The cost of growing

Recent reports from Illinois, Indiana, and Iowa predict double-digit annual increases in input costs for corn and soybeans in the coming year. Fertilizer, which had already seen significant price increases between 2021 and 2020, is a leading driver in higher projected crop input costs in 2022. Labor-adjacent inputs such as hired labor and machine and building repair are also expected to contribute to farmers’ amplified expenses this year. Additionally, the reports highlight the cost-saving nature of crop rotation.

Predictions by state

Table 1, below, shows the University of Illinois Department of Agricultural and Consumer Economics projections for input costs across corn, wheat, and soy for the upcoming 2022 harvest in high productivity farmland in Central Illinois, compared to last year’s projection.

Table 1: Central Illinois Crop Input Cost Projections per Acre for 2022 and Percent Increase from 2021, High Productivity Farmland

    Corn after corn Corn after soy DC Soy Soy after corn Soy after soy Wheat
    $/acre 21/22 $/acre 21/22 $/acre 21/22 $/acre 21/22 $/acre 21/22 $/acre 21/22
Direct Crop insurance $ 24 0.00% $ 24 0.00% $ 4 0.00% $ 16 0.00% $ 16 0.00% $ 9 0.00%
  Drying $ 23 64.29% $ 24 60.00% $ -   $ 2   $ 2   $ 1 0.00%
  Fertilizers $ 240 65.52% $ 230 70.37% $ 29 0.00% $ 102 131.82% $ 102 131.82% $ 137 25.69%
  Pesticides $ 101 23.17% $ 95 25.00% $ 42 5.00% $ 65 44.44% $ 71 42.00% $ 35 29.63%
  Seed $ 124 6.90% $ 124 6.90% $ 49 0.00% $ 80 8.11% $ 80 8.11% $ 50 0.00%
  Storage $ 15 0.00% $ 15 0.00% $ 1 0.00% $ 5 -37.50% $ 5 -37.50% $ 1 0.00%
                           
Overhead Building depreciation $ 15 36.36% $ 15 36.36% $ 5 0.00% $ 13 30.00% $ 13 30.00% $ 8 14.29%
  Building repair and rent $ 8 33.33% $ 8 33.33% $ 6 0.00% $ 7 40.00% $ 7 40.00% $ 4 33.33%
  Hired labor $ 23 27.78% $ 23 27.78% $ 14 0.00% $ 22 29.41% $ 22 29.41% $ 21 16.67%
  Insurance $ 12 33.33% $ 12 33.33% $ -   $ 12 9.09% $ 12 9.09% $ 5 0.00%
  Interest (non-land) $ 12 -47.83% $ 12 -47.83% $ 11 0.00% $ 10 -52.38% $ 10 -52.38% $ 14 0.00%
  Misc $ 11 22.22% $ 11 22.22% $ -   $ 11 22.22% $ 11 22.22% $ 9 0.00%
                           
Power Fuel and oil $ 20 42.86% $ 20 42.86% $ 22 0.00% $ 13 8.33% $ 13 8.33% $ 13 -35.00%
  Light vehicle $ 2 100.00% $ 2 100.00% $ 2 0.00% $ 1 0.00% $ 1 0.00% $ 2 0.00%
  Mach. depreciation $ 79 25.40% $ 79 25.40% $ 28 0.00% $ 68 23.64% $ 68 23.64% $ 68 38.78%
  Machine hire/lease $ 19 18.75% $ 19 18.75% $ 10 -9.09% $ 16 14.29% $ 16 14.29% $ 18 0.00%
  Machine repair $ 36 50.00% $ 36 50.00% $ 25 0.00% $ 27 28.57% $ 27 28.57% $ 33 0.00%
  Utilities $ 6 20.00% $ 6 20.00% $ 5 0.00% $ 6 20.00% $ 6 20.00% $ 7 0.00%
                           
Revenue ARC/PLC $ -   $ -   $ -   $ -   $ -   $ -  
  Crop insurance proceeds $ -   $ -   $ -   $ -   $ -   $ -  
  Crop revenue $ 1,090 29.76% $ 1,140 29.55% $ 516 14.16% $ 852 19.33% $ 828 19.48% $ 563 12.15%
  Other gov't payments                        
  Price per bu $ 5 25.00% $ 5 25.00% $ 12 14.29% $ 12 14.29% $ 12 14.29% $ 8 27.12%
  Yield per acre (bu) 218 3.81% 228 3.64% 43 0.00% 71 4.41% 69 4.55% 75 -11.76%

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.

Table 2: Indiana Input Cost Projections per Acre for 2022 and Percent Increase from 2021, Average Productivity Farmland

  Corn after corn Corn after soy Soy after soy Wheat
Cost 2022 22/21 2022 22/21 2022 22/21 2022 22/21
Dryer fuel $ 52 44% $ 42 45%        
Fertilizer $ 303 130% $ 272 125% $ 95 83% $ 158 108%
Hauling $ 17 0% $ 18 0% $ 6 0% $ 8 0%
Insurance/misc $ 38 0% $ 38 0% $ 34 0% $ 9 0%
Interest $ 20 67% $ 18 50% $ 9 29% $ 10 67%
Machinery fuel $ 21 40% $ 21 40% $ 13 44% $ 13 44%
Machinery repairs $ 22 0% $ 22 0% $ 18 0% $ 18 0%
Pesticides $ 73 26% $ 73 26% $ 63 26% $ 38 27%
Seed $ 118 6% $ 118 6% $ 71 6% $ 44 0%
Yield (bu) 171 1% 182 1% 55 0% 78 1%


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).

Figure 1: Iowa Input Cost Projections per Acre for 2022, Average Productivity Farmland

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.

Cost advantages of crop rotation

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.

Hedging your risk

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.

South American Soybean Futures

As the largest producer and exporter of soybeans, Brazil plays a key role in the global soybean market, driving the need for a regional benchmark for price discovery.


All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.

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