Night 2 – “Farm Economic Outlook”
Ben Brown, Senior Research Associate
Food and Agricultural Policy Research Institute
University of Missouri
Source: Farmdoc, University of Illinois
DTN Farm Business Editor Katie Micik Dehlinger reported yesterday that, “The retail prices of all eight major fertilizers climbed higher in the second week of October, with anhydrous, MAP and UAN32 posting the largest gains.
“DTN polls retail fertilizer sellers each week to compile price estimates and considers a price change of 5% or more to be significant.
“Anhydrous prices climbed 16% on average to $804 per ton. MAP and UAN32 each climbed by 7% to $794/ton and $418/ton, respectively.”
Dehlinger explained that, “The prices of the remaining five fertilizers were all higher than last month, but less significantly. DAP cost an average of $711/ton; potash, $506/ton; urea, $575; 10-34-0, $613/ton; and UAN28, $356/ton.”
Farms are subject to more risks than ever before. Whether it is the liability exposure of driving equipment on roadways or the potential of property loss due to a barn roof collapse, every farm has multiple sources of risk. While farmers can reduce their risk exposure through good business practices and rigorous safety protocols, there is no way to entirely eliminate risks. For this reason, insurance policies that adequately protect against risks are a necessity for farm operations. Farmers likely understand the important role insurance plays in protecting farm assets. But how many actually read and understand their insurance policies? The failure to read policies is not a result of apathy but more likely due to the almost complex nature of an insurance policy. Reading and understanding an insurance policy is difficult for anyone other than those in the insurance industry. The objective of this publication is to help by providing farmers a basic understanding of insurance policies—from common coverages to policies in preparation for a thorough policy review with the insurance agent. Our information is based on general knowledge as applicable to most policies. Farmers should periodically review their insurance policy, including coverage limits, with their agent to be sure they are fully covered for potential risks.
Source: Farmdoc daily, University of Illinois, (edited)
While this article is written for Illinois, many if not all of these thoughts are pertinent in Ohio as well.
Significant increases in production costs in recent years combined with expectations for lower commodity prices have resulted in much lower return expectations for 2023 and 2024 compared with the previous three years (see farmdoc daily, August 29, 2023). In today’s article, we revisit trends in direct costs for corn production in Illinois over time (see farmdoc daily, April 4, 2023 and July 12, 2016, for previous articles). Since 2000, direct costs – which include production inputs – have risen at an average annualized rate of 7% per year. Individual components of direct costs, such as fertilizers, pesticides, and seeds, have all experienced similar average growth rates.
Total direct costs are projected to reach record levels for 2023 and are expected to experience only modest declines for 2024. Fertilizer costs are projected at record levels for 2023, but a fairly large decline is expected for 2024. Seed costs are projected at record levels for 2023 and remain constant in 2024. Pesticide costs are projected to be at record levels for 2023 and to further increase for 2024. In addition to viewing these costs on a $ per acre basis, we also provide perspective on a share of revenue basis.
Total Direct Costs
Direct costs include the cost of production inputs such as fertilizers, seeds, and pesticides (herbicides, pesticides, fungicides). Costs associated with drying, storage, and crop insurance are also included in the direct cost category. Total direct costs for corn production in central Illinois have increased over time from $134 per acre in 2000 to $558 in 2022 (see Figure 1), which implies an average annualized growth rate of 7% between 2000 and 2022. Direct costs for the 2023 crop year are projected at a record level of $579 per acre, with a decline to $527 per acre currently expected for the 2024 crop year based on recently released crop budgets (see farmdoc daily, August 29, 2023 and 2024 Illinois Crop Budgets) and Ohio Crop Enterprise budgets.