Am I going to make money this year?
That’s the overriding question as crop producers spend hours coursing their fields and sitting at their desks. In order to know when to pull the trigger in today’s volatile and complicated grain market, knowing your cost of production is everything. While it won’t make or break your operation, knowing how you’re doing compared to the competition can be a confidence booster, or motivation to improve, depending on where things shake out.
That’s why it’s interesting to look at a newly reported University of Illinois study of producer costs to produce corn and soybeans last year. Granted, Wisconsin isn’t Illinois, but comparable analysis isn’t available in this state, so we’ll look at “what the neighbors are doing.”
Bradley Zwilling in the Department of Agricultural and Consumer Economics with the University of Illinois, used data from local Farm Business Farm Management Associations. The FBFM is a non-profit organization available to all farm operators in Illinois; 5,500 plus producers participate. FBFM field staff provide with computerized recordkeeping, financial management, business planning and income tax management.
Only farms with no livestock and more than 500 acres of productive and nearly level soils in each area of the state were included. Farms in the 22 counties north and northwest of the Illinois River are the northern Illinois sample. Farms from 36 counties below a line from about Mattoon to Alton are in the southern Illinois data. The remaining 44 counties make up central Illinois. Farms averaged between 1,244 and 1,518 tillable acres.
The cost to grow corn, as producers know, depends heavily on location and soil quality. Last year, the total economic costs per acre for growing corn in Illinois averaged $739 in the northern section of the state, $717 in the mid-section with high-rated soil productivity of 86 to 100 ($687 in central Illinois with low soil ratings of 56 to 85) and $635 in southern Illinois.
Soybean costs per acre were $524, $539, $493 and $467, respectively. Costs were lower in southern Illinois primarily because of lower land costs, notes Zwilling.
All economic costs on a per-bushel basis in the different sections of Wisconsin’s neighbor state ranged from $4.25 to $4.38 for corn and from $8.98 to $9.53 for soybeans. Variations in this cost were related to weather, yields and land quality.
Looking just at the northern Illinois producer records (377 farms, averaging 826 acres)—because of the closer proximity to southern Wisconsin—variable costs were $344 an acre for corn. Specifically, they were: Fertility, $118; pesticides, $44; seed, $95; drying, $19; and repairs, fuel and hire, $68. Variable costs were 14 percent less than the prior year.
Other non-land costs for growing corn in northern Illinois were: Labor, $42; buildings, $17; storage, $6; machinery depreciation, $41; nonland interest, $50; and overhead, $57—for a total of $213 an acre. Total non-land costs came to $557 an acre (off 5 percent from ’09).
Land costs amounted to $30 for taxes and $152 for annually adjusted net rent for a total land cost of $182. Total costs per acre amounted to $739 an acre (down 4 percent from the previous year). The 2010 yields among these northern Illinois farmers averaged 174 bushels. Their nonland costs per bushel came to $3.20, and total costs to $4.25.
Zwilling says that the costs per bushel for corn last year were higher (compared to ’09) for all geographic areas of the state except for the northern region highlighted here. “Costs per bushel were higher due to lower yields. Costs per bushel were 6 cents lower in northern Illinois, 18 cents higher in central Illinois with the higher rated soils, 36 cents higher in central Illinois with the lower rated soils and 27 cents higher in southern Illinois,” he details.
The average corn yield in 2010 was 4 bushels per acre lower than 2009 in northern Illinois, 24 to 30 bushels lower in central Illinois and 15 bushel per acre lower in southern Illinois. The 2010 average corn yield in the different geographical locations ranged from 8 to 24 bushels per acre lower than the four-year average from 2007 to 2010.
The 2007-10 average yield was higher at 187 bushels. Nonland costs per bushel across the three years was $2.98, all costs $3.95.
Producers can see comparable figures for the other three portions of the state with different yields and soil types at http://farmdoc.illinois.edu/manage/newsletters/fefo11_11/FEFO_11_11_tab1a.jpg.
Total costs to produce corn for all combined areas in Illinois were $704 per acre—down 7 percent from the year before. Variable costs decreased $64 per acre, or 16 percent; other nonland costs increased $7 per acre; and land costs increased $4 per acre.
In 2010, cash costs accounted for 48 percent of the total cost of production for corn, other nonland costs were 27 percent, and land costs were 25 percent.
The average corn yield for all combined areas of the state was 164 bushels per acre resulting in a total cost of production of $4.29 per bushel.The average corn yield was the lowest in the last five years. The highest corn yield on record was 194 bushels per acre in 2008. Total costs per acre were the second highest on record and total costs per bushel were the highest since 2001.
For soybeans on the same 377 farms (averaging 403 acres) in northern Illinois, variable costs amounted to $168 an acre (10 percent lower than in ’09). They were: Fertility, $28; pesticides, $26; seed, $52; drying, $1; and repairs, fuel and hire, $61.
Other non-land costs for growing soybeans last year were: Labor, $38; buildings, $9; storage, $3; machinery depreciation, $26; nonland interest, $42; and overhead, $56—for a total of $174 an acre. Total nonland costs came to $342 an acre, which was down 2 percent from the prior year.
Land costs for beans came to $30 an acre for taxes and annually adjusted net rent of $132 for a total of $182. Total costs per acre amounted to $524 (off 1 percent from the prior year). Northern Illinois soybean yields among FBFM growers averaged 56 bushels last year. Their nonland cost per bushel for growing beans last year was $6.11, their total cost $9.36.
The 2007-10 average soybean yield in northern Illinois for these farms was 52 bushels, with nonland costs of $6.58 a bushel on average across the past three years. The average total cost was $10.08. Again, growers can take a look at costs and yields for soybeans in other areas at http://farmdoc.illinois.edu/manage/newsletters/fefo11_11/FEFO_11_11_tab1b.jpg.
“Production costs per bushel of soybeans in 2010 decreased in all areas of the state as compared to 2009. Costs per bushel decreased mainly due to higher yields and lower fertility costs. Soybean yields were higher in every region when compared to the year before,” Zwilling says. “Soybean yields ranged from 2 to 7 bushels per acre higher in 2010 as compared to 2009. Decreases in costs per bushel ranged from 58 cents in central Illinois with the lower rated soils to $1.46 in northern Illinois.”
“Total costs per acre decreased in all geographic regions of the state except southern Illinois when compared to 2009. While costs increased $2 per acre in southern Illinois, cost decreased $6 per acre in northern Illinois, $7 per acre in central Illinois with the higher rated soils and $12 per acre in central Illinois with the lower rated soils. Average soybean yields in the different areas ranged from 2 to 4 bushels per acre higher than the four-year average from 2007 to 2010,” he notes.
On a statewide basis in Illinois, the total cost per acre to produce soybeans decreased, from $522 per acre in 2009 to $515 per acre in 2010. “Generally speaking, the same expenses that decreased for corn also decreased for soybeans. Variable costs accounted for 33 percent of the total cost of production for soybeans, other nonland costs 33 percent and land costs 34 percent,” he reports.
The average soybean yield for all combined areas was 56 bushels per acre resulting in a total cost of production of $9.21 per bushel. The average soybean yield was the highest on record. The cost per bushel to raise soybeans the last five years averaged $8.79 per bushel.
How do your costs compare? It’s imperative growers run similar analyses to get a better handle on when to sell their crops for a solidly acceptable profit.