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Veteran Contributor

Everything is relative

Alot of individuals seem to be fixated on what they perceive to be record high grain prices, but in reality are they? Fertilizer prices of $1000 per ton for 46-0-0, diesel fuel at .95 cents per liter. At those inputs growing wheat, barley, oats, and even canola starts to become a questionable endevour.
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7 Replies
Senior Contributor

Re: Everything is relative

     Glad to know maybe some one else sees this problem the same way that I do.The answer to high grains is NO.Look at the cost of  new tires on a tractor,new combines of $300,000 and in terms of gallon priced diesel,near $4.00. Wheat for example hit over $6.00 at our terminal in 1974,off road diesel was probably around 40-45 cents a gallon with urea46% around maybe $130 a ton. Do the math on every thing metioned and to equal that 1974 high of $6.00 a high today would be $24.00 plus.No grains realy are not that high!

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Frequent Contributor

Re: Everything is relative

I completely agree.  All the talk is on big margins for corn and soy on prime corn belt ground, but for those of us on the margins growing say, wheat or barley, it's a different story.  It's a significant point that this market needs all of our production to meet demand now.  Margins for some of us are razer thin or non existent, we can't stand any drop off in price from here and still keep up with inputs.   I'm glad you brought this topic up.

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Senior Advisor

Re: Recent prices in grain

have created demand for crop imputs. Those folks selling those items are well aware of the increased demand and are harvesting their profits.

 

They sell to the folks that will pay foritand they don't much care if you make a profit or not. You have been blessed with increased demand for what you produce. Crop imput suppliers have been blessed the same way. Profitable farmers buying their products.

 

Their productions cast are  like your crop costs in that they have little to do with their selling prices. There prices are reflecting what the market will bear.

 

 

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Senior Contributor

Re: Recent prices in grain

Until one farmer (or corporation) controls all the land farmers will not actually be setting the price they sell for. Input providers establish their prices based on what they think the market will bear and we blindly accept and pay their price. I cannot alone boycott a supplier and expect him to lower his price. I have and will cut back on some inputs even if it means sacrificing a little yield. Will you?

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Senior Contributor

Re: Everything is relative

Spoiler
 

    Growers simply need to look at real margins in their  opperations rather than price. I farm in an area where we produce specialty commodities and for instance a crop that would occasionaly bring say 90 cents a pound in the 80s and 90s . Now when the same crop is around 90. cents,once in a while I will hear a grower say some thing like this,we have always be pretty happy whith 90 cents.Our ag college says break even on this commoditie is 92 cents,and that was last figured when off road deisel was $2.40 per gallon,go figure.The market will pay higher if the growers would hold but their seems to be some kind of satisfaction in being the first one rid of his crop.I think some of these folks just feel helpless!

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Re: Everything is relative

http://www.farmdoc.illinois.edu/manage/index.asp

 

As far as cornbelt economics go, I think the U of I crop budget spreadsheets are pretty good. Low productivity Central Illinois hits Central Indiana pretty close and you can tweak your own numbers into it.

 

Still pretty profitable although no longer a 6 inch putt like in the early years of the boom.  But a whole, whole lot of money on the table.

 

I can remember that for most of the years from say 1981-2005 you could run a crop budget and conclude that you had to beat the average by a little on all counts (price, input cost, yield) in order to make money on that marginal acre that the budget represented. 

 

So in my mind this is a whole lot better although a multi-year period where pries are substantially below present, couple with any sub-par production, will result in some equity bleed for a lot of producers.

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Veteran Contributor

Re: Everything is relative

Read today the cost of producing 46-0-0 is $100 a ton. Nice margin.
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