PRST STD U.S. POSTAGE PAID OMAHA, NE PERMIT NO. 36
Volume IX, Statewide Issue 1
January 2015
Herbicide costs for the GMO varieties are projected to increase more than for the non-GMO varieties.
Drop in land values a driving factor in estimate for lower production costs by Gordon Wolf Authors of an Iowa State University (ISU) Extension publication anticipate that the cost of producing corn and soybeans in Iowa will be less in 2015, but cautioned that many factors will cause costs to vary. The publication, “Estimated Costs of Crop Production in Iowa – 2015,” which was released this week, is a tool to help farmers determine their potential crop costs per acre and per bushel, according to a release from ISU Extension. Tillage practices, machinery, inputs, labor and land are among the crop cost factors that are considered in the calculations. Iowa State University Extension and Outreach Economist Alejandro Plastina told Iowa Farm and Ranch that whether a producer sees a decline in the cost of crop production in 2015 will depend on the cash rent or cash rent equivalent. “We are seeing that our estimates for 2015 are slightly lower than in 2014, but that is really depending on our assumptions that tenants can renegotiate land rents from five to seven percent lower compared to 2014,” he said. Plastina explained that land values, in general, declined substantially, an average of eight percent. “We’ve heard of many producers who have renegoti-
ated their rents around that percentage, some more than five percent, some less than five percent, and others are still renegotiating their cash rents,” he said. Plastina added, though, that his concern is if a producer isn’t able to renegotiate his or her cash rent, then they probably won’t see a decline in the cost of production. He continued it is important for producers to find their break-even point. “These are just the guidelines for the average farm,” Plastina said, explaining that operators of very small or very large farm will have different findings. He also said it is important for producers to use the final column in each table of the “Estimated Costs of Crop Production in Iowa – 2015,” which is reserved for the producer’s estimates. “That is there for the producer to use,” Plastina said. “That is the whole idea. We’re trying to guide and trying to help the producer to find his or her break-even point.” The goal, of course, is to help producers with their marketing plan. “Once they know the break-even point, they can plan on selling part of their production when the price is close to the break-even point,” said Plastina. “If they (the producers) don’t know their break-even point, it’s just a guesstimate of what the break-even
point is,” he added. “Given the not-so-bright outlook in prices, when the price gets close to the break-even point, it would be smart to sell part of your production at that price. It is best to be conservative and make sure you cover most of your costs.” In addition to the value of land as the main driver in the estimate that production costs will be less in 2015, other factors are also pushing costs down. Lower fuel costs help reduce machinery costs and the cost of crop insurance is estimated to be less because of lower prices. Plastina said the costs for seed and chemicals are about the same or slightly higher, while labor costs are flat. Even with the slightly lower production costs predicted, producers can still expect tighter margins, Plastina said. The declining prices are much bigger than the declining costs, he pointed out. “It’s important to highlight the need for a good, strategic marketing plan, because margins will be squeezed,” Plastina said. In a press release, Steve Johnson, farm management specialist with ISU Extension and Outreach, said a drop in the crop cost estimates is expected for both corn and soybean production in Iowa. PRODUCTION COSTS, Page 2