After awhile I become almost numb to the cost of things. The figures get so big I can't get my arms around them, but I know they're overwhelming.
For example, consider the war on terror. The U.S. administration says it's running us about $6 billion a month in Iraq and another $1 billion a month in Afghanistan.
In addition, it now looks like the tab on Hurricane Katrina will come in at about $150 billion, instead of the estimated $200 billion we heard about immediately after the storm hit. That's a big step in the right direction, I suppose, if you can comprehend what a $50 billion savings means.
What I can figure out, though, is what rising costs mean to you for next year, and the picture looks a little grim. If there was ever a time to tighten your belt, this is it.
“Rising costs and lower crop prices will change farm management,” says Lori Wilcox, energy analyst at the University of Missouri Food and Ag Policy Research Institute (FAPRI). “Farmers must re-examine each cropping practice, whether in tillage, crop rotation or application rates.”
And when it comes to diesel prices, don't expect much relief by the time you pull out the planter next spring.
A national outlook projects crude oil prices will average about $63 a barrel throughout 2006. The only bright spot is that you've just finished the costliest fuel usage time of year — harvest — where typically 60% of your fuels costs for corn production occur.
FAPRI says the final cost of production for 2005 is expected to increase at least $14/acre for corn and $5/acre for soybeans. That's still a far cry from 2006 forecasts, however.
Variable costs on Illinois grain farms are projected to be $55/acre higher for corn in 2006 than in 2002, according to a recent University of Illinois (U of I) Extension study.
“Variable costs for soybeans will be $20/acre higher in 2006 than in 2002,” says Gary Schnitkey, U of I Extension farm financial management specialist. “In percentage terms, that's a cost increase of 33% for corn and 19% for soybeans over the four-year period.”
You can check out the full report, “Variable Cost Increases for Corn and Soybeans in Historical Perspective,” at www.farmdoc.uiuc.edu and click on the “management” tab at the left.
The numbers look similar for Indiana, where farmers should plan for a double-digit increase in the costs of producing next year's crops, says Alan Miller, Purdue University farm business management specialist.
“The total variable costs of producing corn and soybeans in rotation on average Indiana farmland are forecast to increase at least 12% in 2006,” Miller says.
This year alone, total production expenses are up $8.9 billion, a 4% increase over last year's $218.7 billion, according to a recent USDA Economic Research Service (ERS) report.
So there's no way around it, buckle down and plan on substantially higher input costs next year. Watch the number of times you need to run a tractor across a field and search long and hard for pricing opportunities on seed, fertilizer and crop chemicals.
Conservation Tillage Conference
Be sure to mark your calendars for the Conservation Tillage Conference & Expo scheduled for Feb. 1-2, 2006, in Sioux Falls, SD. For more information log on to www.cornandsoybeandigest.com and click on the conference icon at the right. The Corn And Soybean Digest is a major sponsor of this event.
MarketMaxx Sign-Up Begins For Next Year
The second year of The Corn And Soybean Digest's MarketMaxx contest is about to kick off. You can sign up now at www.marketmaxx.net. Trading officially begins Jan. 2, 2006. Check out the rules and regs on page 16.