Generally speaking, the trend has been that as prices producers receive have gone up, costs of production go up and somewhat vice versa that as prices come down, costs also come down. Usually costs are slow to come down and some expenses such as cash land rent lag a year or two coming down if at all. Cash land rent is one expenses that also lags a year or two when prices go up.

When comparing 2014 University of Tennessee Crop Budgets to 2013, we do see that costs of production will be less.  The majority of the reduction in costs will be in fertilizer costs as seed and chemicals for the most part look to remain even with last year. There may be some changes due to changes in technology and/or changes in weed and insect pressure. Differences in seed, fertilizers, and chemical cost show a reduction of 13 percent in corn from 2013, an 11 percent decrease in cotton costs, a 7 percent drop in soybean costs, and a 6 percent reduction in wheat and double crop soybeans.

As I have mentioned in previous articles, this year projects to be tighter than the last few years. Producers will need to pay particular attention to the details of input costs as well as machinery costs. Watch nonfarm expenses– a reduction of family living expenses is never a popular subject, but when the financial situation is tight it sometimes becomes a necessity.  Make informed decisions on your operation. 

All producers need to develop farm financial plans on their operation. Farm plans can help determine the direction of the farm operation.