January 16, 2003

Crop Budgets Show Higher Costs, but Most Oilseeds Project Profit for 2003

Total crop production costs are projected to increase for 2003 because of higher fuel and fertilizer prices and a steady increase in repair costs, according to Andrew Swenson, North Dakota State University Extension Service farm management specialist. However, the increase is moderated by lower interest rates and by higher soil nitrogen in most of the state, which will allow some producers to use lower application rates.

Seed, chemical and crop insurance costs for most crops were similar to the previous year, Swenson says. Some exceptions are higher projected seed costs for small grains, field peas, and some specialty crops and greater insecticide use budgeted for canola. Total indirect costs were similar to last year; land costs increased, but higher machinery prices were offset by a lower interest rate charge.

"In general, most oilseed crops project a profit and corn and small grains, except malting barley, show a negative return to the labor and management of the producer," Swenson says. "Sunflowers show a profit in all regions because of strong prices and soybeans are profitable in the Red River Valley, northeast, southeast and south central regions of the state. Flax projected a modest profit in the west and northeast regions, but canola was the one oilseed that typically showed a loss."

Minor crops: safflower and lentils in the west and mustard and millet, projected strong profit, typically $30-$40 per acre, because of good prices. Swenson says if a price for minor crops with thin markets is attractive producers may want to contract that crop.

Malting barley also projected strong income; more so in the west and central regions. However, a significant loss per acre occurs if the price for feed quality barley is used.

Dry edible beans show a profit but because of production risk and discouraging prices Swenson expects acreage to decrease and shift to soybeans and sunflowers. Field peas show a profit of about $8 per acre if food quality peas are produced.

"Unfortunately, returns to labor and management for the state’s most important crop, wheat, are expected to be negative in every region," Swenson says. Returns ranged from a loss of about $2 per acre in the southeast, south central and southwest regions to a loss of about $16 in the north central and northeast region. Durum shows a negative return in every region except the southwest.

Swenson cautions that the budgets are based on the average yield from 1995 to 2001 with the low and high yield years omitted. Current soil conditions are not considered.

"Somewhat surprisingly, the Red River Valley regions have fewer crops that project a profit than the rest of the state," he says. The reason is higher costs, primarily land rent.

Swenson emphasizes that the budget projections are just that. "Commodity prices and yields are extremely difficult to predict from one year to the next. It is critical to evaluate crop insurance and consider the financial downside risk, as well as the upside potential, of the crop rotation," he says.

Swenson also notes that the budgets do not include federal aid that is de-coupled from crop selection and production (direct and counter-cyclical payments). However, those payments are very important to whole farm profit.

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