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July 24, 2008
What is really behind food prices?
No, not those darn nasty biofuels. It is oil. The price of oil driving up fertilizer and transportation costs. Check ou tthis new report.
Costs to get crops in the ground will jump by about a third in 2009, fueled by fertilizer prices expected to surge 82% for corn and 117% for soybeans, said Gary Schnitkey, an agricultural economist who conducts the annual survey of input costs.
Fertilizer—the biggest non-land expense for corn and soybean farmers—is tethered to the same cost spiral that has driven steep gasoline and heating price increases over the last few years, said Schnitkey, a professor of agriculture and consumer economics.
The study projects non-land production costs for corn will total $529 an acre next year, up 36% from 2008 and nearly 85% higher than the average of $286 per acre from 2003 to 2007. At $321 an acre, soybean input costs are projected to rise 34% from 2008 and more than 78% from the 2003-2007 average of $180 an acre.
The per-acre costs are based on high-producing farmland in Central Illinois, but corn and soybean farmers across the country will see similar increases.
Assuming cash-rent fees of $200 an acre, the study projects a break-even price of $3.82 a bushel for corn in Central Illinois, based on an average yield of 191 bushels an acre. Soybeans would break even at $9.65 a bushel, based on yields of 54 bushels per acre.
Schnitkey says 2009 prices should be significantly above break-even prices. Based on futures markets, corn should sell for about $6 a bushel next year, with soybeans in the $13 to $14 range.
Posted by Martin at July 24, 2008 7:40 AM
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