Seed Corn Costs for 2018

Oh boy, here we are finishing the 2017 corn pollination period and this blog post is going to discuss seed corn costs for 2018. What brings up this topic is that very soon, 3-4 months, corn producers will be making seed purchases and orders. Seed corn company field days will start next month. Will seed corn prices drop for 2018 seed corn? Probably not. Recent articles, and charts, from Gary Schnitkey, U of Illinois ag economist, sheds some light on what might happen.

Schnitkey charts seed corn costs calculated by both USDA and central Illinois farmers enrolled in the Farm Business Farm Management program. The USDA numbers are averages for a high productivity farm. While USDA numbers are for all farm productivity types. The two time-series data sets are 0.99 correlated meaning the two data sets closely follow one another.

As we know, seed corn prices have risen since 2006 at a steep rate, from 2006 to 2014 the increase has been 11.3% annually. Schnitkey (2017) An earlier article from Schnitkey (2015) shows annual cost increases for pesticides, 5.7% and fertilizer, 8.1%, for 2006-2014. Fertilizer costs can partially be explained by increased yields and the need for nitrogen to support those higher yields. Even though corn revenue has dropped, recent seed corn costs have been modest. From 2014 to 2016, USDA shows $3/acre seed corn cost decline while the U of Illinois data showed $2/acre drop. The 2015 Schnitkey article also charted per acre and percentage of revenue seed costs using USDA data. Seed corn costs/bushel for 2013 and 2014 were $0.58 and $0.52 respectively. Seed costs per bushel rose at a faster rate, percentage change, than did yields from 1995 to 2015. The trend for seed costs is upward as a percentage of revenue as well. In 1995 seed costs were about 10% of corn revenue and about 13.5% in 2014. The percentage revenue calculation is a little choppy due yearly variation of corn yields but the trend line is clear.

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11172015_fig3

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There are ways to reduce seed corn costs, but significant reductions aren’t likely without price reductions by seed corn companies. How likely is that? A couple of data points give some indication. First, world-wide harvested corn plantings increased about 90 million acres from 2006 to 2016. Schnitkeys’s analysis indicated that 95% of the seed corn price increase can be explained by that rise in corn planting. During that same period, seed corn has added many traits that have value to corn producers such as herbicide resistance, rootworm resistance and some drought tolerance. These two facts and the expected mergers of agricultural technologies companies from 6 to 4 won’t add downward pressure to seed corn prices If the new technologies come from the mergers, prices are more likely to increase since those new technologies have value to farmers. At this point it is probably reasonable to plan for flat seed corn costs in 2018.

Sources:

Schnitkey, G. “Seed Costs for Corn in 2017 and 2018.” farmdoc daily (7):129, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, July 18, 2017.

Schnitkey, G. “Corn Seed Costs from 1995 to 2014.” farmdoc daily (5):214, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, November 17, 2015.

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October Crop Production Report

The October 12 Crop Production report had a negative reaction in the grains market just after its release but the markets have rebounded since. Let’s take a deeper look at the numbers that what was covered in the initial news reports.

Planted corn acreage was updated in 10 objective yield states (IL, IA, KS, MN, NE, OH, SD, WI). The changes increased acreage by 0.3% from the previous report and +7.5% from last year. Corn yield was lowered by 1 bu/acre nationally or -0.6%. Total productions was lowered 0.2% from the previous report, however corn production is still projected at +10.7% from last year. total production is projected at 15.1 billion bushels which would be 900 million bushels higher than the largest corn crop in 2014. Seven new record yields are projected, including Iowa and Illinois where about half of the US corn crop is produced. The US yield, 173.4 bu/ acre would be a record as well Nebraska’s corn yield is projected to be  181 bu/acre which is 3 bu lower than the previous report.

Soybean acreage was updated as well in the October WASDE report but the change was less than +0.1% compared to September’s report. The expected soybean acreage is 1.6% higher than last year. The big change was in projected yield, 1.6% higher than the previous report and 7.1% more than last year. The 2016 US soybean yield is projected at 51.4bu/acre and would be a record. The higher yield comes from much better pod set than in other years.All of this yields to a record high total soybean production of 4.27 billion bu, 314 million bu more than the highest production.Eleven states are expected to have record yields including Nebraska, 61, bu/acre.

Late Season Corn Disease: time to scout!

Reports are coming forward of various disease problems in this year’s corn crop. Some of these diseases include ear rot, anthracnose and stalk rots. Wet warm late season weather can increase the possibility of stalk and ear diseases and worsen any already present. Now is the time to scout fields to determine which may have problems. Farmers may decide to harvest fields with stalk rot earlier to avoid loss. They may also look for varieties that are more resistant to stalk rots when buying next year’s seed, especially in fields that have a history of problems.

Several links are included below which cover current year disease reports in the Corn Belt as well as background on ways to identify and manage the problems.

http://cropwatch.unl.edu/stalk-and-ear-rot-diseases-developing-early-few-fields

http://cropwatch.unl.edu/plantdisease/corn/bacterial-stalk-rot

http://cropwatch.unl.edu/plantdisease/corn/fusarium-stalk-rot

http://crops.extension.iastate.edu/cropnews/2016/09/scout-now-ear-rots

When Will Non-Land Crop Costs Decline?

11 months ago, Gary Schnitkey, University of Illinois Ag Economists, wrote an article reviewing previous periods of non-land cost rises and subsequent reductions after the corn supply shock abated which preceded the cost rise. Two time periods had rapid non-land cost increases, 1972-1982 and 2006-2013. From 1972 to 1982 non-land costs for corn production increased from $85 to $236, more than double. From 1982 to 1988 those same costs did decline but by 18%, approximately 4% annually.

From 1996 to 2005 non land costs remained flat averaging$252 per acre for corn, before they started to rise in 2006. Schnitkey estimated that 2013 would be the peak cost year at $615/acare. If that is correct and cost declines following the same pattern as 1982-1988, we can expect to see corn non-land costs will drop to $504, but not till 2019. Annual declines of only $18.50 are not large enough to allow break-even at current corn prices and cash rental rates. Cash rental rates arelikely to decline over the next few years. How much would only be a guess.