1. Changing Costs of Crop Production Crop Advantage Series Osceola, IA Michael Duffy Extension Economist January 15, 2009

2. Outline Background 2009 estimates Distribution of costs Discussion

10. Costs for 2009 Extremely hard to predict this year –Pre-paid vs. spot –Changes in world and domestic demand –Changes due to financial crisis –New varieties and traits –Energy markets

11. Baseline assumptions Diesel$2.50 N$.68, P $.90K $.72 LP $1.90 Corn seed; $250 Soybeans $45/50lb Land; $178 $205 $232 Yields; continuous corn 125 145 165 –Rotated corn 140 160 180 –Soybeans45 50 55

20. The Rise and Fall of Fertilizer Prices Source: http://www.fertilizerworks.com/html/market/ TheMarket.pdf

21. Ammonia Prices Source: http://www.fertilizerworks.com/html/market/ TheMarket.pdf

22. Iowa Corn Prices vs. Costs Source: USDA-NASS and Duffy and Smith, http://www.extension.iastate.edu/agdm/crops/pdf/a1-21.pdf

23. Iowa Soybean Prices vs. Costs Source: USDA-NASS and Duffy and Smith, http://www.extension.iastate.edu/agdm/crops/pdf/a1-21.pdf

24. Impact of Cost Changes $.50 increase in diesel adds $.02 to corn and $.06 to soybeans $50 increase in corn seed adds $.13 $.25 increase in nitrogen adds $.32 and $.20 for low yield CC and RC, $.28 and $.17 for medium yield and $.24 and $.16 for high yield

25. Impact of Cost Changes A $25 change in rents leads to a $.20, $.17 and $.14 change for CC based on low, medium and high yield land. The change is $.18, $.15 and $.14 for rotated corn and $.55, $.50 and $.44 for soybeans.

33. Conclusions Input prices have risen dramatically and will show increased volatility Some signs world prices have softened but not likely to be seen until current high priced stocks are used Take soil tests and only use what is necessary Remember nitrogen credits and apply what will be optimum given the circumstances

34. Conclusions Evaluate seed and seeding rates carefully Try for flexible lease arrangements Consider all the pest management options available Don’t simply cut back without carefully evaluating the consequences; you have to spend money to make money Consider all the risk management options available

35. Conclusions Know your costs of production Make cuts and changes where they will do you the most good Follow a good marketing plan

37. Web sites Ag Decision Maker: www.extension.iastate.edu/agdm/ My site: www.econ.iastate.edu/faculty/duffy/