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Corn+Soybean Digest

Pinching Pennies

With stagnant corn prices and significantly higher input costs this year compared to last, corn growers will need to develop a plan to reduce their out-of-pocket expenses or risk reduced profit margins by year's end.

“Step back and review your practices to make sure all your inputs are adding value and paying their way,” says Alan Miller, Extension farm management specialist at Purdue University. “In particular, you've got to give the high-cost items some attention. Where you get the most savings on a percentage basis may be in finding even a small reduction on a very expensive item, like fertilizer.”

Miller advises reviewing previous agronomic practices and analyzing where improvements might be made. “Most people will be looking closely to see if there is any fat at all in fertilizer applications,” he says. “New technology might also help to save on application costs.”

Asking advice from agronomists, crop consultants and Extension specialists could also prove profitable for trimming expenses, especially for nitrogen (N) fertilizer. “N recommendations have changed significantly in many Midwest states this year,” says Miller. “Familiarize yourself with the new recommendations, which may help save input costs without jeopardizing yields. Also consider new ways of managing N, either by changing the form you apply, when you apply or how you apply to reduce costs.”

Major out-of-pocket expenses for corn production will vary somewhat from year to year and state-to-state and producer-to-producer, says Miller, who adds that most Midwestern universities publish yearly cost and return estimates for farmers to use as a guide.

Despite the many variables that typically exist, Miller and economists from Illinois and Nebraska list the following as the top input costs likely to challenge farmers in 2006:

  1. Fertilizer

    “Clearly, the hands-down winner in out-of-pocket production costs for corn is fertilizer,” says Miller, “and N is the single largest source of production cost over all.”

    For example, the total fertilizer costs for corn in a crop rotation on average-production soils (147 bu./acre) in Indiana are $87.12/acre, notes Miller. The cost for N as anhydrous ammonia is $48.67/acre, and starter fertilizer is $8/acre. Phosphorous (P) is $13.47/acre; potassium (K) is $13.14/acre; and lime is $3.84/acre.

    Fertilizer costs would total slightly less, an average of $79/acre, on high-production farmland in Central Illinois, says Gary Schnitkey, Extension farm financial specialist at the University of Illinois. Yet, N costs would be significantly higher. “N would account for $60/acre, and the rest ($19/acre) would be for P and K,” he adds.

    On irrigated corn in Nebraska, with target yields in the 200 bu./acre range, 200 lbs. N at 25¢/lb. (from anhydrous ammonia) would cost $50/acre, says Roger Selley, University of Nebraska Extension farm management specialist. However, the amount of actual N applied would need to be based on a soil test, he adds. Starter fertilizer would cost an extra $9.72/acre.

  2. Seed

    “In Indiana, seed is the next highest input cost, at an estimated $35.35/acre for non-transgenic corn,” says Miller. “Indiana is still predominantly a non-GMO (genetically modified) corn state with 74% of last year's corn acreage planted in non-transgenic varieties.”

    In Illinois, seed would also be the second highest cost at about $40/acre for a blend of about 30% transgenic seed and 70% non-transgenic corn, says Schnitkey.

    On irrigated corn in Nebraska, “we've budgeted $60/acre for seed, which would be resistant to both corn borer and corn rootworm,” says Selley. “That would be 80% Bt corn and 20% for a non-Bt corn refuge.”

  3. Fuel

    In places like Nebraska, where irrigation costs rival fertilizer expenses, energy prices can make a real difference, says Selley. “For example, if we were pumping 12 in. of water from a 100-ft. depth with diesel, the fuel and lubrication costs would be more than $50/acre,” he says. “Irrigation costs can be the highest input cost for corn production in major corn growing areas of Nebraska.”

    In Indiana, the third highest corn production cost is LP gas or propane for dryer fuel, at about $25/acre, says Miller. Machinery fuel adds another $17/acre in cost for conventional tillage or $10/acre for reduced tillage, he adds.

    Drying costs in Nebraska would average about $26/acre for continuous corn and $18/acre for a corn-soybean rotation, notes Selley. He adds that drying costs in Nebraska can be reduced by 50% or more by beginning harvest with soybeans and allowing corn to dry in the field longer. In Nebraska, a switch from continuous corn to a corn-soybean rotation would also eliminate the need for a corn rootworm control product, he points out.

  4. Crop Inputs

    Farm chemicals, mostly herbicides, come in fourth in Indiana, at about $20/acre, says Miller. However, where corn rootworms are a concern, farmers would need to budget about another $20/acre in insecticide costs or invest in Bt rootworm corn seed.

    Herbicide costs for irrigated corn in Nebraska are budgeted at $27/acre, says Selley, with very little needed for insecticide, if transgenic hybrids are being used.

    In Illinois, pesticide expenses total close to $39/acre, says Schnitkey, with herbicides comprising about 90% of that cost and insecticides about 10%.

  5. Repairs

    Farmers should expect machinery repairs to total about $10/acre in Indiana, says Miller. Selley says machinery repairs would cost about $14/acre in Nebraska, which would also include repairs for irrigation equipment.

“The two big expenses in Nebraska are N fertilizer and irrigation costs,” says Selley. “To save on expenses, it's important to do soil testing and take N credits for organic matter, residual N, legumes and the amount of N in the irrigation water.”

Pumping costs for irrigation can vary widely from year to year, depending on the weather, points out Selley, “but the thing that you can do with irrigation is just to be sure you don't irrigate any sooner than needed or any longer than needed.”

For example, farmers can save about 10% in the average yearly irrigation cost by irrigating only one time less than normal. If a three-phase power source is available, he adds, farmers could also save on energy costs by switching pumps from diesel to electrical power.

Careful buying practices could also make a big difference, says Miller. “Take advantage of quantity discounts where you can,” he advises. “Shop around every year to get an idea of what price ranges are, and watch when you buy. Sometimes you can take advantage of seasonal patterns in input costs and buy when the cost is lowest.”

Also be aware of the cost differences that might exist between products or agronomic management strategies, adds Miller. For example, compare the cost as well as the effectiveness of using granular or liquid treatments for rootworm control vs. the cost of using transgenic seed to accomplish the same objective, he says.

Nebraska's Selley points out that the most expensive field operation cost is harvesting. “Custom hiring could save money for small-acreage producers,” he says. “Another area would be to take a close look at seed — it's now a big ticket item, about $30 extra or more per bag for transgenic seed if you want protection for both corn borer and corn rootworm.”

The bottom line is to make every purchase a good one, says Schnitkey. “Just try and pinch every penny you can.”

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