After declining for two years, costs of crop production will increase slightly for 2000, according to crop budgets for eight regions of North Dakota published by the North Dakota State University Extension Service. That
increase, coupled with low commodity prices, will make profits hard to achieve. The cost of fuel is the key component driving up input costs for 2000. But interest rates and machinery costs will also be higher
compared to 1999. Fertilizer prices have remained stable, but because soil tests generally have indicated lower soil nitrogen levels, the overall costs associated with nutrient management are likely to be somewhat
higher for 2000.
"Most seed prices will be flat or lower this year, a reflection of the low commodity prices," says Andrew Swenson, NDSU extension farm management specialist. "One exception is sunflower, which will
vary by supplier, but on average, I expect sunflower seed to be up slightly this year."
On the revenue side, Swenson expects considerable variation between his projections and reality because supply determines price,
and weather has a significant effect on yield, both locally and globally. The budgets' projected yields use an eight-year average, which excludes the high- and low-yield years. Yields for oilseeds have increased
significantly during this period, but yields for wheat and barley have actually decreased in several regions.
For oilseeds, Swenson projects prices to remain below the marketing loan. He expects feed grain prices to
hover near the loan rate and wheat prices to be above loan.
"The budgets use the higher price, whether that be the market price or the loan rate," Swenson explains, "so of the crops with loan protection, only wheat
has downward revenue risk from price declines."
Some of the smaller-acreage crops such as lentils, crambe and mustard project positive returns in the west and north central areas of the state. Confectionery
sunflowers and dry beans show the best returns in other regions, Swenson says. But most of the crops have significant productions and price risks.
"If the price is attractive, it's a good policy to contract crops
that have a thin market," Swenson stresses.
Producers are likely to take a closer look at malting barley this year because it projects higher returns than spring wheat. Part of that decision, though, must include
consideration of the substantial reduction in revenues if barley does not meet malting quality, which is a situation that has occurred about half the time during the past 10 years. Flax does not project the highest net
return in any region, but Swenson believes there is likely to be an increase in flax acreage due to several factors: its loan rate, strong yields in recent years, less disease problems than with other oilseeds and lower
production costs compared to row crops.
For the past two years, Swenson has recommended planting oilseeds because of favorable loan rates compared to feed grains and wheat, and once again the budgets would suggest
the strategy of growing oilseeds that are best suited to a particular area of the state. Then, as now, however, oilseeds will require higher-than-average yields to garner a solid net return, he says.
At the same
time, Swenson recommends using caution in the crop selection process for 2000. The weather has been favorable for row crops the past few years in many areas, but similar conditions may not continue. Also, many rotations
have pushed oilseeds to the limit, with respect to disease susceptibility.
"It is critical to evaluate crop insurance and consider the financial downside of crop selections," Swenson continues. "As in any year,
producers will need to consider how the entire rotation will affect current and future profitability and risk under different weather and price scenarios, and then wait until harvest for a grade on that multiple-choice
question."
Swenson cautions that NDSU Extension Service crop budgets are intended to be used only as guides because soil types, weather conditions, management, debt levels and production practices vary considerably
from farm to farm in each region—which is why a column is provided in the budgets for producers to enter their own numbers.
Area-specific budgets are available on the Internet at:
