Dramatic price increases

Oct 1, 2008 12:00 PM, Mark Moore

Get Ready for another big increase in production costs. Gary Schnitkey, farm financial management specialist at the University of Illinois, forecasts that corn and soybean producers will see significant price increases for all input costs next year.

“For corn, 2009 non-land production costs are projected at $529/acre, a $141/acre increase from 2008 levels,” Schnitkey says. Non-land production costs averaged $286/acre between 2003 and 2007, so that puts 2009 production costs $243/acre higher than that five-year average, an increase of 85%.

The increase is just as dramatic for soybeans. Non-land production costs for 2009 are projected at $321/acre, up $82/acre from 2008 costs. The 2003 to 2007 non-land costs averaged $180/acre, putting 2009 production costs $141 above the 2003 to 2007 average, an increase of 78%.

Fertilizer is singled out as the input with the largest cost increase, with prices for corn projected at $215/acre for 2009, an increase of $97/acre over the 2008 level of $118/acre. And soybean fertilizer costs for 2009 are projected at $98/acre, a $53 increase over the 2008 level of $45/acre.

Schnitkey based his cost projections on central Illinois farms with high-productivity land, but the increases are expected to be just as dramatic across the Corn Belt.

And using his numbers, break-even prices also should climb. “Based on yield expectations of 191 bu./acre, the 2009 break-even price for corn is $3.82/bu. and the soybean break-even price is $9.65/bu.,” Schnitkey says. “We've reached a new plateau on the cost of production.”

Projecting further ahead, Schnitkey says all indicators point to continued high input costs for 2010 as well. “I don't foresee a price decline unless there's a dramatic drop in energy prices,” he says. “And I don't see that happening.”