AMES, Iowa – Managing the cost of crop production will continue to be critical for farmer profitability this year, and farmers have some recent data to consider, found in Iowa State University Extension and Outreach’s “Estimated Costs of Crop Production in Iowa” report.
Included in the January edition of the Ag Decision Maker, the report “provides average cost estimates for Iowa farms in 2020, and provides guidelines to help farmers calculate their own costs of production,” according to Alejandro Plastina, report author and assistant professor and extension economist at Iowa State University.
The report includes crop production prices for corn, corn silage, soybean, alfalfa and pasture maintenance, with data compiled from multiple state surveys.
On average, the total cost of corn and soybean production in Iowa is expected to decline by 4% from last year. However, producers will still need to be prudent to be profitable, as there is still substantial uncertainty regarding crop prices for the rest of 2020.
The estimated costs of production for continuous corn are $3.81, $3.78 and $3.76 per bushel, for expected yields of 164 bushels per acre, 182 bpa and 200 bpa, respectively. The estimated costs of production per bushel for corn following soybeans are $3.22, $3.23 and $3.23, assuming 179 bpa, 199 bpa and 219 bpa, respectively.
Cost of production estimates, per bushel, for herbicide-tolerant soybeans are $8.89, $8.72 and $8.57 assuming 50, 56 and 62 bushels per acre, respectively. The total cost per bushel of soybeans is projected at $8.72 for non-herbicide-tolerant beans at 56 bpa, according to the report.
The most recent United States Department of Agriculture projections for 2020-2021, published in October 2019, put the average U.S. farm prices for corn and soybean at $3.40 and $8.85. In this scenario, soybean production would only be profitable for operations with medium and high yields, but the profitability margins could be very tight. A continuous corn system would not be able to cover all costs, even with high yields, and corn production following soybean would generate $30-$40 per acre in profits. More optimistic price scenarios are found in futures prices, but uncertainty remains high.
“Producers need to have a strong grasp of their own production costs,” Alejandro said. “Costs of production are not seeing the rapid fluctuations that were seen in recent years, but the trade war and other events create a lot of uncertainty when it comes to profitability on an individual operation.”
For a more detailed crop production analysis, review the data found in the report and compare your own operation to these averages. Decision Tool spreadsheets for each budget are also available in this month’s Ag Decision Maker updates.