Corn profit comparisons

Monday, October 7, 2013

Is corn more profitable to grow now than a decade ago, or nearly 40 years ago for that matter?  Kansas State University ag economics professor Brian C. Briggeman says "yes" to both scenarios for American corn farmers. According to a fact sheet the ag economics department published in early August, the cost to produce an acre of corn has risen to US$639 an acre from $417 since 2002. Economists blame seed costs that have more than doubled to $90 an acre from $40, and fertilizer costs that have tripled to $158.

However, taking it back to 1975, on an inflation-adjusted basis the total cost of producing an acre of corn is up only two per cent. Seed costs have nearly doubled in that time, while equipment costs are up 92 per cent.

According to the U.S. Department of Agriculture, the total profit per acre in 1975 was $120, based on 2012 dollars, while the 2012 profit was $162.

The average corn farmer has experienced the longest-running stretch of positive profits since 1975 in the years 2007 to 2012. Interest on loans cost just less than $8 an acre in 1975, but today "that cost has plummeted nearly to zero," Briggeman writes, because of lower debt levels and very low interest rates.

Believe it or not, land rentals in the United State remain below historical levels – nearly 25 per cent or $50 an acre lower. BF