Higher energy prices hit growers in the variable cost line on their financial statements. Variable costs are expected to be 33% higher in 2006 than 2002, according to a study by Gary Schnitkey and Dale Lattz, University of Illinois economists. The variable costs of corn production are projected to be $55/acre higher next year than in 2002. About half of the increase is due to fertilizer costs, projected to be $28 higher next year than in 2002. Pesticides and seeds are $17 higher and machinery-related items like fuel are $7/acre higher. Variable costs for soybean production are projected to be up $20/acre in 2006 compared to 2002.
A continuous corn production system will need to boost yields next year to cover increased energy costs compared to a corn-soybean rotation. Kevin Robertson, Purdue University economist, analyzed production costs and found that a grower planting continuous corn needs at least a 225-bu./acre yield to compete with a corn rotation yield of 180 bu./acre. In his analysis, Robertson figured $3/gal. diesel fuel and $0.38/lb. nitrogen costs along with $2.30/bu. corn. He suggests that growers carefully examine costs and consider shifting from rotation to continuous corn.