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Moneywise

October 10, 2008
By: Sara Schafer, Farm Journal Media Business and Crops Editor
 
 

Buying nitrogen can be a natural gas

Naturally, you would know that the cost of farming is pretty dependent on natural gas (NatGas) prices. Fertilizer, irrigation and drying costs all hinge on this energy source. There is now an active "mini” NatGas contract that will allow you to hedge against price increases. One contract will meet nitrogen (N) needs for 816 acres of corn at 150 units of N per acre. Or it will dry about 200,000 bu. at 22% moisture.

Right now, the price of NatGas has declined from a contract high of 12¢/mmBTU to 7.9¢. But we expect it to rise. Anhydrous is expensive. If we're going to buy, let's buy what has the odds of rising rather than buying something that has odds of prices dropping.

For a more detailed explanation, see www.ToProducer.comWeb Extra. —Bill Biedermann, www.allendale-inc.com


Farmers remain relatively confident

For the past three months, Farm Journal Media has polled its readers about how positive their attitude is. Through July and August, 54% held a positive view of the farm economy's financial health, but that slipped to 39% in September.

At 64% to 67%, more farmers feel positive about their own farm's financial health.

Not all are so happy, however. "Farmers in my area went from highly optimistic to down in eight months,” says one Wisconsin grower. "We had flooding and then no rain in August. Yield will be average or a bit below depending where the fields lay and soils. Inputs and risk next year are really stressful. We'll have $600–$800/acre in corn in rents and inputs if they stay where they are and no skimping is done. Breakeven in an average year will be $5/bu. corn. Losses could be huge if not insured and a weather event occurs. Many will plant less corn if prices stay where they are.”

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FEATURED IN: Top Producer - OCTOBER 2008

 
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