will be up about 20 percent, corn 17 percent and soybeans 4 percent.
Fuel prices have increased as well. Fuel cost is a small component of the total cost of production, but this cost is rising. Estimated fuel costs for 2012 will be 5 to 10 percent more than 2011.
Machinery ownership and repair costs continue to increase year after year. All farms have a varied inventory of machinery ranging from new machines to machines nearing the end of their useful life. One way to measure the change in machinery costs is to compare the selling price of new machinery from one year to the next.
A source for this information is the "The Official Guide of the Equipment Industry" published by Ironsolutions.
"A review of the selling price of new tractors suggests that the selling price for identical models has risen about 6 percent from last year," Aakre says.
"Some manufacturers have come out with new models that cost about 15 percent more than the same-sized tractor last year. However, this is not always an equal comparison because the new models incorporate new technology. The price of a new combine is up 5 to 6 percent over last year's prices."
Annualized machinery costs include depreciation and interest on the investment.
Both of these costs increase accordingly with an increase in the purchase price. Also, repair costs follow changes in the value of the whole machine.
Pesticide costs per acre should not be much different than in 2011, and crop insurance premiums are holding steady for most producers. The lower insurance prices and lower volatility factors will reduce premiums slightly. Many producers will increase their coverage, resulting in little change in overall premium costs.
The NDSU Extension Service's "Projected Crop Budgets for the South Valley for 2012" indicates that all costs except land, labor and management will increase by about 8 percent for soybeans, 10 percent for corn and 12 percent for wheat, compared with 2011. These cost increases, combined with lower market prices, will reduce the amount of money available for land, labor and management costs.