text: Production costs continue to climb | southeast FarmPress
  Laura Skillman, University of Kentucky | Feb 19, 2008
  Farmers continue to see the cost of doing business climb. Fertilizer prices are at record highs. Fuel and pesticide costs are also up, along with land rents and other expenses.
  Costs of putting out a crop in 2008 will be 20 to 25 percent more expensive than one year ago, says Suzy Martin, a farm business management specialist with the University of Kentucky College of Agriculture.
  "The increases in input costs have been more than made up by increases in commodity prices," he said. "Assuming a normal growing season, and grain prices anywhere near current levels, we are looking at a record year in terms of profitability." However, he quickly added, "commodity prices are extremely volatile right now, and we have no idea where prices will end up".
  In fact, the following day futures prices dropped the limit for both soybeans (50 cents per bushel) and corn (20 cents per bushel) on new crop contracts.
  Input costs have farmers looking at lots of options from what crop to grow to which types of seed and tillage methods would be most cost-effective, Martin said. More and more farmers are opting for minimum or no-tillage methods of production to limit the amount of fuel needed to produce a crop, she said.
  Land values have also been going up and with them cash rent prices many farmers pay. Martin noted there are still many shared rental agreements in some areas of Kentucky where a farmer receives two-thirds of the crop for example and the land owner one-third. With strong commodity prices and an average crop year, landowners are making more income through these agreements than in most cash rental agreements.
  With the volatility in costs and pricing, farmers should use their estimated production costs to determine what prices need to be in order to make a profit. Once this is determined, agricultural economists recommend producers lock in prices for at least a portion of their 2008 crop in order to insure themselves a profitable year. All said, however, weather can still be an important player in determining profitability so using crop insurance is also advisable.