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2008 cost-of-production figures for Panhandle farmersNebraska Farmers have reason to smile this year because of high commodity prices. But the rosy income picture is tempered by the fact that farmers' cost of production also has increased. For some inputs, the price hike has been sharp enough to take your breath away. University of Nebraska personnel are busy calculating 2008 cost-of-production figures for crops grown in the Panhandle. As every farmer knows, costs have gone up since 2006, the last time UNL calculated them, according to Extension Educator Tom Holman. Higher input costs are not good news for farmers but, if there is a silver lining to this economic cloud, Holman said it could be that there is more money circulating through local economies through agribusinesses that sell fuel, chemicals, fertilizer and other inputs. Costs have increased in almost every input category--fuel, land, electricity and chemicals. Fuel and fertilizer are the leaders. The cost of diesel fuel has increased 55 percent since 2006. Diesel prices are averaging slightly over $3.50 a gallon in the Panhandle this spring, compared with closer to $2.00 a gallon two years ago. Fertilizer prices have increased comparably. Nitrogen fertilizer prices are up a bit over 60-70 percent since 2006. Phosphorous fertilizer has increased 180-200 percent. Paul Burgener, economist at the Panhandle Center, said fertilizer prices are driven by a number of factors. Half of the nitrogen fertilizer is imported, and global demand is up. The weak dollar abroad is another factor. For phosphorous, which is also imported, the cost has increased due to world demand. Burgener said price increases for the various crop protection chemicals has varied widely, ranging from 5 percent to more than 200 percent. Electrical costs have increased 12 percent in the past two years. Land prices have increased 20 percent since 2006. This affects not only renters, who typically share the costs, but also landowners, due to the opportunity to invest the capital at a 5 percent rate of return or better, Holman and Burgener say. The figures used by the University are conservative, Holman and Burgener stressed. Holman also calculated input costs for major crops in the Panhandle, including fertilizer, chemicals and seed. The cost increases vary from crop to crop with the respective levels of different kinds of inputs. For example, some crops use less fertilizer and different types of fertilizer, than others. By crop, the two-year change in input costs were: --Alfalfa: Up 78 percent from 2006. This is largely due to higher phosphorous costs. Seed prices have been relatively stable. --Corn: Up 47 percent. The biggest change was fertilizer prices. Corn uses a lot of nitrogen fertilizer. Seed prices also are up. --Dry edible beans: Up 40 percent. The increase was attributed to chemicals, seed and fertilizer. --Dryland wheat: Up 3 percent. Wheat's increase wasn't as large as some other crops because it has fewer inputs than the other crops. For example, dryland wheat uses less fertilizer than corn. The chemicals commonly used on wheat did not increase much, and seed prices had not increased when the 2008 crop was planted last fall. Holman acknowledged that it is difficult to calculate direct cost comparisons to 2006 because many farmers have changed cultural practices. For example, Roundup Ready sugar beets have exploded onto the scene this year and are expected to account for almost all beet acres this season. Dryland crop-fallow rotations are changing, as well. Holman and Burgener continue to work on the cost-of-production numbers, and plan to publish current budgets for each Panhandle crop in the near future. The crop budgets are typically published every other year, and include wheat (irrigated and dryland), sugar beets, dry edible beans, alfalfa, and corn for both gravity and pivot-irrigated systems. The Panhandle Research and Extension Center at www.panhandle.unl.edu. 4/21/08 Date: 4/16/08
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