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Farm Production Issues - 2009

February 13, 2009
From Wayne Schoper Brown/Nicollet Extension Educator

We have had a nice run of corn and soybean prices for the past several years. Corn hit close to $7 per bushel in June of 2008 and soybeans followed suit settling somewhere around $16 per bushel.

Those prices did not last long and since that time we have seen a large retreat with current cash prices around $3.40 for corn and $9.80 for soybeans. The reality is that very few farmers actually received any of these record-high prices.

Most farmers follow some sort of a marketing plan and price their crops as the market moves along. If we average out what farmers actually received we would see prices all over the board from $2.75 to $7 with an average somewhere in the middle.

It was very fortunate for livestock producers that these high commodity prices did not persist as feed costs also reached all-time high and cut deeply into livestock producers bottom-lines.

These kinds of record high prices get everyone excited and we see things like input costs and land prices start to get over-valued. Not very long after we saw $7 corn we experienced an escalation in input costs such as fertilizer and seed. It seems that everyone wanted to get on the bandwagon and get their share of the money.

With that run-up in commodity prices and the unprecedented rise in crop input costs, the high corn and soybean prices did not keep up. Fertilizer is a good example of one of the input costs that spiraled out of control. Anhydrous ammonia hit all-time highs when prices went over $1200 per ton. That works out to over $.75 per pound of actual nitrogen, by far an all-time high. Just a few years ago, the same product was around $400 per ton and $.25 per pound of actual nitrogen.

Blame has been placed on high petroleum prices and that was a factor. However, we never actually faced a shortage of this or any other fertilizer product. It's a little bit like the price of oil when it hit $147 per barrel last summer. Everyone had an excuse, but it boiled down to speculators and old-fashioned greed.

Fertilizer prices have come down somewhat, but we are still going to have to spend some money to produce the kind of yields that it will take to pay the bills.

So the question becomes, where do we go from here? Everything is not doom and gloom and we have weathered whose times than these. I was at a farm conference recently where the main speaker made the comment that the worst farming year for profitability on record was 1983. This was compared to the last 100 years of agriculture and adjusted for inflation and other factors. The second worst was 1933.

Many farmers farming today lived and farmed through the 1980's and we will survive this situation also. But we need to be cognizant of what we spend on certain inputs and one of the big ones is land rent.

Land rent - One of the biggest issues in farming in the past couple of years has been land rent. As corn and soybean prices rose over the past several years, so did land rent. There are stories out there of rents on the books for 2009 production for over $300 an acre. The reality is that current corn and soybean prices cannot sustain these rent levels. I feel that a fair cash land rent for 2009 should be from $155 to $160 acre. This is down somewhat from the numbers that we were discussing last fall. However, we do know that the agriculture economy has also changed dramatically and adjusts have to be made.

 
 

 

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