Comprehensive 2008 price outlook

Higher fuel and nitrogen prices in 2007 have signaled trends that will most likely hold throughout 2008. Ohio State University Extension budgets show projected variable (cash) costs for corn production to be 24 percent to 35 percent higher in ’08 than ’07 depending on seed trait selection.
Projections. Soybean variable costs are projected to be 23 percent higher in ’08 than ’07.
Higher commodity prices and profitability in 2007, and projected net profits in 2008, have already led to cash rental rate increases. Cash rents increased 5.8 percent in Ohio in 2007, and projections are for these rents to increase at a larger rate in 2008.
Higher commodity prices and higher costs lead us to a riskier production year as the cash investment in an acre of corn will top $300 and the cash investment in an acre of soybeans will top $150.
Outlook information presented here was developed with data from Ohio State’s Department of Agricultural, Environmental and Development Economics research, Energy Information Administration, USDA, other land grant research, futures markets and retail sector surveys.
Fuel. As of Nov. 6, the Energy Information Administration pegged the average price for West Texas Intermediate Crude Oil at $79.92 per barrel for 2008. This is a 12 percent increase over the 2007 crude price.
The Energy Information Administration projects the Henry Hub Natural Gas price to average $8.01 per thousand cubic feet in 2007. This is a 9.7 percent increase over the 2007 Henry Hub Natural Gas price.
The Henry Hub in Louisiana is the nexus of 16 intra- and interstate natural gas pipeline systems that draw supplies from the region’s prolific gas deposits. The pipelines serve markets throughout the U.S. East Coast, the Gulf Coast, the Midwest and up to the Canadian border.
Natural Gas Futures quotes are available via the online New York Mercantile Exchange at www.nymex.com. Natural gas futures are traded as million British Thermal Unit (mmBtu). One contract equals 10,000 mmBtu.
Natural gas is sold wholesale per thousand cubic foot (mcf). Btus per cubic foot of natural gas do vary. One cubic foot of natural gas = 1,000 to 1,031 Btu. One thousand cubic feet (1 mcf) of natural gas = 1 to 1.031 mmBtu.
Diesel price is expected to increase 8.1 percent in 2008, with an expected average price of $3.09 per gallon for on-highway diesel.
Fertilizer.

About the Author

(Barry Ward is the leader of production business management in the Ohio State University Extension’s department of agricultural, environmental and development economics.) More Stories by Barry Ward

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