Push Those Pencils

November 9, 2010 09:23 AM
 
InputCosts Josh

Josh Smith changed his soybean herbicide program in 2010 because it was the right thing to do. The threat of glyphosate-resistant weeds convinced him to be proactive and alternate herbicide modes of action.

The falling price of glyphosate now has the Auburn, Ill., farmer rethinking that strategy for 2011. He’s leaning toward going back to a Roundup Ready platform, despite being satisfied with his soybean yields in the alternative LibertyLink system. “Glyphosate is just so darn cheap that it is hard not to use it,” he says.

An early harvest has given growers like Smith more time to push the pencil this fall. Inputs are being scrutinized even more carefully in light of price volatility.

Joe Nichols of Cadiz, Ky., is thankful he already has most of his 2011 inputs bought and paid for.
“Nitrogen prices are jumping right along with the corn prices,” Nichols says. “We just drilled a lot of wheat into the driest conditions I can remember. I expect this next crop to be one of the most confusing of my lifetime, as I’m making so many decisions based on a lot of unknowns.”

It depends. The outlook for 2011 input costs boils down to this: it depends. Final farmgate prices depend somewhat on how well your retailer priced and how much of price value was passed on to customers. It depends on whether you were able to lock in volume discounts and/or use bundling incentives to decrease costs. It depends on where you live.

Finally, it depends on who you ask. Purdue University economists Bruce Erickson, Alan Miller and Craig Dobbins see crop costs climbing in 2011 after dropping slightly for the 2010 crop. As of October, Purdue crop budgets show production costs for rotation corn up 10%, soybeans increasing 5% and wheat up 12% compared to January 2010—fueled mostly by increases in fertilizer prices.
University of Nebraska agricultural economist Roger Wilson is still number-crunching to determine crop budgets for 2011, but he expects average prices to mostly hold steady for the coming year.
“However, averages hide a lot of information,” he says. “For instance, average seed price has declined slightly less than 2% but this change includes an increase of 27% for sugar beets as well as a decrease of 33% for millet—which doesn’t tell corn and soybean growers a lot.”

Seed choices. Few input sectors have grabbed headlines like seed. The amount of genetically modified corn acres is catching up to soybeans and, as a result, growers are paying more for seed as they adopt technology, despite some price rollbacks for next season.

The new eight-trait SmartStax technology developed cooperatively by Monsanto and Dow AgroSciences drove seed prices to new levels in 2010 and caused some grower pushback. Monsanto spokesman Ben Kampelman says DeKalb Genuity SmartStax will be priced an average of $50 less per unit for 2011 compared to 2010.

“We’re committed to increasing the farmer’s probability of trialing this technology,” Kampelman says. “We hope this price reduction will make the decision easier.”

Hank King, Mycogen Seeds senior corn marketing manager, says that for 2011 Mycogen will continue to offer zone pricing using historical yield data, insect pressure and grower input on the value proposition of SmartStax compared with various trait packages. “Our pricing strategy for SmartStax will support broad adoption,” he says.

Mycogen SmartStax hybrids will also experience a $40 to $50 per bag retail price reduction compared to 2010 levels.

Syngenta is bringing the new above- and belowground trait technology Viptera to market in 2011. The company is also releasing a total of 140 new hybrids for the coming season.

Syngenta Seeds’ head of product marketing for corn and soybeans, Tracy Mader, says Agrisure corn hybrids and soybean varieties are priced to deliver a 3:1 grower return on technology investment. The same ratio will apply to the Agrisure Viptera 3111 trait stack.

In general, Pioneer brand corn and soybean prices will be flat for 2011, says Jerry Harrington, Pioneer spokesman. But he also notes that prices vary area by area and product by product. “New products tend to be priced slightly higher to reflect the increased value they bring growers,” he adds.

For soybeans, the price premium between Monsanto’s RR2Y and RR1 varieties will narrow. Some of that savings comes because growers now have the option of buying RR2Y seed with or without Acceleron seed treatment.

Fertilizer figures. Wilson says he is using higher prices for fertilizer budgets, “but nitrogen prices are very volatile, so an estimate at this time is nothing more than a guess.”

Gone are the fall 2008 prices that sent anhydrous ammonia skyrocketing to $1,000 per ton. USDA shows October retail sales in Illinois of $625 to $750 per ton for anhydrous ammonia, diammonium phosphate at $560 to $689 per ton and potassium at $470 to $560 per ton. Purdue’s projections put 2011 corn fertilizer in the $120 to $150 per acre range, depending on your previous crops and soil composition.

“Costs to produce and transport fertilizer are highly dependent on energy costs,” Erickson says.
The Energy Information Administration predicts fuel prices will increase in coming months as demand increases with worldwide economic recovery, Erickson adds. Crude oil prices for 2011 are expected to rise by about 6% over 2010. Retail diesel is expected to rise by 6% and retail gasoline by 7%.

Crop protection costs. Nebraska figures show the average price of herbicide is up about 3% and insecticide about 2%. “Again, these average prices mask large price raises and declines for specific products,” Wilson says.

In March 2010, the latest USDA reporting period for chemical prices, glyphosate dropped to $22.80 per gallon from $42.80 per gallon in 2009.

Southern growers, in particular, are seeing added costs as they try to clean up resistant weeds. Some manufacturers are offering special incentive programs to include residuals into their pricing structure.

Get ready to sharpen those pencils because 2011 is less than certain.


Fast Facts

  • Crude oil prices for 2011 are expected to rise by about 6% over 2010.Retail diesel will rise 6% and retail gasoline by 7%.
  • As of October, Purdue crop budgets show production costs for rotation corn up 10%, soybeans increasing 5% and wheat up 12% compared to January 2010—fueled mostly by increases in fertilizer prices.
  • In March 2010, USDA reported that the cost of glyphosate dropped to $22.80 per gallon from $42.80 per gallon in 2009.
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Anonymous
11/22/2010 11:05 AM
 

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