An Indiana survey shows cash rents statewide increased 4%, on average, from 2020 to 2021. Expect pressure from increased commodity prices to push them up an additional 5% to 10% for 2022. However, beyond ’22, Michael Langemeier says pressure on cash rents may ease, and farm income may dip lower again.

“Costs of production are rising sharply for most inputs, particularly fertilizer,” says Langemeier, Purdue University Extension agricultural economist and associate director of the Purdue Center for Commercial Agriculture. “History tells us that while input prices can come down, it’s often a slow process. These rising production costs will eat into net farm income for ’22 and beyond, even though we still expect strong crop prices into ’22.”

The best way to get a handle on input price increases is to prepare a budget for 2022, Langemeier suggests. He prepared a sample budget on a breakeven-per-bushel basis for a case farm in west-central Indiana, featuring high-productivity soils with a corn and soybean rotation.

“You should only use our budget as a guideline,” he emphasizes. “It lines up with budgets prepared by other universities across the Midwest, but what counts is what you actually pay and produce on your farm. We would hope you would go down through these budgets and plug in your own numbers. See where your projected costs come out for next season.”

Here is a closer look at the case farm example. Langemeier assumed yields of 215 bushels per acre for corn and 65 bushels per acre for soybeans. He divided total costs for each input per acre by expected yield to determine cost per bushel. Refer to the table while following the discussion:

Land. Whether you own the land or rent it, it was entered at a cost of $285 per acre in this example, divided by bushels. At $1.33 per bushel for corn and $4.38 for soybeans, it’s the highest cost input by far, especially for soybeans.

Fertilizer. “Sources are telling us fertilizer costs could be 15% to 20% higher in ’22 versus ’21,” Langemeier says. “They could be back to about where they were per acre when they peaked in 2013.” He says fertilizer is the second-costliest input on a per-bushel basis for corn, and third, right behind machinery, for soybeans.

Machinery. Both fixed ownership costs and variable costs including fuel and repairs are included in this number, the ag economist says. If you don’t include a cost of ownership, you’re not accounting for replacing machinery over time, he notes.

Seed. Expect seed prices also to be up to some degree for ’22, based on early reports. Put your own numbers in here, Langemeier urges.

Pesticides. Rumors of some pesticide shortages and higher costs are circulating, but on a per-bushel basis, pesticides still come in at No. 5 of all costs.

Labor. Labor is a fixed cost that may be higher, on average, for small to medium-size farms than larger farms, Langemeier says. He used what a farmer would withdraw for family living expenses as a base for computing labor costs per bushel.

Other costs. Other costs include things like crop insurance, property insurance, interest payments and hauling grain, which don’t make the list of top six expenses by themselves, he notes.

Total costs. In this example, Langemeier arrives at $4.32-per-bushel breakeven cost for growing corn in 2022, and $10.74 per bushel for soybeans. “If your yields are lower, then your cost per bushel for corn could be up to $4.55 to $4.60, and your breakeven for soybeans might be $11 to $11.25 per bushel,” he concludes.