Grain farmer Cecil Schoenherr thought he hit pay dirt late last year when he sold his 2008 wheat crop on contract for $4 a bushel, much more than the $2.50 he got for it in 2005. But what he didn’t foresee was that the cost of fertilizer, herbicides and other materials he needed to grow the crops would triple this year or that the fuel to operate the machinery would be $3.70 a gallon.
With the price of grains at record highs, what could have been a financial windfall for Schoenherr and other farmers is in many cases turning out to be just enough to cover their skyrocketing overhead, farmers and agri-industry experts say.
“I never saw $4 wheat, but I never saw $500-a-ton fertilizer either,” said Schoenherr, who farms 600 acres of corn, wheat and soybeans in eastern Michigan. “We’re just handling more money.”
As farmers’ incomes have risen, so have their expenses. A report by the U.S. Department of Agriculture notes the recent trends holding down their bottom lines: The price of nitrogen fertilizer is about $880 per ton, compared with $375 per ton just two years ago.
Fuel has gone from $1.35 a gallon two years ago, to $2.50 last year to $3.70 now.
Repair costs for farm equipment have risen 50 percent to 70 percent due to higher steel costs.
“Certainly it helps,” said Jim Byrum, president of the Michigan Agri-Business Association, of the higher grain prices. “But it’s not going to be a bonanza year like everyone thinks it is.”
The higher cost of production is an issue for growers such as Dan Fox of DLS Farms, a 300-acre spread in Armada, Mich., where he grows soybeans and corn. He was paying $300 per ton of fertilizer last year and now he’s shelling out $600 per ton.
Plus, his land rent is up and so is the fuel that powers his tractors.
“Prices have come up, but we are not at parity,” he said. “The profits are being eaten away by things you need to purchase to grow the crop.”
John Rhein also is feeling the pain. Even though he’s getting more for his corn, wheat and soybeans, he paid $25,000 more this year for the nitrogen fertilizer he uses on his 1,300-acre Michigan farm this year. Also, the 100 gallons of fuel his three tractors burn each day during planting season costs almost $200 more than last year.
“The money is in one hand and out the other,” he said. “If the price of grain hadn’t gone up, we’d be working at a loss.” The higher prices are “more or less keeping us alive right now.”
Fox contracted 50 percent of his soybeans at $13.30 per bushel, significantly more than what he got for it last year. Still, production costs are eating up much of that.
But, “it’s better than last year when I sold it for $7.80,” he said.
