Fuel and fertilizer costs, crop futures prices and rent arrangements are among the dozens of factors Arkansas farmers will have considered before planting this spring, said Scott Stiles, Extension agricultural economist-risk management for the University of Arkansas Division of Agriculture.
The answers that come up on their spreadsheets will shape the state’s crop profile in 2010.
“At planting time, the competition for acreage remains strong among corn, soybeans, rice, and cotton,” he said. “A number of factors come into play in the final planting decision. Yield potential, cost of production, basis, gin incentives, and commodity prices are just a few considerations.”
The December 2010 futures price for cotton was 75.4 cents per pound on April 7; September 2010 corn, $3.66 per bushel; September 2010 rice, $12.67 per hundredweight, and November soybeans, $9.32 per bushel.
“Crop mix decisions must be made on a farm-by-farm basis,” Stiles said. For example, “it’s critical for growers to evaluate their budgets, yield potential, and rent arrangements to determine the price level needed for their 2010 crops. Rent arrangements alone can influence a grower’s break-even price by several cents per pound or bushel.”
Production inputs include such things as seed, fertilizers, chemicals, fuel, labor, custom services, and repairs.
“Fertilizer and some herbicides are expected to be priced lower this year,” Stiles said. “Seed costs are stable to slightly higher. Fuel costs for most operations will definitely be higher assuming we don’t have repeat of 2009 rainfall.”
Stiles offered this overview of cost concerns for fertilizer and fuel.
Fertilizer — Since bottoming last October and trending higher throughout the last quarter of 2009, fertilizer prices have moved very little in any direction this spring. The sharp drop in wheat acres cut into early spring fertilizer demand. A lower bias in the grain markets is also keeping fertilizer prices flat.
Compared to late March 2009, many of the major fertilizers have decreased in price. Diammonium phosphate, or DAP, is now 10 percent lower, 32 percent UAN (urea of ammonium nitrate) is 24 percent lower, potash 39 percent lower, and urea (46 percent nitrogen) is 9 percent lower.
A rally in both the grains and energy markets could pull fertilizer prices higher. Normally, grains and energy prices strengthen from March into late June.
Getting the 2010 crop planted will be of particular interest to the fertilizer market. Due to the wet weather and late harvest, very little fertilizer was applied last fall. Given the prospect of increased acreage in corn, cotton, and rice, there will be a surge in demand for nitrogen over the next 60 to 90 days.
Fuel — Producers will likely see higher fuel costs this year compared to 2009. Over the past month, crude oil prices have fluctuated from $79 to $83 per barrel. Since the first of April, prices have surged higher to $87 per barrel.
The Energy Department’s Energy Information Agency (EIA) projections for West Texas Intermediate crude oil prices have remained stable over the last five months. The EIA expects West Texas Intermediate prices to remain above $80 per barrel this summer, and average about $81 per barrel this year.
In April 2009, crude oil prices were trading in the range of $55 to $65 per barrel with farm level diesel prices ranging from $1.65 to $1.95 per gallon.
Assuming crude oil prices average $81 per barrel in 2010, farm level prices for diesel will be near $2.30 per gallon.
For more information on budgeting, contact your county Extension office, visit www.uaex.edu, or see the Farm Management and Marketing Newsletter at www.aragriculture.org/News/farmmgmt/2010/March2010.pdf.