What is in this article?:
Uncertainties abound for corn and soybean production in 2013. Potential drought, crop insurance payouts, and commodity prices are just a few major unknowns. To help growers prepare for the next year, Farm Industry News put together a buyer’s forecast of interest rates and the costs of production inputs and land. Featured here is the 2013 forecast for fuel.
The rest of the input forecasts may be found here:
Breaking down the fuel budget
The following are two 2012 budget examples calculated by Roger Wilson, farm management/enterprise budget analyst at the agricultural economics department, University of Nebraska–Lincoln, which show how fuel price changes affect different crops using different tillage systems. The department is still calculating the 2013 budgets.
The price of $3.50 per gallon for diesel was used to calculate the 2012 budgets.
The first budget was for a crop that used a heavy amount of fuel for ridge-till, pivot-irrigated corn. Fuel use for the corn budget included energy for pumping irrigation water.
The second budget was for a crop that didn’t use much fuel: no-till, dry land soybeans.
At $3.50 per gallon, fuel costs were $123.40 per acre for the ridge-till, pivot-irrigated corn budget and $10.98 per acre for the no-till, dry land soybean budget. If, for example, the price of fuel increased by $1.00, from $3.50 to $4.50 per gallon, the fuel price per acre for the ridge-till, pivot-irrigated corn went up more than $35 per acre to $158.78. This contrasted to just more than $3.00 per acre increase for no-till, dry land soybeans to $14.12.
Looking at this hypothetical fuel price spike in terms of cost per unit of production showed the cost to produce a bushel of corn would increase $0.16 per bushel, from $4.19 to $4.35 using 2012 budget costs, which amounts to an almost 4% increase for ridge-till, pivot-irrigated corn. This contrasted to a $0.07 increase per bushel for no-till, dry land soybeans, from $6.41 to $6.48 using 2012 budget costs, which amounts to about a 1% increase.