2011 crop margins & costs
It's going to cost you more to grow your corn and soybean crops this year, but with the general trend in the grain markets lately, that added expense should be worth it, according to new crop margin data from Purdue University.
Two Purdue economists find rising input costs -- namely fertilizer and fuel -- have the average per-bushel production cost for corn around $4.19 per bushel. That's up 30 cents from a year ago. The jump in soybean production costs is around 33 cents per bushel at $9.73. The numbers, say Purdue ag economists Craig Dobbins and Bruce Erickson are based on "average-quality land" that's capable of raising 161-bushel corn and 49-bushel soybeans.
Last October, Purdue specialists estimated corn fertilizer costs to be around $134 per acre. That's up to $151 per acre in the most recent figures. Soybean fertilizer costs are seen up $7 to $69 per acre in that same timeframe.
"Fertilizer prices seem to be one of those areas where the cost increases are most noticeable," Erickson says in a Purdue report. "Even though fertilizer prices are up compared to last summer, if you look at them relative to grain prices they're not terribly out of line."
Though crop insurance premiums won't be set until early next month, Dobbins also expects them to move higher. But, 2011 is not a good year to trim your insurance investment, he advises. Why? Since October, per-bushel prices are up 74 cents for corn, $1.52 for soybeans and $1.21 for wheat. That kind of upward movement in prices indicates farmers shouldn't sell crop insurance short, Dobbins says in a university report.
"We're in an environment where that's not a place to think about saving costs this year," he says. "It's an issue of finding the policy that you think will work best for you and pay the premium."
One bright spot on the cost side is grain drying costs. Propane prices have slipped since last fall -- Erickson and Dobbins expect corn drying costs to be closer to $26 per acre versus last fall's estimate of $33 per acre.
So, taking these cost variables into account, the Purdue economists say profit margins are still "quite large." That means the time between now and planting is a good time to make sure those margins stay intact.
"At this point in time, contribution margins -- the difference between gross revenue and production costs -- are really quite large," Dobbins says. "If one is looking for a place to expend energy from now until you can get out into the field and plant, I think one ought to focus that energy on protecting the margin that you've got in crop production today."