CROP REPORT: High inputs strip away windfalls

By MARVIN BAKER, Staff Writer, news@minotdailynews.com

Farming costs have risen so dramatically this year that some producers are left wondering how much it will cost them to get their valuable grain to the elevator this fall.

Two producers, one in McLean County and one in Bottineau County, talked about their concerns. They say that even though wheat has been lingering around the $8-per-bushel range, inputs have stripped away what may have otherwise been a windfall.

"Fuel costs are not our problem," said Lansford producer Paul Smetana. "They're not helpful, but they're not the problem."

According to Smetana, it's the cost of fertilizer that has gone through the roof and is digging into the pocketbooks of just about every farmer in North Dakota.

"The fertilizer situation is insane," Smetana said. "I prebought for this spring, which was helpful, but what happens next spring?"

Smetana said news reports earlier this year have suggested that farmers are making loads of money since spring wheat peaked at more than $21 a bushel back in February.

Unfortunately, they leave out the part about the cost it takes to farm the land, he said.

The way Smetana described the situation, producers have to eat the cost of fuel regardless. He said most producers have become so efficient they can't tighten their fuel consumption belt any more.

No-till, lighter implements, larger tires, frequent maintenance and computerized navigation have all eased the fuel burden to an extent and even though everyone cringed when farm diesel went up $2 per gallon, it's a necessary evil, according to Smetana.

But when it comes to other inputs, that's where the difficulty lies. Smetana said a common fertilizer that he uses, 11-52-0, has increased to $1,100 a ton. In addition, a farm chemical Smetana uses often that he didn't name, has increased roughly $8.75 per acre in the past year.

Producers have been watching the cost of anhydrous ammonia pushing upward since 2000 when it cost about $170 a ton. The last time Smetana checked, it was selling for $1,050 a ton.

"That's a real killer," he said. "Fuel hurts, but it's not the same death knoll as fertilizer. Then there's freight charges. I put fuel in the semi and it's just killing me to take grain to the elevator."

Smetana said it doesn't stop there. He said labor on the farm costs more in 2008, as does crop insurance as does cash rent.

"You get to a point that all you do is handle more money and take on more risk," he said. "Cash rents have gone up and you can't blame the landlords because taxes have gone up."

Using a 4,000-acre farm as an example, Smetana said it costs approximately $125 per acre to get the crop seeded when seed, fuel, fertilizer, labor and everything else is included. It means a producer has to borrow a half-million dollars against equity to put the next crop in the field.

Looking at harvest, if wheat is $8 a bushel and barley is $5, average yields would barely hit the break-even point. The only saving grace would be a decent stand of canola or sunflowers. Smetana called it a complicated gamble.

He said it's important to keep in mind that while producers are talking to their bankers, they're thinking about the risk of hail, disease and pests.

"I have crop insurance this year, but I probably won't have it next year," Smetana said. "This is the only year that crop insurance is actually insuring my risk."

Dan Johannes sees the same risk in farming this year, but from a different angle. Johannes, who raises cattle and seed oats as well as oats for the race horse market near Underwood, said seed oats are selling at a good price going into harvest, but he wonders if he is going to make any money from his crop.

He said the state's oat crop is short this year, which would explain why cash prices are fairly liberal, but it's going to cost a lot more to harvest that oat crop than it did just a year ago.

"I have been selling seed oats since the mid '80s and this is the shortest it's been," Johannes said. "A lot of oats this year will be destined for the baler or the creep feeder."

Johannes said there was a speculated oat shortage, but it has been coming back in the past three weeks. He said December oats on Wednesday was trading at $4.07 per bushel.

"Once harvest is past, my thoughts are oats are going to hit $6 to $8," he said. Johannes is also worried about his hay crop and what he might be feeding his cattle should there be a harsh winter in North Dakota. Drought conditions across much of the state have not only hurt small grains, but hay as well.

That prompted Agriculture Commissioner Roger Johnson to solicit the federal government to free up Conservation Reserve Program acreage for haying. That began Saturday.

"The hay crop is going to be short and I think some guys are going to be selling cows this fall," Johannes said. "If you have access to CRP, great. But a lot of it is low quality and there are transport costs. And with the price of diesel fuel, you can't haul that hay very far."

Johannes said he was purchasing farm fuel just 11 years ago for 64 cents a gallon. On Wednesday, it was selling for $4.20 in Underwood, he said.

And yes, wheat has gone from about $3.75 in 1997 to $8.76 today. That's an increase of $5.01 per bushel, but because fuel has increased $3.56 a gallon, that increase in wheat is essentially zeroed out with no other factors like labor, chemical, fertilizer, land rent considered.

Like Smetana, Johannes compared inputs vs. cash at the elevator. He said it's amazing some producers are still in business, given the sharp increases, despite better cash grain prices.

"Input costs have spiraled and I haven't received my chemical bill yet," he said. "It's going to be somewhere between double and triple. December wheat was at $8.76 and that looked pretty good a year ago. But we turned around and put it all in the ground this spring."