farmgate: Farm Expenditures: How Do You Compare With The Averages?
You and your neighbors have all said at some time or another that the 2009 crop was the most expensive you every planted. The cost of fertilizer probably ensured that fact and seed corn prices had a lot of input as well. Certainly 2009 production costs were above that of the two prior years, but after the big jump up in 2007, production cost for 2008 did not rise as rapidly, aiding profitability. USDA has just calculated your 2008 production costs, and while high, the upward trend slowed a bit.
Farm production expenses were $307 billion in 2008, up 8.3% from 2007, but 2007 farm production expenses were up more than 19% compared to the prior year. The USDA survey indicated that higher machinery costs lead the way for 2008 expenses, both in the tractor & combine category that was up 32.6% and in the “other machinery” category that was up 34.1%. However, output for machinery and vehicles was only 7% of total farm outlays.
The major category was chemicals, fertilizer, and seed, which was 16% of the outlays, and totaled more than $49 billion. Feed expenses were next highest at nearly $47 billion. While fuel expense was only 5.2% of total outlay, USDA economists delved into the $16 billion that farmers paid for energy. Diesel fuel was nearly 62% of that, with gasoline at nearly 19%, LP gas at 13%, and other fuels about 7%. The average fuel cost per farm approached $8,000.
Over the course of 2006 to 2008, all categories of expense climbed incrementally, except for the outlay for livestock and poultry. Livestock producers paid more for feeder calves and feeder pigs in 2007 than they did in 2008. Specifically the 2007 total was $33 billion, compared to only $28.3 billion in 2008. Notable is the fact that interest expenses held steady from 2007 to 2008.
Over the five year period from 2004 to 2008, total farm production costs have risen from just under $212 billion to just over $307 billion. The cost of feed is the largest expense, rising from $29.7 billion in 2004 to $46.9 billion in 2008. The next highest category, farm services, includes all crop custom work, veterinary custom services, transportation costs, marketing charges, insurance, leasing of machinery and equipment, general and miscellaneous business expenses, and utilities. Farmers saw those costs rise from $26.8 billion in 2004 to $38 billion in 2008. For 2008, labor expenses of $29.7 billion slipped ahead of fertilizer at $22.5 billion. However, as a percentage of the totals both farm services and labor fell slightly.
For crop farms, which reported an average of $175,141 in total expenses, the farm services bill consumed $23,000, fertilizer consumed $20,000, the cash rent bill was nearly $20,000, and labor was more than $21,000, all for 2008. The seed bill last year was over $14,000 and the chemical bill was just under $11,000.
For livestock farms in 2008, which averaged $113,390 in average expenditure, the feed bill was just under $35,000, the cost of feeder stock was just over $20,000, and farm services was nearly $13,000.
Across the Cornbelt the average expenditure per farm was $145,555 with feed outlay at $17,558, cash rent at $16,919, farm services at $14,621, and fertilizer at $14,525. Interestingly, Cornbelt farmers spent nearly $7,500 on new machinery in 2007, versus nearly $10,700 in 2008.
Summary:
There is no surprise that farm expenses have risen in every category except for interest payments. However, the surprising fact about USDA’s survey of farm outlays is the deceleration of the increase from 2007 to 2008. Following the 19% increase in expenses from 2006 to 2007, the rate climbed only 8% more in 2008. The report on 2009 expenses will not be issued until August of 2010. While fertilizer and seed costs rose expectedly in 2008, the largest jumps were in the costs that farmers had to pay for farm machinery.
Posted by Stu Ellis on August 10, 2009 12:11 AM to farmgate