NEWS for North Dakotans
Agriculture Communication, North Dakota State
University
7 Morrill Hall, Fargo, ND 58105-5665
January 22, 1998
Costs of crop production in North Dakota appear to be flattening and may even decline next year, according to 1998 crop budgets just published by the North Dakota State University Extension Service.
"I suspect direct production costs will drop a bit in 1998, reversing the rather strong upward trend in production costs we've experienced since about 1991," says Andrew Swenson, farm management specialist for the NDSU Extension Service. "Certainly we've seen the end—for now—of strong increases in costs of production."
Several reasons.
Fuel prices are down. Interest rates are flat or down from what they were. Chemicals are a mixed bag, some up and some down. Fertilizer has flattened out or declined, depending on the product. Seed prices are mixed—spring wheat seed is down about 50 cents from last year, while durum, flax and soybean seed are expected to be higher by that amount or more. Sunflower and corn prices are flat to 3 percent higher, depending on the retailer.
"Add all this together and I think we're over the hump," says Swenson. "The bad news is that making a profit is still projected to be very difficult in some areas—in the northeast region, for instance. Wheat and durum yields there have been so poor recently that it doesn't look rosy.
"Even so, when I ran these budgets I was a little surprised that they weren't worse than they are, since there's been so much doom and gloom in the farm news these days."
The NDSU Extension Service publishes estimated crop budgets for eight regions of North Dakota each year, and this year is publishing budgets for more crops than ever. Budgets for lentils and yellow mustard are now available for some areas of the state, and budgets for canola, crambe, corn and soybeans have been created for regions where until recently farmers have shown little interest in these crops.
"Some of the specialty crops appear to show more promise than traditional crops," says Swenson, "but for many of the specialty crops no insurance is available. So no insurance has been included in budgeting the costs of raising them. Producers need to take this into account as they decide what to grow next year.
"Overall, the projected crop returns in North Dakota are modest, but they are higher than what was projected for 1997."
Durum and canola look like good choices in the northwest and north central areas, as do the minor crops yellow mustard, lentils and crambe, he says. Eleven of 20 crop budgets for the south central region show positive returns, including those for wheat, durum, soybeans, dry beans and some minor crops.
"Unfortunately, the northeast and northern Red River Valley regions—areas hit hard by low crop profit in recent years—look like the most difficult areas in which to turn a profit in 1998," says Swenson.
The extension service crop budgets are intended to be used only as a guide, he cautions, because soil types, weather conditions, management, debt levels and production practices vary considerably from farm to farm in each region—which is why a column is provided in the budgets for producers to enter their own numbers.
"The profitability budget includes all direct cash costs plus replacement costs for machinery and opportunity cost of land," says Swenson. "The bottom line is the return to labor and management. This is the expected `payment' to the producer for the labor and managerial efforts required by the crop enterprise."
The cash flow budget shows the one-year cash flow feasibility of the crop enterprise. The net cash flow represents the cash left for family living, state and federal taxes, saving and investment after all the cash operating expenses and 1998 land and machinery debt obligations, both principal and interest payments, have been met. It is assumed that there are loans on 40 percent of the land and machinery investment.
Contact any county office of the NDSU Extension Service for a copy of the budgets for your area. Many are presently available, and the rest will be available about Feb. 1.
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Source: Andrew Swenson (701) 231-7379
Editor: Barry Brissman (701) 231-7866