Input costs for the corn, soybeans and spring wheat are running 10 to 15% higher than 2011, says Jack Davis, SDSU extension farm management specialist.
He estimates production costs to be up 13-15% for corn, 14-16% for soybeans and 10-12% for spring wheat.
Fertilizer and land rent costs are two of the input costs with the largest increases, Davis says.
These two inputs combine to make up 40 to 50% of expected gross revenue for each of the spring crops. Fertilizer and rent are followed by equipment costs at 18% to 20% and seed at 10% to 13% making up the top four input costs and accounting for 70% to 80% of gross revenue.
To help manage expected tighter margins in 2012, Davis suggests that you:
Use good agronomic practices. Know your farm and its land production history. What is your yield and costs for continuous corn? If you experience yield drag for corn on corn you may want to stay with a rotation.
Use soil tests and appropriate yield goals for your farm. A good guideline yield goal for corn is to use a 5-year Olympic average plus 10 to 15%.
Consider using a flexible cash lease. A flexible-cash lease agreement is a rental arrangement in which the landowner receives additional cash payments from the tenant or operator in addition to the base rate often adjusted for changes in crop prices and yields. Don Guthmiller, an SDSU farm management specialists, provides the following example of how a flexible cash lease would work:
- If the base corn cash rental rate was $150 per acre and the crop insurance yield is 150 bushels with a $5 price that would give a total base price per acre price of $750.
- At harvest if the total return was $900 per acre then the owner would share in the additional income at a predetermined rate. If the rate were 25%, 25% of the $150 increase per acre returns would give the landowner $37.50 more per acre for a total rent of $187.50 per acre.