Ag faces inherent risks
By Brian Rees, Extension Agent
Saturday, October 18, 2008
Harvest seems to be progressing nicely to date, after a brief break with some appreciated rainfall last week. With any kind of luck, much of the crop should be harvested by the end of the month, and it appears that it should be mostly an above average harvest. As with most of life, the high commodity prices did not hold through harvest and I know of only a few individuals who took advantage of the opportunity to lock in some of those higher prices with forward contracting.
The uncertainty of the national and world economic situation brings a great deal of uneasiness to the ag sector as well. Many individuals within the Lyon County community do not understand the risks taken by local ag producers, both personal and financial.
For example, with the greatly increased fertilizer, seed and chemical prices, it would not be uncommon for a producer to have over $200 per acre tied up in those, plus the cost of land, crop insurance, equipment and its operation, and living. Simple math would give you the result of $20,000 for 100 acres of corn, or $100,000 for 500 acres of corn.
Additional expenses could include any field tillage, fertilizer and chemical application, and harvesting expenses to name a few. With conventional tillage, average custom rates from 2007 — and they are higher this year — for disking were $8.85 per acre, and a follow-up field cultivation averaged $7.75 per acre. Custom rates for no-till planting averaged nearly $12 per acre in 2007, while custom rates for planting in conventional tilled fields averaged over $10.50. Fertilizer and chemical application charges averaged $5 per acre per trip in 2007, and in most situations there were at least two trips for no-till corn and one for conventional, but more than likely there were 3 and 2 trips respectively. In 2007, corn harvesting averaged nearly $24 per acre plus an additional $0.17 per bushel on fields yielding over 78 bushels per acre, with hauling charges averaging $0.15 per bushel with an additional charge of nearly $0.01 per bushel per mile over 15 miles.
So what does this all mean, other than it’s a bunch of numbers that add up quickly? Well, just to get a corn field to the point of harvest, a producer would have the $200 per acre in inputs, plus another $40 per acre in tillage, planting and application charges. Harvest expenses in 2007, and for round figures I’ll use a 100 bushel per acre yield, would have averaged nearly $43 per acre. We quickly see that we are nearing $300 per acre in up-front expenses.
With today’s commodity prices – down like the stock market from earlier highs – it will take nearly an 80 bushel per acre corn yield (the 2006-2007 average was 93 bushels per acre) to cover crop expenses without anything figured in for a land cost regardless of whether rented or owned. Also remember there is nothing calculated for living expenses.
Look unsettling? I have long considered agricultural producers to be some of the biggest gamblers in the world – it just takes a while to know if you win or lose!By Brian Rees
Extension Agent
By Brian Rees