December 21, 2010

Corn, soy production costs to rise in 2011

Traders and economists have forecasted last week high corn and soy prices for 2011, with the crop production cost to be also higher.

US$6 corn and US$13 soy are bearable to most Indiana growers, but sharp increase in fertiliser and cash rents will bite into those enticing profits. Purdue Ag Economist Dr Chris Hurt says, while corn and soy production will be profitable next year, farmers will be facing higher input costs, "our estimates are that corn production will cost about US$4.40 a bushel, and soy production will average about US$10.40 a bushel."

These estimates, released in October, take into account all inputs plus cash rent, machinery deprecation, and family living expenses. Hurt said that, while US$10 soy may sound high, farmers will have to get at least that level just to break even.

Fertiliser costs have already begun to rise and Hurt advises producers to lock in those prices as soon as possible, "higher prices will mean farmers around the world will want to use more fertiliser, so demand will be very strong and prices high." How strong that world fertiliser demand is may be a factor in determining whether growers plant corn and soy in 2011.

Hurt says in Indiana cash rents could jump by as much as 10% next year, "cash rent increases will be hard to judge, but we see them going up at least 10% and, in some cases, even more." He said good price and profit prospects for 2011 will combine to push cash rent agreements up in 2011. He also sees the land market remaining strong with prices moving up from 2010 levels.