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Corn+Soybean Digest

Dramatic Cost Increases Coming In 2009

Significantly higher production costs in 2009 are facing Illinois corn and soybean farmers, according to a University of Illinois Extension study.

"These cost increases will lead to higher breakeven prices for both corn and soybeans," said Gary D. Schnitkey, University of Illinois (U of I) Extension farm financial management specialist. "Higher costs will cause farmers to more closely examine how much to adjust cash rent bids. Higher costs also may influence marketing and crop insurance decisions."

Schnitkey's report, "Dramatic Increases in Corn and Soybean Costs in 2009," is available on U of I Extension's farmdoc website.

The cost increases were projected for central Illinois farms having high-productivity farmland.

"Input prices, particularly for fertilizers, are uncertain and could be different than those we used in the study," he said. "It is safe, however, to estimate large production cost increases for both corn and soybeans in 2009."

For corn, non-land production costs for 2009 are projected at $529/acre, a $141/acre increase from 2008 levels of $388/acre. Between 2003 and 2007, non-land production costs averaged $286/acre. Production costs for 2009 are projected to be $243/acre higher than the 2003-2007 average, an increase of 85%.

For soybeans, non-land production costs for 2009 are projected at $321/acre, up by $82 over 2008 costs of $239/acre. Between 2003 and 2007, non-land costs for soybeans averaged $180/acre. Productions costs for 2009 are projected to be $4,141 higher than 2003-2007 levels, an increase of 78%.

"Fertilizer is the input with the large cost increase," said Schnitkey. "For corn, fertilizer costs in 2009 are projected at $215/acre, an increase of $97/acre over the 2008 projected level of $118/acre.

"For soybeans, fertilizer costs in 2009 are projected at $98/acre, a $53 increase over the 2008 level of $45/acre."

He noted that projected 2009 fertilizer prices are significantly above fertilizer prices in recent years.

"Besides fertilizer, seed costs are projected to increase," he noted.

Also up in the 2009 projections are insurance and power costs.

Based on yield expectations of 191 bu./acre, the 2009 breakeven price for corn is $3.82/bu. The soybean breakeven price is $9.65/bushel.

"These breakeven prices are significantly higher than historic commodity prices," Schnitkey said. "Corn, for example, averaged close to $2.40/bu. between the mid-1970s to the middle 2000s.

"Large income losses would occur if commodity prices returned to historical averages."

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