November 26, 2008
US grain farmers face potential losses from high input costs

After reaping bumper profits for corn and soy crops in the past two years, US grain farmers may incur losses for their 2009 crop even before finalising their planting strategy.

Corn and soy prices have nose dived to a point that producers locked into input costs for next year's crop when prices were booming months ago, require a rebound to earn a profit.
In northern Ohio, corn  farmers need to receive US$5 per bushel to break even, which requires prices to increase 42 percent from the current cash corn price of US$3.52 per bushel, according to an informal study by an Ohio grain dealer.
The breakeven soy price was US$9.83 per bushel, up 14 percent from the current cash price of US$8.64 per bushel, the study said.
Fertiliser, the largest input cost for corn production, was at US$242.17 per acre, while fertiliser for soy cost US$83.73 per acre, said the study.
Labour costs also reached US$44.85 per corn acre and US$39 for soy.
Aside from fertiliser, the cost of fuel for tractors is swinging wildly amid the global economy slowdown.
Fertiliser prices soared in the first half of 2008 as demand rise on tight supplies and record grain prices that spurred farmers to plant as many acres as possible.
Prices have dropped in the past few weeks but have not matched the nearly 54-percent decline in corn futures and the nearly 47-percent fall in soy futures from record highs. Some fertiliser producers were also reducing output to support prices.
Some crop producers were planning to void fertiliser contracts booked during the summer, but the lack of fertilisers may lead to reduced yields, said an industry player.
US Midwest farmers were finding that the size and condition of their recently harvested corn and soy crops were having little impact on prices that grain dealers were offering for their supplies, said farmers and agricultural economists.
Most farmers were getting prices based on non-agricultural factors such as the US dollar value, weakness in crude oil and the performance of equity markets, as there is a realisation that those are the fundamentals of the market, said Darren Good from the University of Illinois.
Due to the market volatility, some farmers chose to maintain their traditional rotation practices to ensure some level of predictability.
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