Cost of Production Estimates Available in Ag Decision Maker

AMES, Iowa – Accurately estimating cost of crop production will be vital for farmers in 2019. With a market outlook in 2019 similar to 2018, farmers will face another year of marketing challenges.
The first step toward knowing a profitable sales price is understanding input costs. The January issue of Iowa State University Extension and Outreach’s Ag Decision Maker provides information on costs through its annual “Estimated Costs of Crop Production in Iowa” report.
“Having a firm handle on one’s cost of production provides a key piece of information to any strong marketing plan,” said Alejandro Plastina, assistant professor and extension economist at Iowa State University. “Marketing strategies for farmers include forward pricing, setting a quantity-only marketing plan or using the spot market. The price consequences of these decisions are substantial.”
The report estimates the cost of production for continuous corn to be $3.93, $3.91 and $3.88 per bushel for expected yields of 164, 182 and 200 bushels per acre, respectively. The estimated costs of production per bushel for corn following soybeans are $3.39, $3.39 and $3.38 assuming 178, 198 and 218 bushels per acre, respectively.
Cost of production estimates, per bushel, for herbicide tolerant soybeans are $9.21, $9.04 and $8.86 assuming 50, 56 and 62 bushels per acre, respectively. The total cost per bushel of soybeans is projected at $9.13 for non-herbicide tolerant beans at 56 bushels per acre.
“The average price for corn is near $3.90 per bushel in recent projections for the 2019 marketing year, showing the potential for a slight profit for most yield levels,” Plastina said. “Projections for soybean prices give a more negative outlook at $8.75 per bushel.”
According to the most recent projections, a rented acre of corn following soybeans would need to produce 172 bushels of corn to break even, while a rented acre of genetically modified soybeans would need to produce 58 bushels to break even. However, a rented acre of corn following corn would need to produce 183 bushels of corn to break even.
The highest portion of the cost of production for corn following corn, corn following soybeans and herbicide tolerant soybeans is land, followed by machinery, seed and fertilizer. A full breakdown of estimated costs of production is available through Ag Decision Maker or by accessing ISU Extension and Outreach publication FM 1712 “Estimated Costs of Crop Production in Iowa.”
“Producers need to have a strong grasp of their own production costs,” Plastina said. “Costs of production are not seeing the rapid fluctuations that were seen in recent years, but current prices still create a lot of uncertainty when it comes to profitability on individual operations. Knowing costs is key.”
About the Authors: 

Alejandro Plastina

Extension Economist/Assistant Professor in Economics
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