Cost of Production Dips Due to Lower Prices for Fertilizer, Gas

June 2, 2015 07:00 AM
 
Corn Sky Field

If you’ve planted corn this year, it will cost you slightly less this year to produce an acre of corn compared to last year, according to forecasts released Monday by the USDA’s Economic Research Service.

Estimated "Operating Costs" for Inputs

American farmers will see estimated operating costs of $334.55 per acre for corn in 2015, which represents a $22 drop from 2014. The reason? Lower energy prices, which has pushed per-acre fertilizer prices down 9% and fuel prices down 27%, compared to 2014. (The USDA categorizes expenses such as land costs, taxes, and labor as overhead and breaks them out separately.)

On a per-acre basis, corn farmers will spend the following on key inputs:

  • $101.55 for seed.
  • $136.03 for fertilizer.
  • $27.67 for chemicals.
  • $18.78 for custom operations like technical services and commercial drying.
  • $23.81 for fuel, lube, and electricity
  • $26.33 for repairs.
  • 12 cents on other variable expenses such as purchased irrigation water.
  • 26 cents for interest on operating capital.

Click the graphic to see a visual breakdown for corn operating costs in 2015.

corn_operating_costs

Other row crop farmers will also see lower costs of production for the same reason, including soybeans ($170.25), wheat ($117) and cotton ($489.92) in 2015.

For soybeans, farmers are estimated to spend the following on inputs:

  • $60.36 on seed.
  • $34.16 for fertilizer
  • $25.86 for chemicals.
  • $10.55 for custom operations such as technical services.
  • $15.66  on fuel, lube and electricity.
  • $23.47 for repairs.
  • 6 cents on other variable expenses.
  • 13 cents for interest on operating capital.

Those who grow wheat are estimated to spend the following in 2015 on inputs:

  • $15.90 on seed
  • $39.83 for fertilizer.
  • $14.10 for chemicals.
  • $11.15 for custom operations like technical services and commercial drying.
  • $13.93 for fuel, lube and electricity.
  • $21.63 for repairs.
  • 64 cents on variable expenses such as purchased irrigation water.
  • 9 cents in interest on operating capital.

The situation could change in 2016, of course. The USDA forecasts those per-acre operating costs to tick upwards slightly, to $337.09 for corn, $171.80 for soybeans, $118.64 for wheat, and $496.50 for cotton.

Estimated Overhead Costs

Land and labor also represent key costs, but the USDA categorizes them differently. Those expenses are considered  "allocated overhead" and are broken out separately from input costs.

For corn, farmers are expected to encounter $339.15 in "allocated overhead" expenses in 2015, which includes:

  • $3.18 for hired labor.
  • $24.92 for the opportunity cost of unpaid labor.
  • $102.71 for capital recovery of machinery and equipment.
  • $178.82 in opportunity cost of land (rental rate).
  • $9.52 for taxes and insurance.
  • $20 in general farm overhead.

The numbers are lower for soybean farmers, of course, with an estimated $301.88 per acre for overhead. That breaks down as following:

  • $3.12 for hired labor.
  • $18.19 for opportunity cost of unpaid labor.
  • $90.45 for capital recovery of machinery and equipment.
  • $161.33 in opportunity cost of land (rental rate).
  • $10.36 in taxes and insurance.
  • $18.43 in general farm overhead.

Finally, here are the estimated overhead figures for wheat, which has $193.01 in overhead costs per acre:

  • $2.21 for hired labor.
  • $17.70 for opportunity cost of unpaid labor.
  • $88.72 in capital recovery of machinery and equipment.
  • $66.25 in opportunity cost of land (rental rate).
  • $6.73 in taxes and insurance.
  • $11.40 in general farm overhead.

Click here for the USDA's crop-specific forecasts and historical numbers. 

How do your costs compare? Leave a comment below or visit the AgWeb discussion boards.

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Comments

 
Spell Check

Dave
Glencoe, MN
6/2/2015 08:56 AM
 

  Very disappointed in the research. As a banker, most all of my customers are much higher. Costs areclose to or over $650.00 per acre for corn with land costs and machinery patments. Farm Management reports also show similar to my estimates. With corn cash prices at $3.25 in our area there is not much left for any family living.

 
 
Adam
Spokane, WA
6/2/2015 09:22 AM
 

  Are these guys serious? Where did these numbers come from? Several of these numbers are off by 50%! Maybe they dusted off some late 90s or early 2000's research when commodities were half their current value. That was the last time we could grow wheat that cheap.

 
 
Clark
Belview , MN
6/2/2015 09:38 AM
 

  USDA does us no service by publishing such ill advised numbers. This contradicts what we are telling our landlords and undermines our ability to negotiate cash rents. My seed and fertilizer costs alone are $315, and where's the insurance expense which is around $40/acre? Nobody who's planting Dekalb or Pioneer will be getting by for $101.55/acre for seed. The title of this article sure got my attention...I bet it got a lot of landlords also. Poorly done USDA

 
 

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