Crop Budgets Show 2001 will be a Challenge

Increased fuel, fertilizer and machinery costs combined with low crop prices put profit projections at the lowest in a decade for 2001, according to Andrew Swenson, North Dakota State University Extension farm management specialist.

"I’ve been assembling projected crop budgets for 10 years, and this is the lowest I’ve ever seen them," he says.

Increasing fertilizer costs may make profitability even more elusive than the budgets predict, Swenson says. Costs for nitrogen fertilizer are expected to increase significantly from the $290 per ton for anhydrous ammonia that was used to calculate the budgets in December. "As a result, fertilizer cost for the budgets may be understated by a couple of dollars per acre," he says.

But not all the news is bad. The budgeted fertilizer costs were tempered somewhat because nitrogen soil tests have generally been higher than last year. Crop insurance will cost less than last year, interest rates are relatively flat and land costs in some northern regions have softened, Swenson says.

He also notes that yields for certain crops have shifted dramatically. Yield projections in the budget are the seven-year averages, excluding the high and low years. As a result, projected wheat yields for 2001 are 20 percent lower in the northeastern part of North Dakota than they were in 1994. Conversely, projected yields for corn and soybeans have increased 40 percent in the same time period for southcentral North Dakota. Although corn yields have greatly improved during the past few years, the crop still projects negative returns because of high production costs.

Projected crop prices continue to be dismal, Swenson says, with oilseeds below marketing loan rates, feed grains near marketing loan rates and the statewide average wheat price projected at $3.20 per bushel. Swenson assumed marketing loan rates will be the same as last year, but because of several years of low prices the rates could be lowered for 2001. However, that would be a politically difficult decision for the Secretary of Agriculture to make.

Negative returns to labor and management are projected from spring wheat production in all regions of the state. However, the smallest losses are expected in the southwest, followed by the south central, northwest and southeast. Losses in other regions are projected to exceed $20 per acre.

Only the minor crops, lentils -- garbanzo beans, crambe, mustard, buckwheat and safflower -- projected positive returns in the western regions. Confectionery sunflowers and dry beans showed the best returns in central and eastern regions. However, most of these crops have significant production and price risks, Swenson cautions. If a price is attractive, it is a good policy to contract a crop that has a thin market, he advises. For example, millet shows a decent profit in the south central region at $6 per hundredweight.

Relative to other regions, profit projections are worst in the Red River Valley counties because yields are not high enough to offset the additional costs, primarily land rent.

For the fourth consecutive year, the budgets suggest a strategy of growing oilseeds, subject to rotation limitations, that are best suited to a particular growing area. Even though loan rates are more attractive than for wheat or feed grains, higher-than-average yields are still needed to garner a solid net return, Swenson notes. Soybeans project a positive return in the southern Red River Valley, southeast and south central regions, and nearly breakeven in the northern Red River Valley. In the northern regions outside of the Red River Valley, Swenson advises producers to look closely at flax because of lower production costs and fewer disease concerns than sunflowers and canola. Also in these northern regions, field pea is projected to generate a loss, but acreage may hold because of low fertilizer needs.

Swenson cautions that projections are just that. Last year the southern half of the state had very good yields and achieved profits much better than projections. This year, the projections do highlight the financial risk of raising a crop in 2001.

"If yields are less than average there will be significant revenue shortfall per acre and the impact is magnified because farms are larger than in the past. It is critical to evaluate crop insurance and consider the financial downside risk, as well as the upside potential, of the crop rotation," Swenson says.

Producers can access the budgets on the World Wide Web at The budgets will soon be available at county offices of the NDSU Extension Service.

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Source: Andrew Swenson, (701) 231-7379, aswenson@ndsuext.nodak.edu
Editor: Tom Jirik, (701) 231-9629, tjirik@ndsuext.nodak.edu