2016 USDA Cost of Production Forecasts Point To More of the Same for U.S. Farmers

ElNino Yields

by Brent Gloy

NOTE: An updated look at costs of production – and the 2017 USDA data- is available here.

 

The USDA’s Economic Research Service recently released 2016 crop cost of production estimates. We thought it would be useful to take a look at the budgets and see how ERS thought things might change for the next crop year. Then we looked at the budgets and realized there wasn’t much to say if we were going to focus on differences from 2015. The 2016 cost of production estimates for corn, soybeans, and wheat show costs nearly the same as those forecast for 2015. To be specific the budgeted costs range from $8.48 (corn) to $5.00 per acre (wheat) higher than 2015.  Continue reading

Changes in Capital Investment on U.S. Farms

Flickr: johnnyalive. Johnny Klemme

by Brent Gloy

The U.S. farming system is capital intensive. As the agricultural sector adjusts to lower commodity prices many areas of the agricultural economy will adjust and it’s hard to imagine that capital expenditures will escape significant adjustment. We have looked at fertilizer prices, seed prices, land prices, and equipment investment in recent posts. With respect to machinery and equipment investment, David recently noted that both USDA and farm record keeping data indicated that these costs had not yet showed declines. We decided to take a further look at the main components of capital investment on U.S. farms and examine how they had changed over time. Continue reading

Equipment Investment: How Much is Enough?

Flickr: johnnyalive. Johnny Klemme

by Brent Gloy

The rapid descent of crop prices and resulting margin squeeze have forced farmers to carefully evaluate their financial structure and look for ways to reduce their cost of production. Because prices for inputs such as fertilizer and seed have been slow to adjust, much of the attention has turned to fixed costs such as land rents and equipment costs. These are typically the largest categories of fixed costs on most farms. While we have looked at costs associated with farmland extensively, equipment costs are often very large on many farms and deserving of attention. There is likely great variation in equipment investment and costs across most farms. Continue reading