An elusive national workforce is expected to further augment labor costs in 2022, increasing hired labor costs by 28% for corn and 29% for soybeans compared to last year. Labor shortages and supply chain issues are predicted to similarly heighten machine depreciation, hire, and repair costs in the coming year, while the cost of oil is expected to cause double-digit annual increases in fuel and utility costs for farmers, according to the Illinois report. Fertilizer costs are expected to increase by 132% for soybeans and 66-70% for corn.

The Illinois report also estimates that crop revenue in 2022 will increase by approximately 30% for corn and 19% for soybeans compared to the prior year, buoyed by higher average commodity prices and strong yield per acre. To maintain profitability, revenue will need to exceed the cost of production.

Reports published by Purdue University in Indiana detailing predicted input costs for Indiana crops in 2021 and 2022 also paint a picture of rising and volatile input costs. As seen in Table 2, below, Purdue estimates fertilizer costs at $272 per acre for rotated corn and $303 per acre for unrotated corn in average productivity soil, marking annual increases of 125% and 130% respectively. Notably, the Indiana report suggests higher fertilizer costs for all soil qualities than those estimated by Illinois in 2022. Perdue and Illinois estimate pesticide and seed costs to rise to a similar annual degree.

The University of Iowa predicts total production costs to see an annual increase of 19% for corn and 15% for soybeans in 2022, with substantial hikes in the cost of fertilizer, machinery, seeds, crop insurance, and labor. Figure 1, below, shows the state’s input cost outlook for 2022 for rotated soybeans, rotated corn, and unrotated corn grown in average productivity soil. The report estimates the total cost of continuous corn to be $842 per acre, rotated corn at $785 per acre, and rotated soybeans at $575 per acre.

Total corn and soybean production costs (using last year’s cash rent average to measure land costs and excluding storage) would average $800 and $575 per acre in 2022, respectively, showing 19 and 15% increases from 2021 levels (Figure 1).

Iowa’s estimation for fertilizer costs in 2022 are notably lower than the values predicted by Illinois and Purdue, though Iowa’s annual increases in the cost of seed and labor are commensurate with estimations by other states.

The reports highlight the relative efficiency of crop rotation, particularly with respect to corn. As seen in Table 1, above, the University of Illinois estimates that fertilizer costs in 2022 will be 4.3% ($10) greater per acre for corn grown after corn than for corn grown after soybeans, while pesticide for unrotated corn is predicted to cost 6.3% ($6) more per acre than for rotated corn. Yield per acre for rotated corn is expected to exceed that of unrotated corn by 4.6% (10 bushels).

Table 2, above, pertaining to average productivity farmland in Indiana, estimates fertilizer costs for unrotated corn to exceed that of rotated corn by 11% ($31). Figure 1, above, depicting Iowa input costs across products, suggests a cost of crop protection at 58% higher ($23) for unrotated corn than for rotated corn.

The exact degree to which input costs will ultimately rise in 2022 cannot be known. A min-max contract can provide price stability for producers amidst volatile input costs and uncertain commodity prices.

Related: Case Study: Hedging Downside Risk in Corn Under Rising Input Costs with a Min-Max Contract