Corn has, or will have reached, pollination; soybeans are blooming; and you are thinking it may be time to revisit your marketing plan since crop prospects look better than they did last month. And marketing will be more important than ever for the new crop, since it will have to pay the freight on higher priced inputs for the 2009 crop. If you have not yet looked at the cost of production of next year, that’s OK, we have.

Some farmers have been asked for a 100% prepayment for fall fertilizer, if they plan to order any. Others have heard that some units of seed corn will be similarly priced to what a tank of anhydrous ammonia used to cost. University of Illinois Extension Farm Management Specialist Gary Schnitkey has been exploring 2009 production costs to see if there is any profitability potential. His recent newsletter makes you wonder!

On average the non-land costs for corn will be $529 per acre, up $141 from the current year and 85% higher than the four year average. For soybeans, the non-land costs will be $321 per acre, up $82 from the current year and 78% over the four year average.

Fertilizer is the heavyweight. You will shell out more than twice as much in 2009 as you did in 2008, and Schnitkey estimates the cost at $215 per acre for corn and $98 for soybeans. That takes into account anhydrous ammonia at $1,000 per ton, DAP at $1,000 per ton and potash at $900 per ton. He says prices may vary depending on location, timing, and international energy markets. But if those are the prices you have to pay, they represent a 171% increase for anhydrous ammonia over 6 years, 302% for DAP and 456% increase for potash over the same period.

Seed costs run a close second. Schnitkey says count on a 25% increase in seed costs for 2009 compared to what you paid this past spring, and that includes both seed corn and seed beans.

Crop insurance premiums increase with little surprise. Higher values for crops mean higher premiums to insure them and Schnitkey calculates $27 for corn and $12 for soybeans, but premiums will be higher for revenue types of insurance.

Other costs rising as well. Fuel and machinery costs should be budgeted at $88 per acre, up $12 from 2008 corn and $75 for soybeans, a $9 increase. With many farmers trading machinery more rapidly in recent years, depreciation has gone up as well, which Schnitkey computes at $27 for 2009.

On the revenue side, your marketing plan will have to be precise and well-executed. Current prices exceed $6 for corn and $14 for soybeans which would provide a $641 return to land and operator for corn and $486 return to land and operator for soybeans.

Breaking even will be a significant challenge. The non-land costs of $529 for corn and $321 for soybeans do not include cash rent, which could average $200 and up on average to good land. That raises costs to more than $700 per acre for corn and over $500 for soybeans. Using Schnitkey’s example of 191 bushel yields for corn means a break even price of $3.82 and $9.65 for soybeans, based on a 54 bushel average yield. Yields that are less than that amount will push break-even prices higher. And Schnitkey says large income losses would occur if price returned to more traditional levels. He adds that the higher costs of production expected next year may also influence cash rent bids, marketing plans, and crop insurance decisions.

Summary:
Significantly higher prices for fertilizer, seed, fuel, and crop insurance will necessitate the use of a sharp pencil in formulating 2009 crop budgets. While prices are preliminary, they indicate non-land costs will rise rapidly, and that will impact how much farmers can bid for cash rent and their requirements for crop insurance coverage.