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Costs rising for 2011 crops

Jeff Caldwell 12/10/2010 @ 3:21pm Agricultural content creator and marketer.

Get that checkbook ready: It's going to cost you more to raise the 2011 corn and soybean crops than it did this year, according to a recent report.

The 2011 Purdue Crop Cost & Return Guide, released Tuesday by Purdue University crop specialists and ag economists, indicates variable costs -- including fertilizer, seed, pesticides, fuel and machinery -- could see "double-digit increases" next year, reflecting higher grain market prices in recent months.

"For rotational corn, which is most of the corn in Indiana, our estimates show variable costs in 2011 up around 13% compared with 2010," says Bruce Erickson, Purdue director of cropping systems management. "Soybean production costs will be up around 6%, and for winter wheat we're estimating that costs will be 13% higher. If you grow continuous corn, you can expect to spend about 14% more next year."

For corn in a typical corn-soybean rotation, the Purdue study shows variable costs will range from $348 to $403 per acre, while the same costs for soybeans in the same rotation will range from $182 to $205 per acre. Continuous corn variable costs will range from $366 to $422 per acre.

Erickson says fertilizer has seen the biggest price increases, especially for ammonia, diammonium phosphate and potash. "An April U.S. Department of Agriculture survey of Illinois retail fertilizer prices -- a benchmark for Indiana -- reported average per-ton costs of ammonia at $520, diammonium phosphate at $503 and potash at $501," according to a Purdue report. "This month those prices are $736, $661 and $526, respectively."

How accurate are these numbers? Fairly close to reality, farmers say, at least compared to early input purchases for next year's crop. "The specific numbers are pretty close to what I've pre-paid," says Agriculture.com Farm Business Talk member BA Deere.

And, the increases are not just limited to typical crop inputs; Farm Business Talk member Kay/NC says bumps in electricity rates will add to the cost burden on farms like hers.

"The generating utility companies are asking for rate increases, and passing that along to the REA cooperatives when they purchase power," Kay/NC says. "This is a big burden on us in hogs, especially in the cooling season, and it has to add to the guys running crop drying fans in the fall."

So, what can you do to hedge against these rising costs? Farm Business Talk member jrsiajdranch says he'll look at alternatives for crop nutrients, where costs are seeing the highest price increases.

"I decided that fertilizer is going to be slashed to the bone this year: Half rate of commercial N on corn-on-corn acres and no commercial N on old alfalfa acres," he says. "Also going back to doing my own spraying this next year to cut costs. All in all, I think fuel may actually be the biggest concern."

Erickson adds that farmers who are buying inputs early and looking at alternatives for traditional inputs, like fertilizer, are making the right move in minimizing the effects of these types of price increases.

"The situation for an individual farm can be much different than this depending on how and when crops were sold, how purchases were made, etcetera," he says. "While costs are back up, most crop producers are managing to stay ahead of the curve."


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