Farmers need record high prices to cover increased production costs

By David Bau, University of Minnesota Extension

ST. PAUL, Minn. (7/7/2008) — Crop production costs are rising rapidly in 2008, and the trend will continue in 2009. Although farm commodity prices are at record high levels, they must remain there for farmers to cover dramatically higher production costs.

A great resource to examine historic production costs is found at http://www.finbin.umn.edu. This FINBIN website is full of data that can be used to examine 2007 crop production costs by several variables.

The winter 2007 corn forecast for 2008 indicated a projected gross return of $530 per acre, compared with $437 in 2007, an increase of $93. Total expenses are forecast $505 per acre. This compares to $407 in total expenses in 2007, or an increase of $98 per acre from 2007 to 2008. As you see, expenses go up slightly more than returns.

The FINBIN soybean budget for 2008 forecasts total expenses of $326 per acre, compared to $284 in 2007--a $42 increase.

The corn and soybean budgets can also be found in the 2008 Farm Resource Guide, along with a summary of average data of FINBIN for Southern Minnesota from 1993 to 2006. This resource guide is available for a fee of $25, plus tax, that helps fund continued Extension efforts in agricultural business management.

To purchase a hard copy, CD or e-mail version of the 2008 Farm Resource Guide, e-mail me at bauxx003@umn.edu or call me at 507-372-3906. Let me know which format you prefer. I will send you the materials and an invoice. Some county Extension offices also have copies of the 2008 Farm Resource Guide.

In the 2008 edition of the Farm Resource Guide, there are several forms that utilize the 2008 production cost forecasts that can help determine one of the major production costs, land rent. The yields of 175 and 50 bushels for corn and soybeans are above state averages, and of course are not guaranteed. Lower yields would significantly increase the price per bushel for corn and soybeans necessary to cover production expenses. Current market prices have doubled for corn and increased 50 percent for soybeans since this winter which has increased the gross per acre to $1,055 for corn and to $610 for soybeans if yields are normal.

Any use of this article must include the byline or following credit line: David Bau is an agricultural business management educator with University of Minnesota Extension.

Media Contact: Catherine Dehdashti, U of M Extension (612) 625-0237, ced@umn.edu

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URL: http:// www3.extension.umn.edu/extensionnews/2008/increasedproductioncost.html This page was updated July 7, 2008 .
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