Menu

by Seth Teter

Many farmers will be operating on narrower margins than in 2005 as the rising costs of fuel, fertilizer and interest rates are expected to converge during spring planting.

Barry Ward, an Ohio State Extension agricultural economist, said most farm input prices are on the rise with few signs of relief in the near future.

"Of course, net farm income in the short term is going to be affected," he said.

Ward authored a recent report outlining significant increases in 2006 input costs including the following:

• Off Road Diesel – up 19 percent

• Propane – up 17 percent

• Nitrogen – up 22 percent

• K205 – up 32 percent

• P205 – up 5 percent

• Seed – up 2.5 percent

• Operating loan rates – up 19 percent

• Land Cash Rental Rates – up 0 to 1 percent

As of late February, Ward expected the projections to hold with the exception of off-road diesel, which he said may drop slightly. Crop protection chemicals are not expected to increase from last year.

So what does this mean to farmers' bottom lines? The report estimates that corn growers that employ conservation and no-till practices with a 160-bushel yield goal will spend from $1.39 to $1.45 per bushel on inputs. That's up as much as 20 cents per bushel from 2004.

Soybean producers using no-till practices with a 55-bushel yield goal are projected to spend $2.37 per bushel, up from $2.09 in 2004. Ward notes that these estimates do not include the cost of land, machinery and other capital investment, labor and management.

He said growers should evaluate their field operations to reduce the impact of rising production costs.

"They might decrease tillage although that has some ramifications on the yield side," he said.

Other measures can include soil testing to determine the nutrient applications needed, switching some acres of corn to soybeans and using nitrogen as efficiently as possible, he said.

Ohio State has released nitrogen recommendations using a new system that bases optimum nitrogen rates on the current price of fertilizer and the average price of the crop rather than yield potential. The new recommendations also allow farmers to choose from range of application rates depending on their individual risk management strategy.

According to Robert Mullen, an Ohio State soil scientist, aiming for maximum yield is not the most economical goal when applying nitrogen because yield eventually levels off regardless of additional application.

OFBF has begun working to help farmers deal with rising input costs in 2006. Earlier this year, OFBF President Bob Peterson was appointed to an American Farm Bureau Federation Input Cost Review Panel that will identify financial planning and risk management tools to enable producers to maximize their returns.

The organization has also made influencing energy policy one of its goals for 2006. Adam Sharp, OFBF director of national affairs, noted that it took Congress a number of years to pass the 2005 energy bill.

"One of the major challenges this year will be trying to get congress to focus again and pass comprehensive energy legislation," he said.

Sharp said Farm Bureau will be supporting policies that increase the nation's ability to improve its own energy production system and may include expanding oil and natural gas exploration, increasing the focus on renewable fuels and improving the infrastructure for natural gas.

"We need to remember this is an election year and energy prices hit home. So it’s a good year to contact your legislator and express the need to improve our energy policies," he said.