As the 2011 harvest concludes, preparations are well underway for 2012. You already know how many acres of corn and soybeans you are planting, and where they are being planted. Your seed dealer has been calling since July wanting your order, and whether prices were available or not, you know that seed prices will be higher for the 2012 crop. You have probably already booked your nitrogen, and know it is higher than last fall. It is probably time to get a grip on just how expensive your 2012 crop will be.

Input prices are surging higher, which is not what you wanted to hear, but need to know. Purdue economists Bruce Erickson and Alan Miller say growing corn, wheat, or soybeans next year will likely cost much more than it did in 2011. In the latest Purdue Ag Economics Report they outline many of the increases in crop input costs which you will have to budget for the coming crop year.

The greatest increase will be cash rents, which will likely parallel the 12% increase seen a year ago.  However, you may have more control over your land costs than other crop input prices.

Cornbelt prices for anhydrous ammonia range from $790 to $890 per ton. DAP is $680 to $725, and potash at $580 to $665. The Purdue economists say the average is $100 per ton higher this year than last year.  Based on price per acre of nutrients, their fertilizer cost estimates range from $165 to $211—depending on the prior crop, soil test, and nutrients remaining from the prior crop. If you harvested corn stover for biomass use, P & K requirements may be slightly higher.

Fertilizer prices are a function of world demand and imported products make up 55% of the nitrogen and 81% of the potash you use. Since the US produces phosphate, and exports 44% of production, foreign demand will help set its price. You have likely heard that South American producers are planting more corn for 2012 harvest, which means their demand for fertilizer has increased your prices. Nutrient prices are also heavily dependent on energy prices paid for transportation. Ammonia is made with natural gas, but that price has recently been fairly low. With the broad range of prices for nitrogen and fluctuating price of corn, make your nitrogen decisions based on the returns you receive from its application. A handy Web-based decision aid is provided by Iowa State University. The N-rate calculator only needs to know your location, ammonia price, and corn price, and then provides the most economic application rate.

Seed corn costs may be as much as $87 to $107 per acre for 2012, after all discounts are applied. Seed bean costs may be about $62 per acre. The Purdue economists project increases in acreage planted with biotech seed, since 2011 corn was about 80% herbicide tolerant and 65% was insect resistant. About 95% of soybean acres are herbicide tolerant.

Crop protectants have not increased much in price in recent years, and the Purdue economists say that will be the case for the coming year. Glyphosate prices fell two years ago and were even lower last year. Other chemicals will see lower prices and some higher, depending on market demands. However, if you remain with products used in recent years, your budget for crop protectants should be about the same as 2011.

Another flat priced trend will be for diesel fuel. Prices surged from 2010 into 2011, but have remained rather steady.  For specific monthly pricing, based on the futures market, Kansas State economist Kevin Dhuyvetter provides a monthly forecast which indicates spring diesel fuel prices will be 25% below prices paid in the spring of 2011.

Machinery costs have been rising. If you are in the market for a small tractor, that market is dominated by the stagnant housing market and soft demand for construction equipment. However the demand for large tractors, tillage equipment, and combines is higher as farming operations get larger and weather windows get smaller. Planters and other precision farming implement costs are also higher due to the attachments that reduce overlaps and provide greater efficiency.

Summary:
Be prepared to expect higher crop production costs for 2012, compared to the past year. Fertilizer prices are higher due to international demands; seed costs are higher because of demand and performance; and machinery costs are higher due to greater efficiency. Crop chemical and fuel prices are flat to lower compared to the 2011 crop.

Source: FarmGate blog