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With more peanut acres likely in 2014 and contract offers expected to be in the $400 neighborhood, Marshall Lamb tells growers: “Anything you can do to keep your overhead low, this will be the year to do it. Try to manage production costs to the degree that you can.”
JASON SARVER, center, the new peanut agronomist for the Mississippi State University Extension Service, visits with Steve McPeek, left, Bayer CropScience, Clinton, Miss., and Daniel Parrish, Lexington, Miss., producer, at the annual conference of the Mississippi Peanut Growers Association.
Impact of Midwest crop decisions
Corn/soybean production costs for Midwest farmers have risen significantly, Lamb notes, which makes it all the more critical that they produce high yields in order to cover costs.
“Illinois Farm Business Management Association figures, based on grower data, show their total cost per acre of growing corn has gone up from $400 in 2004 to $800-plus in 2013. Some of that is related to higher energy and nitrogen costs, but total input costs have risen from $172 per acre to $372.
“With skyrocketing Midwest farmland prices, their land costs — whether rented or owned — have gone from an average $140 per acre to $276 per acre.
“For corn, their breakeven price over variable cost has gone from about $2 per bushel in the mid-2000s to $4.31-$4.65 per acre now. Corn prices today are around $4.50, which can put a big squeeze on a lot of Midwest growers.”
The same trend holds for the region’s soybean producers, Lamb says. “Their cost of production went from $300 per acre in mid-2000s to $548 in 2013. Inputs went from $90 per acre to $163, and land costs doubled to $276.
“This also puts them in a very tight situation in terms of breakeven. Their breakeven price, over variable costs, has skyrocketed from the $5-6 per bushel range to $10-$11. Today, we’re looking at around $11 per bushel for soybeans, so it’s going to be very difficult for these producers.”
For all the major U.S. crops, Lamb says, the overriding influence on markets is the supply-demand ratio.
While USDA’s stocks-to-use ratios for U.S. corn, soybeans, and cotton have remained fairly flat for the 2011-13, period, they have risen globally, reflecting greater supplies worldwide, he says.
“Stocks-to-use ratios are getting back to more normal levels, and markets are correcting for that. With prices for grains as high as they’ve been, we had to know that eventually they would come back down —markets always adjust themselves, and that’s what we’re going through right now. For a lot of people, particularly for Midwest growers with high per acre costs, it may be tough to get through this.”