Illinois farmers squeezed by production costs

By JIM SUHR

posted: 47 DAYS 13 HOURS AGO

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ST. LOUIS -Like many corn growers, Monty Whipple benefited in recent years from high grain prices stoked by the ethanol craze.

But this year, some experts predict a big turnaround: the worst margins for corn and soybeans in decades because costs of everything from fertilizer to seed have soared while commodity prices and export demand have fallen.

"It's definitely the most expensive year we've ever had," said Whipple, who has farmed for more than 30 years in Illinois' LaSalle County, southwest of Chicago.

University of Illinois economists forecast that central Illinois farmers will see negative returns both for corn and soybeans this year for the first time since 1990.

Net returns could reflect losses of $8 per acre of corn and $15 for soybeans, with the projected loss statewide amounting to $98 million for corn and $136.5 million for soybeans, economists predict.

But it's still too soon to tell if the news is all bad.

Many farmers may be able to tap financial reserves built up over the previous two years, when corn and soybean prices soared and yields were healthy. What's more, this year's returns could still come in better than the currently dour projections if commodity prices improve, and farmers carry insurance that covers certain losses to their crops.

University of Illinois agricultural economist Gary Schnitkey cautions that the loss projections are merely averages and, if anything, the many farmers who reaped high returns on soaring commodities prices the past couple of years now may see their ledgers closer to historical averages.

"We're projecting a low income, but most farms aren't going to be financially strapped," in many cases insulated by the cash they've managed to squirrel away from the past two years, Schnitkey said.

In Rock Island County in west-central Illinois, Phil Fuhr expects "probably average earnings" this year, probably 30 percent lower than last year's income. But the sixth-generation farmer expects his yields to be strong enough to offset the production costs.

"It definitely isn't going to be the rosy picture that it was in 2008," said Fuhr, 39, who farms 2,500 acres of corn and soybeans near Taylor Ridge.

Even so, for many growers, this may be a year they want to forget.

Central Illinois corn growers likely will see fertilizer prices for this year more than 300 percent higher than 2002 while pesticide costs have spiked a projected 68 percent and seed prices could balloon nearly 360 percent.

The region's soybean producers anticipate fertilizer prices 400 percent higher than they were seven years ago. Seed prices will have more than doubled.

During the same period, fuel and oil prices have risen 35 percent and land costs are up 65 percent.

The economists say such "input" prices are summarized from grain farms enrolled in Illinois Farm Business Farm Management, a nonprofit group including more than 5,500 farmers.

Many Illinois farmers this fall also will have additional costs to dry their grain, expected to come in from the fields with 30 percent moisture, twice the threshold for it to be stored. Potential savings from the expected lower prices of natural gas used in the drying could be offset by the longer time it'll take to do the job.

Whipple said anhydrous ammonia used as fertilizer in this year's crop cost him about $1,200, three times what he expects to pay next year. Corn seed that five years ago cost him about $50 a bag — enough to plant roughly 2.5 acres — ran him $300 to $350 a sack for this year's crop.

Despite the higher input prices, Whipple expects to turn a profit if the fields dry.

"I want to be fair: The commodity prices have had a good run here the last couple of years," he said. "Right now the prices have dropped back considerably from their highs. But the opportunity's been there, and we hope there'll be more opportunity down the road."

2009-10-09 18:09:48