US farmers to spend more on grain production costs

US farmers will spend more to produce their 2011 crops, but they are likely to compensate that with higher grain prices, according to Purdue University Extension specialists.

Which crops farmers choose to plant this season also will play a factor in the returns they will earn, according to Craig Dobbins and Bruce Erickson of Purdue's Department of Agricultural Economics. The numbers suggest a corn-soy rotation is the best choice, with double-crop soy/wheat a good option for those farmers living in areas where that cropping system is viable.

"At this point in time, contribution margins - the difference between gross revenue and production costs - are really quite large," Dobbins said. "If one is looking for a place to expend energy from now until you can get out into the field and plant, I think one ought to focus that energy on protecting the margin that you've got in crop production today."

Dobbins, Erickson and fellow Extension specialists in Purdue's departments of Agricultural Economics, Agronomy and Botany and Plant Pathology expect farmers to dig deeper into their wallets to grow corn, soy and wheat in 2011 than first thought last fall.

Since October, fertiliser and diesel fuel prices have gone up, while crop insurance premiums are likely headed higher, the economists said. On the flip side, pesticide and grain dryer fuel prices have dipped.

It adds up to a per-bushel production cost of US$4.19 for rotation corn on average-yielding land, up 30 cents from 2010. The projected cost to produce rotation soy this year is US$9.73 per bushel on average-quality land, a 33-cent jump from one year ago.