cancel
Showing results for 
Search instead for 
Did you mean: 
Honored Advisor

Projecting record yield 4 years out?????

Costs incurred in Raising a bushel of corn-------- and how they have changed in the last 30 years.

 

1. Seed----- under Global Corporate control

 

2. Fertilizer------ priced on a world market

 

3. weed control, Pest & disease control ----- Cheaper than 30 yrs ago.

 

4. Land and water ---------- coupled together they equalize the land cost in corn expenses of most of out production areas

 

5. Labor -------------   A very small portion of corn cost per bushel

 

6. Equipment ------- Now international in sales and demand, with high steel and tech costs.

 

7. Transportation and marketing ---------

 

8.  Interest --------------   already low

 

------------------------------------------------------------------------------------

If the price of corn is going to go down 25+% again in 2014.  Which of these expense areas will go down to make it possible to maintain production???

IMO half of these will not go down and likely none of them, which means the other half will need to drop more than the % drop in corn to maintain production acres for more than one planting.

 

Serious question 

 

 

0 Kudos
13 Replies
Honored Advisor

Re: Projecting record yield 4 years out?????

SW- the US is the best area in the world to raise corn, if we can`t... I don`t think anyone else will either.  Smiley Happy

 

Seed will go down, because if it isn`t any cheaper and corn is cheap, I`ll buy all conventional seed from the Albert Lea Seed House  http://www.alseed.com/    screw the big corporations!  Buy conventional soybean seed and plant bin-run seed the next.

 

Fertilizer, fertilize as much as you can afford with the price that the market offers. A small crop doesn`t remove as much fertility.   With land in a cheap grain environment, land prices will have to come down and that might hurt those with locked in high land costs.

 

With equpiment, everybody is already overpowered.  Not that many years ago a guy could farm 1,000 acres with 8 row machinery, now it takes 16 row and they`re eyeing a 24 row...and now they don`t even cultivate.  Smiley Happy

 

Interest rates have no where to go but up, and once they start and the skids get greased up, it could get painful fast.

 

But, this current price down trend "could" be just a blip.  Oil prices are firm, trouble in the Ukraine, China has had strong demand,  "global warming" makes record crops unreliable.  So, I wouldn`t perform "Last rites" just yet....next year if it doesn`t improve, maybe  Smiley Happy

0 Kudos
Advisor

Re: Projecting record yield 4 years out?????

you have to remember that these projections are from the same bunch that says there is no inflation.

Honored Advisor

Re: Projecting record yield 4 years out?????

BA,  

You guys are where there is more potential for conventional seed, but I have my doubts there is enough seed production left to force the big dogs to back off the costs.  I am thinking large acres going to other crops might be the only thing that backs them down and that would drop production.  But I agree with your sentiment.

Equipment, yes it looks like we plenty of ability, but I think that means costs are locked in for a few years. (and some of it without a depreciation offset)

Fertilizer------- the one thing that could be backed away from and be ok for the 1st year, but production will drop ---- I just don't think the price is as flexible as it once was.

 

I have a feeling your right on the last statements.  And I think even usda will cheer for higher corn prices before the fed stops sitting on interest rates.  That would be like admitting the fed. actions of 2008-9 didn't work.  

0 Kudos
Senior Advisor

Re: Projecting record yield 4 years out?????

Costs incurred in Raising a bushel of corn-------- and how they have changed in the last 30 years.

 

1. Seed----- under Global Corporate control

 

The seed companies think that the only way for farmers to increase yield and profits is with there produces = we  can't live with out them , We have to plant them - and they are not willing to come down on them - that only leaves one thing for farmers to do - cut populations down to reduce costs .

 

2. Fertilizer------ priced on a world market

 

You said it sw -- WORLD market ! Just because our prices are down don't mean that some place on Gods Green Earth  , they are not - just look at the price of urea - it has gone up sence the first of dec. and 28 is up 87 bucks a ton .

 

3. weed control, Pest & disease control ----- Cheaper than 30 yrs ago.

 

Really there holding there own here - BUT 2-4-D has gone up a lot - Just me thinking out loud here , but isn't it funny it would go up about the same time that the new beans are about to come out ? I here it's a acid shortage ? What ever !

 

4. Land and water ---------- coupled together they equalize the land cost in corn expenses of most of out production areas

 

Yes land costs ! But I just don't see cash rent coming down much or any - reason ? There land taxs go up just like everbodies and for the most part are retired = cost of living

 

Water ??????? Lost here - We still use good ole rain here - when we get it , Smiley Wink

 

5. Labor -------------   A very small portion of corn cost per bushel

 

Other than Norm and Big Jay in the fall - that will not change much - unless they go on strike ! New contracts come up this year - Smiley Surprised

 

 

 

6. Equipment ------- Now international in sales and demand, with high steel and tech costs.

 

This could be where the shoe drop's - The market is over run with large equipment .

 

7. Transportation and marketing ---------

 

I see this about the same

 

8.  Interest --------------   already low

 

Agree with one way to go - up

 

Also good point BA - It will boil down to how much you can aford to put on to control profit .

 

Have a Great Sunday -  Don't forget - Today is the Great American Race = Daytona Smiley Happy

 

------------------------------------------------------------------------------------

If the price of corn is going to go down 25+% again in 2014.  Which of these expense areas will go down to make it possible to maintain production???

IMO half of these will not go down and likely none of them, which means the other half will need to drop more than the % drop in corn to maintain production acres for more than one planting.

 

Serious question 

0 Kudos
Highlighted
Senior Contributor

Re: Projecting record yield 4 years out?????

I agree with most of the posts on this thread.

 

SW posted:  "Equipment, yes it looks like we plenty of ability, but I think that means costs are locked in for a few years. (and some of it without a depreciation offset)"

 

We were just talking about this last week. We are pretty well set up with equipment for the next few years. We have done some updating the last 5 years. As far as the depreciation offset:  we have done some Section 179ing the last few years but never taking all of a piece of equipment. 

 

I am pretty simplistic in my thinking, but if we aren't making as much money, therefore paying less income taxes, doesn't that  = not needing as much depreciation offset.

Advisor

Re: Projecting record yield 4 years out?????

Worst case you can farm insurance... Reduce n rates/ fert/ seeding rates. If you have half decent yield history you'll turn a profit from insurance

It's a long way til that happens though... At least here we are at 4.50.

Who knows we might get another 50 cents before July and then start heading to breakeven, which is 3-3.50 for me.
0 Kudos
Honored Advisor

Re: Projecting record yield 4 years out?????

Good one arnfarm735,

 

Your right that depreciation thisn will take care of itself if price gets low enough.

0 Kudos
Honored Advisor

Re: Projecting record yield 4 years out?????

A little irritated at myself ------ I left out one of my costs.

 

9 --- Inflation cost ---------- you seldom see anyone account for it but this years income has got to pay for next years expenses ----- you just cannot leave it out.

0 Kudos
Veteran Advisor

Re: Projecting record yield 4 years out?????

From my cracked crystal ball with duct tape
And baling wire holding it together.

Seed cost, they will go down, but only
To the big producers. We will see bigger
Discounts in the "associate dealer" programs
Also requirements to buy other seeds.

Remember, these companies MUST make
Money, due to stock holders demands.

As far as conventional.....where are you going
To get seed?
0 Kudos