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■ Agriculture Outlook
■ Agricultural Outlook
By Kent Thiesse
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Rising farm input costs continue into 2023
Crop producers in Southern Minnesota had some very good profit years in 2020 and 2021 and will likely have another strong profit year in 2022. The higher levels of net farm income in recent years are the result of above average crop yields, strong commodity prices, and manageable crop expenses. However, as we end the current year, inflation and rapidly rising crop input costs for 2023 will likely increase crop breakeven costs, which could potentially result in much lower net farm income levels for the 2023 crop year.
Almost every crop input expense for crop production will increase in 2023 compared to expense levels in 2022 and other recent years. Much of the focus has been in higher fertilizer costs for corn; however, input costs are also expected to be significantly higher for seed, crop chemicals, diesel fuel, propane, repairs, custom work, and labor. About the only input not expected to a show major increase is crop insurance expense. Interest expense, machinery depreciation and other overhead costs are also likely to increase in 2023.
Many types of fertilizer products are now at record price levels, which is likely to have a big impact on corn breakeven levels and could encourage more soybean acres next year. Most fertilizer products have doubled in price from 2021 levels, with some nitrogen products almost three times higher than 2021 levels. The rapid increase in fertilizer costs is being driven by high global demand, very tight supplies of many fertilizer ingredients, and by shipping issues at U.S. Ports. Fertilizer expense typically accounted for about one-third of a corn farmers crop input costs (20132021); however, in 2022 the fertilizer cost will likely be 35-40 percent of total input costs and may rise to 45 percent or higher in 2023.
An average corn fertilizer program in Southern Minnesota is expected to cost $300 per acre or more in 2023, without any supplemental manure applications. This compares to documented fertilizer expenses of $142 per acre in 2021 and $126 per acre in 2020, based on South Central College (SCC) Farm Business Management (FBM) data. In addition to increases in fertilizer costs and some other crop input costs, most farmers will also likely face increases in land rental rates in 2023. Most experts expect 2023 cash rental rates in the Upper Midwest to increase by 10 percent or more, meaning that rental rates that were $250 to $275 per acre in 2022 will likely be $275 to over $325 per acre in 2023.
The combination of significantly higher crop input costs
SOUTHERN MN FARM BUSINESS MANAGEMENT SUMMARY
(average corn bushels to cover crop input costs, land rent costs, overhead costs per acre)
Input Costs 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
(Est) 2023
(Proj.)
Seed $125 $128 $123 $121 $118 $113 $111 $108 $110 $125 $135 Fertilizer $191 $167 $147 $135 $116 $115 $128 $126 $142 $250 $300 Chemicals $34 $35 $37 $38 $38 $36 $37 $37 $42 $65 $75 Other Costs $167 $167 $138 $130 $152 $151 $159 $147 $166 $175 $180
Total
Input Costs $517 $497 $445 $424 $424 $415 $435 $418 $460 $615 $690 Ave. Price $4.49 $3.97 $3.52 $3.35 $3.23 $3.48 $3.76 $4.09 $5.40 $6.50 $6.00
Per Bu. (est.) ($5.00)
Corn Bu. 115 83 87 88 84 76 73 69 86 95 115
to cover Inputs (138)
Cash Rent $250 $251 $235 $230 $219 $217 $214 $214 $227 $265 $300
(Ave./Acre)
Corn Bu. to 56 63 67 69 68 62 57 52 43 41 50
cover Cash Rent (60)
Overhead Expense $116 $111 $110 $101 $99 $94 $95 $99 $107 $110 $115 Corn Bu. to cover 26 28 31 30 31 27 25 24 20 17 19
Ovhd. Exp. (23)
Total Bu. 197 174 185 187 183 165 155 145 149 153 184to
cover All Costs (221)
Actual Corn Yield 171 167 206 205 215 178 180 207 206 210 200 Net Return ($7) ($44) ($56) ($54) ($34) ($56) +$42 +$169 +$333 +$350 ????
over All Costs (est.)
NOTES: n The data in the table is from the South Central College Farm Business Management (FBM) Program and the University of Minnesota FINBIN program. n The “Net Return over all Costs” includes government farm program and crop insurance payments. n The “Net Return” does not include any allocation for farm operator labor and management charges. 28 • NOVEMBER 2022 • MN Valley Business