If you can just get past 2009, the financial picture for 2010 seems to be brighter. Those high fertilizer prices may eat your lunch, but with lower prices for N, P, & K in 2010 and steady costs for other inputs, there are more chances for profitability.

The latest forecasts for 2010 crop profits come from the economists at Purdue, who say they are still uncertain of long term price levels, “While these general price trends are obvious, the real questions are at what level will prices find equilibrium, what factors will affect them, and what is in store for certain inputs.” The Purdue crop budgets are offered in their Top Farmer Newsletter. Compared to their 2009 budgets, variable costs for soybeans are down 13%, corn costs are down 17%, and wheat by 22%.


If you have not yet priced fertilizer for 2010, you may find a pleasant surprise, compared to the nasty tricks played on you last year with anhydrous ammonia on either side of the $1,000 per ton mark. It should be in the $400 to $450 range, with DAP on either side of $400, and potash on either side of $600. Phosphate should be in the price range of anhydrous ammonia. The difference is lower commodity prices. When commodity prices were high, there was more global demand for fertilizer. For the coming year, you’ll spend $100 to $130 per acre for fertility, with the potential cost to rise slightly based on the market.

Based on the relationships between the price of corn and the price of nitrogen per pound, the Purdue forecast for 2010 indicates nitrogen will be relatively cheap. That is based on a $3.30 corn price and a 28 cent nitrogen price which is 8% of corn values. Compared to 2009, the price of nitrogen was 12% of corn values.

Seed costs continue to be strong and rising, but the Purdue economists say farmers are getting more value in their seed, with various crop protection traits included in the genetics. The “fully-equipped hybrids” will be over $300 per bag and soybeans may be over $60 per bag. Depending on planting rates, crop budgets should allow $75 to $95 per acre seed costs. The genetic companies are charging seed companies for technology fees and those are being passed on to farmers, but the rate of increase for seed costs has begun to level off.

Somewhat level for several years has been the cost of crop protectants, such as herbicides, insecticides, and fungicides. While prices for glyphosate were up for 2009, those price increases are reversing for 2010 crops.

Your fuel bill will see a 15% increase over 2009 based on predictions by the Energy Information Administration. Diesel prices were relatively low in early 2009. Propane costs have been flat due to abundant supplies, but may rise going into the winter, and level off again.

If you are buying a new tractor, the market has been soft for small tractors due to the slowdown in construction. However, sales of larger horsepower tractors have been up in recent years, with 2009 indicating a leveling off and a potential softening of prices.

Summary:
The fall of production costs for 2010 follows the softening of the grain market, but about one year late for many farmers who will be pinched to make a profit in 2009. The reduction comes primarily from lower fertilizer prices, and a stagnation in the costs for many other crop inputs, including seed, chemicals, and equipment. There may be a slight rise in energy costs for the 2010 crop, compared to 2009.

Source: Stu Ellis, University of Illinois