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Crop Profit Projections Down For 2009

The 2009 crop profit projections are better than expected and are favorable when viewed in a longer historical context.

By Andrew Swenson, Farm Management Specialist

NDSU Extension Service

The 2009 crop profit projections are lower than those made for the 2007 and 2008 growing seasons, but those projections were the best that I had seen in 18 years of preparing crop budgets.

However, the 2009 projections are better than expected and are favorable when viewed in a longer historical context.

Grain prices and input costs are much higher than three years ago and have been volatile the past two years. For example, direct cash costs of crop production last year were projected to explode, on average, by about 30 percent. Actual production costs in 2008 were even higher than projected. Compared with last year’s actual costs, overall 2009 production costs should be relatively flat, with increases in some crops, but probable declines for small-grain crops.

Total costs for small grains may decline some because of reductions in the price of seed, fuel and crop insurance. Many producers have purchased fuel already for 2009 at one-half the price paid last year.

Revenue crop insurance premiums, per acre, should drop because of lower dollar coverage. For example, last year wheat revenue insurance was based on a price of $11.11 per bushel. This year, it is more likely to be around $6.50 per bushel. Producers could have about 40 percent less coverage and, therefore, lower premiums. However, the cost per dollar of coverage is higher this year, so the premium costs per acre would not be reduced by the same percentage as coverage.

Seed prices for several crops will be significantly higher. The increases are 25 percent to 30 percent or more for canola and soybeans, 15 percent to 20 percent for corn and around 15 percent for sunflowers. Overall, herbicide prices increased about 5 percent to 10 percent.

Fertilizer costs are difficult to predict. They will vary greatly from producer to producer, depending on the time of purchase. Lack of demand has caused fertilizer prices to crash from historical peaks.

Many of the fertilizer purchases in the summer and early fall of 2008 for the 2009 crop were made at prices twice as high as current levels, but fertilizer prices often increase in the spring. Areas that were dry last year, such as the southwestern part of the state, have higher soil nitrogen levels, which will help producers with nitrogen costs.

Spring wheat profit is expected to be $20 per acre in the east-central and southeastern regions and mostly positive, but near break-even in the other regions.

Durum profits are projected at $30 to $47 per acre in the western and central regions. Other regions show a profit, but there is substantial risk of price discounts due to poor quality.

Generally, winter wheat shows a modest profit, with the best returns ($29) in the south-central region.

Except for the Red River Valley regions, malting barley is one of the better prospects throughout the state in 2009. Profits should average in a range from $20 to $50 per acre. Corn shows a modest profit in the southern Red River Valley and southeastern regions, but losses in most other regions.

As usual, soybeans look good. Profits are projected at between $50 and $75 per acre in the Red River Valley and the east-central and southeastern regions. However, the oilseed crops of sunflowers, canola and flax show negative returns for all regions, except for a small profit for sunflowers in the north-central region.

Field peas, assuming food quality grade is achieved, generally project a profit in the $20 to $30 range.

The highest profit projections are for dry beans, lentils and mustard. Projections range from $75 to more than $100 per acre. However, these crops are not suitable for all regions of the state and have more production management challenges than other crops.

A management reminder for 2009 and reinforced in 2008 is that input cost procurement, grain marketing and crop insurance should be managed in concert to reduce the risk of being caught on the wrong side of rapid price changes.

The budget projections are a snapshot in time and only intended to be used as a guide. Producers are encouraged to develop their own budgets. Prices and yields are extremely difficult to predict. It is critical to evaluate crop insurance and consider the financial downside risk, as well as the upside potential, of different crop rotations.

The budgets are available on the Web at www.ext.nodak.edu/extpubs/ecguides.htm and your local NDSU Extension Service office.


NDSU Agriculture Communication

Source:Andy Swenson, (701) 231-7379, andrew.swenson@ndsu.edu
Editor:Rich Mattern, (701) 231-6136, richard.mattern@ndsu.edu
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