This year’s harvest is not over yet. There are still plenty of crops standing in the northern counties and, elsewhere, farmers are trying to bring in as much as possible while the weather is still pleasant.
While there is still some harvest, it’s hard not to think about plans for 2023. Just like this year, farmers will have to generate substantial yields, as the budget will be even more daunting to manage.
“Planting 1,000 acres of corn will be more than a million dollar feat in 2023,” said Gary Schnitkey, who designs crop budgets at the University of Illinois. “We continue to see large increases in all costs. For non-land costs, we show them rising about $ 90 from 2022. This is a central Illinois situation. In 2022, the non-land costs were $ 760 per acre and we will reach $ 850 by 2023 “.
Schnitkey predicts that high fertilizer prices will be one of the key factors contributing to rising input costs. But it is a general increase, with the involvement of high diesel prices as well. When the farmer adds the cash rent to the spreadsheet, the budget goes up even more. “We are expecting average cash rents for high-productivity land in central Illinois to be $ 340 per acre. So, $ 850 plus $ 340 brings you $ 1,190 per acre for next year’s corn crop. “
This means that if a farmer plans to lease 1,000 acres of corn land next year, it will cost on average nearly $ 1.2 million just to produce that crop. If the average yield is 200 bushels per acre, the price of corn would have to average $ 6 per bush just to break even. Schnitkey uses a 220 bu / y model, which brings the average break-even price closer to $ 5.25. Although the prices have been better for a couple of years, there is certainly no guarantee that they will remain high.
Schnitkey adds that the formula isn’t much better in other parts of the state. “All will go over $ 1,000 in costs (per acre),” he said. “We have about the same non-land costs in northern Illinois, a slightly lower rent. Renting $ 300 to $ 860 in non-land costs will still cost a lot. In southern Illinois, $ 820 is cost and $ 860 is cost. 230 of rent in cash, so that’s still more than $ 1,000. “
Adding to this high price puzzle is the biggest increase of all. On a percentage basis, it could be argued that the biggest increase came in the cost of money. “When it comes to doubling, tripling costs, whatever, take a look at what your interest rate did, what the Fed did, and how that comes down to borrowing costs,” said Brad Ray, president and CEO of Security Savings Bank in Monmouth.
“We’ve been through such a long period of reasonably low interest rates … historically low … to borrow money whether it’s land, operations or equipment purchases. When going from a rate of 3.5 % at a rate of 7%, throughout history doesn’t sound bad, but it’s doubling interest costs. Now it’s more of a consideration than perhaps what it has been for the past 10 years because it’s now a bigger piece of the pie. “