What is in this article?:
- Farmers watch crop returns rise as production costs follow
- Crop insurance going up
- Farmers will spend more to produce their 2011 crops but they're likely to make that up — and then some.
- "At this point in time, contribution margins -- the difference between gross revenue and production costs -- are really quite large. If one is looking for a place to expend energy from now until you can get out into the field and plant, I think one ought to focus that energy on protecting the margin that you've got in crop production today."
Crop insurance going up
Crop insurance premiums will be set for the year in early March. Dobbins believes they'll go up.
"The premiums one pays on crop insurance get determined, in part, by what the average price is for corn and beans in February," he said. "The exact cost isn't going to be known for a couple of weeks yet, but it's pretty obvious, I think, that the average price for this February is going to be higher than it was last February, which means crop insurance is going to cost significantly more this year than it did last year."
Since the October crop cost guide was issued, per-bushel prices are up 74 cents for corn, $1.52 for soybeans and $1.21 for wheat. That kind of upward movement in prices indicates farmers shouldn't sell crop insurance short, Dobbins said.
"We're in an environment where that's not a place to think about saving costs this year," he said. "It's an issue of finding the policy that you think will work best for you and pay the premium."
Other management implications from the updated crop cost guide include:
- Rotation corn and soybeans or corn, soybeans and wheat provide similar returns on lower-yielding land.
- Rotation corn and soybeans is the best option on high-yielding land.
- Rotation corn and soybeans remain a better cost-return choice than continuous corn.
Down the road, the updated crop production estimates are likely to influence the rates farmland owners charge producers to rent their land, Dobbins said.
"Landlords can make these calculations on potential returns as easy as tenants can, and many of them see big numbers at the bottom of these calculations," he said. "So in many areas cash rents are moving up significantly, and so that's going to be an area that people are likely to see a significant rise in costs, as well."