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Cutting costs in '09: What's the best approach?

Fertilizer might well cost you twice in '09 what it cost you this year. You may see numbers that make your head spin when you go to sign your land lease agreement for next year.

Sobering facts like these make it tough to see the light at the end of the tunnel. But, there are ways to get around some of these spiking costs, farmers say.

In a study of central Illinois farm ground, University of Illinois ag economist Gary Schnitkey estimates non-land input costs for corn to total $529 per acre in '09, up from $388 this year, with estimated soybean per-acre costs estimated at $321 per acre, up from $239 this year.

"These break-even prices are significantly higher than historic commodity prices. Corn, for example, averaged close to $2.40 per bushel between the mid-1970s to the middle 2000s. Large income losses would occur if commodity prices returned to historical averages," Schnitkey said in a report last month. "Significantly higher costs will occur in 2009, leading to higher break-even prices for both corn and soybeans. Higher costs will cause farmers to more closely examine how much to adjust cash rent bids. Higher costs also may influence marketing and crop insurance decisions."

But, land costs aren't the only ones that can be trimmed. Farmers participating in a recent Agriculture Online poll say they expect to cut input costs a number of ways. Whether it's simply cutting application rates, or changing how or what fertilizer or chemical is applied, this input segment is a common target for potential cost savings, some say. In fact, in early poll results, 28% of those responding say cutting phosphorous (P) and potassium (K) will be a high priority in '09.

Others are prepaying for chemical inputs and fuel to try to get ahead of higher prices next spring. Agriculture Online Farm Business Talk member greenup3399293 says there's often value in paying earlier.

"Pay for things early and get a savings on the carry," he says. "I usually pay for seed early in October, but I believe unless there is real value there, I won't."

Fertilizer costs could also cause a shift in acres next spring. In his area of southwest Ohio, Farm Business Talk member hymark says farmers in his area are already talking about trimming back corn acres in favor of more fertilizer-sipping soybeans.

"The talk here is all or mostly soybeans with little or no fertilizer," he says.

"I farm in southwest Kansas and our ground is very high pH," adds jettabo1754713. "I found [glyphosate-] tolerant soybeans this year that look great. I think I am going to go with a soybean-wheat rotation."

Other farmers say fertilizer and chemical are too important to a successful crop to tinker with application rates. Farm Business Talk member wicksfield says he's hesitant to make any changes to his fertilizer program, instead opting to make machinery changes to cut costs.

"I will always use good fertilizer and seed at the recommended rates," he says. "One of the biggest savings that I see is to continue to rebuild and use equipment that is paid for."

He cites an example -- a piece of tillage equipment -- that he recently rebuilt for a fraction of the cost of a new implement. "I saved about $12,000 by rebuilding the disk that I have, which is paid for," he says.

If you're not keen on isolating any one particular part of your farm to in which to trim input costs, take Farm Business Talk member Jim Meade / Iowa City's approach: Buy -- and apply -- smarter.

"By buying smarter, I include the time of year you buy, the cost of money, whether you have storage and are able to handle the product and whether there is an alternative," he says. "For example, from the sounds of it, we should buy generic glyphosate this fall and store it at home. We will have to look at fall-applied NH3 with some preservative. We need to order the right seed at the right time for the right money and take delivery when necessary. We all know that fuel is cheaper in the winter -- it will likely pay you to buy a big tank and buy it all in the winter."

The majority of early poll-takers say despite rising input costs, they're not looking at that side of the equation. Instead, 29% of respondents say they'll do "nothing much" to trim costs, but will work toward higher yields instead.

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Fertilizer might well cost you twice in '09 what it cost you this year. You may see numbers that make your head spin when you go to sign your land lease agreement for next year.

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