Archive for Wednesday, May 31, 2006

Corn prices help offset costs

Fuel, fertilizer expenses cut into profits

May 31, 2006


At least corn prices are rising.

A new report from the Kansas Farm Management Assn. shows that farmers paid an extra 39 percent for gasoline, diesel fuel and oil last year, on top of a 21 percent jump experienced in 2004. Fertilizer costs spiked by 31 percent, and insecticides climbed by 16 percent.

Such increases soaked up many of the profits that farmers may have been fortunate enough to clear last year, said Sam Funk, the association's administrator.

In northeast Kansas, farm profits averaged $68,325, down nearly 12 percent from a year earlier, the association said. The statewide average was $56,982, down 9 percent.

"With farm income at that level, we had about 50 percent not covering family expenses," Funk said.

The report, released Tuesday, comes as farmers look with optimism at a rise in prices being paid for corn, the No. 2 crop in Douglas County. Corn futures were trading Tuesday for more than $2.55 a bushel on the Chicago Board of Trade, up from the $2 this past winter, when farmers were deciding what to plant.

Farm data

Selected per-acre costs for producing corn in northeast Kansas in 2005, as compiled by Bill Wood of K-State Research & Extension in Douglas County, using data from the Kansas Farm Management Assn.: ¢ Fertilizer: $45.81, up 31 percent, or $10.84. ¢ Herbicides: $33.15, up 16 percent, or $4.52. ¢ Fuel: $14.66, up 39 percent, or $4.11.

Analysts attribute the climb to supply and demand. Corn farmers are expected to harvest 10.7 million bushels this season, while total consumption is expected to hit 11.5 million bushels, according to The ProExporter Network, an Olathe-based research firm.

Driving the imbalance: Demand for ethanol, the clean-burning corn-based fuel that increasingly is being blended for use in automobiles and other equipment.

Bill Wood, agriculture agent for K-State Research & Extension in Douglas County, said that a 40-cent boost in per-bushel prices would help ease the pain of rising input costs for farmers. Such a price while raising 100-bushel-per-acre corn would earn another $40 per acre, enough to offset the $20 extra farmers paid last year per acre for fuel, fertilizer and herbicides.

If such rising prices hold - ProExporter expects corn prices to increase steadily for the next decade, but no higher than a yearly average of $2.84 - it could be good for farmers.

"If it gets to where we're making even more ethanol, to the point where it brings corn (prices) up, our farmers will grow more corn to meet demand," Wood said. "It's good for America - or at least the Midwest, where we grow corn - because when farmers get money, they spend it. They buy more tractors, more pickups, and that helps the rest of the economy."

The Associated Press contributed information to this story.


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