The significant decline in crop net returns that has taken place in 2014 and 2015 indicate the importance of examining major cost items. Seed costs are the third most important production cost items for corn and soybeans. The two most important cost items for corn are cash rent or land ownership costs, and fertilizer costs. For soybeans they're cash rent or land ownership costs, and machinery ownership costs.

Related: Check revenue vs. seed cost when picking corn hybrids

In addition to being an important cost item, seed costs have increased dramatically during the last 10 years. This makes it even more important to examine seed costs and make appropriate adjustments in production practices.

Seed costs matter: This Purdue ag economist implies you may be able to save on input costs by lowering seeding rates.

Using Purdue cost and budget information, seed cost per acre for corn grown on average productivity land was $34 in 2005, $94 in 2010, and $123 in 2015. Seed cost for soybeans grown on average productivity land was $36 in 2005, $52 in 2010, and $74 in 2015.

Projected seed costs for corn and soybeans in 2016 are expected to be similar to those experienced in 2015. Expected seed costs per bushel of yield for 2016 are $0.75 for corn and $1.48 for soybeans.

For most tracts of land, there is a difference between the production maximizing seeding rates, which would be the seeding rate that maximizes yield, and the economically optimal seeding rate. The latter is the optimal rate given the relationship between yield and seeding rate, and seed and output prices.

What economics say
Why is the difference important? The difference in these two rates represents potential seed cost savings. As with any cost item, it is important to compare the potential benefit of each additional unit of input, related to yield and output price, and the cost of each unit of seed.

Using the Purdue cost and return budget, each 1,000 increment in corn seeds or each 5,000 increment in soybean seeds represents a cost of $3.73 per acre for corn and $2.19 per acre for soybeans. In other words, if you plant another 1,000 corn seeds, you invest another $3.73. This number is based on projected seed prices. Based on the traits you select and company you buy form, your actual cost per 1,000 seed in corn, or 5,000 seeds in soybeans, may vary.

Related: Calculate seed cost when figuring seeding rates for corn

In addition to seeding rates, seed costs are impacted by variable rate seeding and hybrid selection. Again, it's important to compare the benefits of variable rate seeding and specific hybrids to the costs associated with each of these items. It's also important to remember that hybrid selection can also impact risk. Specifically, using a portfolio of hybrids often leads to less risk than using just a few hybrids.

This article briefly discussed the importance of examining seed costs. More information pertaining to cost items can be found on the web site for the Center for Commercial Agriculture.

Langemeier is director of cropping systems for Purdue University's Center for Commercial Agriculture