Growers should expect budget squeeze in 2010

WEST LAFAYETTE, Ind — Farmers should see some relief on input costs next year, but profit margins are still likely to be squeezed.

Bruce Erickson, a Purdue University agricultural economist, said growers would likely see the most savings on fertilizer costs in the 2010 planting season.

“Some farmers were spending as much as $200 per acre to fertilize the 2009 corn crop, more than rent in some cases, when you consider nitrogen, P and K replacement, and any liming requirements,” Erickson said.

Good news

“Next year it will be about one-third less — in our projections about $100 to $130 per acre — depending on soils and crop rotation.”

Erickson and his colleagues’ estimates are available in the “2010 Purdue Crop Cost & Return Guide,” now available online.

The guide gives estimates of input costs and expected returns for the coming planting season.

At the time these estimates were prepared, Chicago Mercantile Exchange Group futures indicated that fall 2010 cash prices were near $3.30 per bushel for corn and $8.40 for soybeans. These prices are lower than what was used in the 2009 budget estimates by 70 cents for corn and 30 cents for soybeans.

Starting point

It’s fairly certain that these costs and returns will change before anything is planted, but the estimates provide a starting point for thinking about 2010, Erickson said.

“The guide provides a general barometer for people who do their own budgets,” he said.

While fertilizer prices have already come down, Erickson said overall costs remain relatively high and have not come down as much as commodity prices.

Today’s grain prices are placing downward pressure on the seed and crop protection companies.

“Some technology fees have increased, and we know list prices of some of the newest hybrids have gone up, but we’re also hearing of significant discounting as well,” Erickson said.

Also, some input suppliers have already announced substantially lower glyphosate prices.

“For the second year in a row, farmers’ margins will be less than they were in 2007 and 2008,” Erickson said.

Machinery

One cost-saving area could be machinery. Erickson said industry reports show sales of new large farm machinery to be down, which could keep a lid on the cost of those purchases. On the other hand, interest in buying used equipment is on the rise.

“There could be some bargains on new equipment out there,” he said.