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Impact of falling fertilizer prices on corn, soybean production costs

augering grain from wagon to truck
CORN BREAKEVEN: For rotation corn, breakeven price to cover total costs on average-productivity land declined from $4.98 per bushel in 2015 to an expected $4.40 per bushel for 2017. This is partially due to a 27% drop in fertilizer costs for corn.
Farm Business: Lower fertilizer prices help but don’t erase all the red ink.

Fertilizer prices have continued declining. The drop in prices during the last couple of years has been extremely helpful in lowering fertilizer cost per bushel. Using information from USDA's Illinois Department of Agricultural Market News, nitrogen prices dropped about 30%, phosphorus prices about 25% and potash prices about 34% from January 2015 to January 2017. 

Here’s how fertilizer price declines impact expected production costs for rotation corn and soybeans for 2017.

Using Purdue University cost and return budget information for average-productivity soil, the reduction in fertilizer prices for corn resulted in a $29-per-acre, or 25-cents-per-bushel, decrease in budgeted fertilizer costs from '15 to '17. This represents a 27% decline in fertilizer costs. Projected fertilizer cost on average-productivity land for rotation corn in '17 is $108 per acre, or 64 cents per bushel.   

For rotation soybeans, the decrease in fertilizer costs from two years ago is $17 per acre, or 37 cents per bushel. That’s a 28% decline. Budgeted fertilizer cost for rotation soybeans on average-productivity land in '17 is $40 per acre, or 77 cents per bushel. 

The reduction in fertilizer costs along with anticipated reductions in cash rent has a large positive impact on breakeven prices for corn and soybeans. For rotation corn, breakeven price to cover total costs on average-productivity land declined from $4.98 per bushel in 2015 and $4.56 in 2016 to an expected breakeven price of $4.40 for 2017. For rotation soybeans, breakeven price declined from $11.94 per bushel in 2015 to $11.12 in 2016 to an expected breakeven price of $10.88 in 2017. 

More information pertaining to costs for corn, soybeans and wheat can be found on the website for the Purdue Center for Commercial Agriculture.

Langemeier is associate director of the Purdue University Center for Commercial Agriculture.     

TAGS: Management
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