NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665
January 20, 2000
After declining for two years, costs of crop production in North Dakota will increase slightly for 2000, according to crop budgets for eight regions of the state published by the North Dakota State University Extension Service. That increase, coupled with low commodity prices, will make profits hard to achieve. For example, no budget for spring wheat projects better than a negative $10 per acre return to labor and management.
"The current profit projections are the lowest of the nine years that I've been constructing crop budgets," says Andrew Swenson, farm management specialist with the NDSU Extension Service.
The cost of fuel is the key component driving up input costs for 2000. But Swenson is also projecting that interest rates and machinery costs will be higher, compared to 1999. Meanwhile, fertilizer prices have remained stable, but because soil tests generally have indicated lower soil nitrogen levels, the overall costs associated with nutrient management are likely to be somewhat higher for 2000.
"Most seed prices will be flat or lower this year, a reflection of the low commodity prices," Swenson continues. "One exception is sunflower, which will vary by supplier, but on average, I expect sunflower seed to be up slightly this year."
On the revenue side, Swenson expects considerable variation between his projections and reality because supply determines price, and weather has a significant effect on yield, both locally and globally. The budgets' projected yields use an eight-year average, which excludes the high- and low-yield years. Yields for oilseeds have increased significantly during this period, but yields for wheat and barley have actually decreased in several regions.
For oilseeds, Swenson projects prices to remain below the marketing loan. He expects feed grain prices to hover near the loan rate and wheat prices to be above loan.
"The budgets use the higher price, whether that be the market price or the loan rate," Swenson explains, "so of the crops with loan protection, only wheat has downward revenue risk from price declines."
Some of the smaller-acreage crops such as lentils, crambe and mustard project positive returns in the west and north central areas of the state. Confectionery sunflowers and dry beans show the best returns in other regions, Swenson says. But most of the crops have significant productions and price risks.
"If the price is attractive, it's a good policy to contract crops that have a thin market," Swenson stresses.
Producers are likely to take a closer look at malting barley this year because it projects higher returns than spring wheat. Part of that decision, though, must include consideration of the substantial reduction in revenues if barley does not meet malting quality, which is a situation that has occurred about half the time during the past 10 years. Flax does not project the highest net return in any region, but Swenson believes there is likely to be an increase in flax acreage due to several factors: its loan rate, strong yields in recent years, less disease problems than with other oilseeds and lower production costs compared to row crops.
For the past two years, Swenson has recommended planting oilseeds because of favorable loan rates compared to feed grains and wheat, and once again the budgets would suggest the strategy of growing oilseeds that are best suited to a particular area of the state. Then as now, however, oilseeds will require higher-than-average yields to garner a solid net return, he says.
At the same time, Swenson recommends using caution in the crop selection process for 2000. The weather has been favorable for row crops the past few years in many areas, but similar conditions may not continue. Also, many rotations have pushed oilseeds to the limit, with respect to disease susceptibility.
"It is critical to evaluate crop insurance and consider the financial downside of crop selections," Swenson continues. "As in any year, producers will need to consider how the entire rotation will affect current and future profitability and risk under different weather and price scenarios, and then wait until harvest for a grade on that multiple-choice question."
Swenson cautions that NDSU Extension Service crop budgets are intended to be used only as guides 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.
Producers can contact their local office of the NDSU Extension Service for area-specific budgets. The budgets are also available on the World Wide Web (http://www.ext.nodak.edu/extpubs/ecguides.htm).
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Source: Andrew Swenson (701) 231-7379
Editor: Dean Hulse (701) 231-6136