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Keep a close eye on input costs

Agriculture.com Staff 01/16/2008 @ 10:10am

Short supplies and big demand are causing costs for crop inputs like seed and chemical to take giant leaps as commodity prices and farm incomes rise. Changes in crop acres and production practices could also put additional strain on the supply chain, according to a report from Iowa Corn.

Gary Edwards, a farmer from Anamosa in eastern Iowa, uses computer spreadsheets to help him calculate costs and make crop and profitability comparisons. Edwards obtains estimated prices for seed and for inputs such as nitrogen and P and K. He lists all of those costs mentioned above and includes land rental prices, crop insurance and other considerations for corn on corn, corn on soybeans and soybeans in three separate columns. Then he calculates the costs of each of those scenarios and makes comparisons.

"I'll run the numbers several times and calculate different scenarios before I commit to anything," Edwards says. "There are a lot of variables to consider but I try to compare and contrast and then make final decisions so that I can take advantage of ordering products during the winter to obtain early-pay price discounts."

As Edwards runs the numbers for 2008, he is careful to estimate crop inputs because he knows it will have a direct impact on profit margins.

"Rental land prices and nitrogen are two costs that have risen, but overall, nearly everything has gone up," Edwards says. "It's very important for farmers to review their costs and make the right decisions which will help them be profitable in 2008."

"A majority of Iowa farmers have probably already made their crop rotation decisions, possibly applied fall fertilizer and purchased seed, but for those who haven't, there will be real sticker shock," says Steve Johnson, Iowa State University Extension farm management specialist.

"Overall, we're looking at direct input cost increases of $30 to $50 per acre on corn and about $10 to $15 per acre on soybeans for 2008," Johnson says. He adds he expects fertilizer prices to be up by 35% over last year and costs to remain high next spring.

"Fertilizer, seed, fuel and land costs are affecting farmer's profitability and their crop decisions," Johnson adds. "It will be critical for farmers to estimate their profit margins and manage their financial risks for 2008 crops."

Short supplies and big demand are causing costs for crop inputs like seed and chemical to take giant leaps as commodity prices and farm incomes rise. Changes in crop acres and production practices could also put additional strain on the supply chain, according to a report from Iowa Corn.

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