~~Farm Doc Daily released a report today on how crop input costs have not dropped much in the last couple of years. The report presented a chart showing the total costs for high-productivity farms in Central Illinois from 1990 to 2015 for Seed, Pesticide, Fertilizer and Cash Rents. As you can guess, the lowest cost year for the crop inputs (seed, fertilizer and pesticide) was 1990 at slightly less than $100. It took until 2005 for these costs to exceed $150 per acre. It only took three years to exceed $200 per acre in 2008 and then jumped all the way to $325 in 2009. It dropped back to about $250 in 2010 and then has exceeded $300 since then with a high of $358 in 2014.
Cash rents remained under $150 per acre until 2006, then over the next 10 years rose to about $293 per acre and in 2015 finally dropped about $16 an acre to $275 per acre.
For 2015, seed decreased by $2 per acre, pesticide by a $1 and fertilizer by $5. For 2016, they are projecting a $41 decrease in fertilizer costs, seed down by $2 and cash rents to drop by $10.
Let's run some numbers for 2016 assuming that these costs do in fact drop by this much and corn averages $3.50 per bushel on 225 bushels of production. This results in gross revenue of $787.
Total crop costs for 2015 were $628 per acre. If we drop them by $53 ($41 $2 10) we arrive at total costs of $575 per acre. This results in $232 to cover all other costs including other input costs, machinery, insurance, labor, personal capital and investment, interest, etc. It is likely that these farmers will at best, break-even and will likely lose up to $100 per acre for this crop year on corn. For lower productive ground, the losses would likely be even greater.