Crop input costs at record levels
Dec 17, 2008 9:36 AM,
By Brad Haire
University of Georgia
Row-crop harvest is winding down in Georgia. Farmers don’t know yet exactly how much corn, cotton, peanuts and soybeans they’ve produced. But one thing is almost certain: This year’s row crops were the most expensive in history to produce.
“Georgia farmers, like many, have enjoyed good yields and prices for a few years now. But they’ve had to deal with rising costs, too,” said Don Shurley, an economist with University of Georgia Cooperative Extension. “The bigger problem is (crop) prices are falling now.”
Last year, Georgia farmers spent $478, on average, to grow an acre of cotton on irrigated land, Shurley said. This year, they spent an estimated $573 per acre, the most ever, according to UGA College of Agricultural and Environmental Sciences data.
The per-acre figure includes a farmer’s variable costs, which are things like fuel, seed, fertilizers, chemicals, labor, monitoring, harvesting and utilities. It doesn’t include what are called fixed costs, or things like equipment depreciation and payments, insurance or land rent that can also be associated with growing crops. It doesn’t include the salary the farmer pays himself, either.
In 2007, Georgia cotton farmers picked an average of 801 pounds of cotton per acre. After subtracting the variable costs, they made $63 per acre. In 2008, they averaged 843 pounds per acre. After subtracting their variable costs this year, they made only $19 per acre.
“These are all average numbers. Some farmers did better. Some did worse,” Shurley said. “But this just goes to show that even with good yields it hasn’t been enough to keep up with costs.”
The situation is the same for corn, peanuts and soybeans, said Nathan Smith, a UGA Extension economist.
An acre of irrigated peanuts cost a farmer $529 in 2007. It cost $685 this year, a 30 percent increase. An acre of irrigated soybeans cost $225 in 2007. It cost $314 this year, a 40 percent increase. An acre of irrigated corn this year cost $648, almost 50 percent more than last year. All are record-setting numbers, he said.
The rising prices are cutting farmers’ returns on their investments.
The average return on an acre of peanuts last year, after subtracting the variable costs, was $233. It will be $178 this year. The average return on an acre of soybeans last year was $105 after variable costs. It will be $24 this year. The average return on an acre of corn last year was $148. It will be $98 this year. Again, these numbers don’t include costs for equipment depreciation or payments, insurance, land rent or the farmer’s salary.
“What these numbers do show is that farming has always been volatile in that the farmer has little control over input prices or the prices he receives,” Smith said. “That volatility is even more so now.”
The prices for fuel and fertilizer have stabilized, or decreased, in recent weeks, Shurley said. “But to me, 2009 will be tighter than 2008. Farmers will have some tough decisions to make for next year’s crops.”
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