FCA Board Meeting 

February 2018

Cost of Production Trends for 

Grain and Soybean Producers

February 8, 2018

Stephen Gabriel

Chief Economist

Office of Regulatory Policy
Iowa corn producers to earn thin 

profits in 2017 and 2018

2

1.63 

0.96 

(0.10)

1.64 

2.23 

1.45 

(0.18) (0.29) (0.23) (0.13)

0.08 0.02 

4.29 4.10

3.59

5.23

6.20

6.92

4.49

3.71 3.52 3.36

3.25 3.30

2.80

3.32

3.84 3.74 4.11

5.66

4.81

4.39 4.02

3.58

3.17 3.28

-1.00

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F

Dollars per Bushel

Iowa Season-average Corn Profit Margin Estimates

Margin w/ Government Payments Iowa Price Total Production Costs

Source: FCA-ORP using data from USDA and Iowa State University. 2018 forecast assumes USDA baseline price and trendline yields.

As of 1/12/2018 
Good yields helped boost 

Soybean producers’ profits

3

0.28 

4.20 

1.98 

0.06 

2.85 3.55 

2.47 

1.20 

(0.90) (0.60)

0.53 0.70 0.57 

6.58

10.50 10.20 9.52

11.20

12.60

14.40

13.10

9.96

8.91

9.42

9.25 9.25

6.40

6.47 8.42

9.62

8.50 9.20

12.13 12.04

10.91

9.70

8.89 8.55 8.68

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F

Dollars per Bushel

Iowa Season-average Soybean Profit Margin Estimates

Margin w/ Gov. Payments Iowa Price Total Production Costs

As of 1/12/2018 

Source: FCA-ORP using data from USDA and Iowa State University. 2018 forecast uses USDA Baseline prices and trendline yields. 
Wheat producers face another 

year of red ink

4

(1.25)

0.79 0.98 1.53 

0.33 

(4.03)

(2.73)

(1.09) (1.59) (1.27)

4.79

5.14

7.03 7.48

6.99

6.07

4.74

3.20 3.87 4.34

6.40

4.69

6.48 6.32

7.07

10.83

8.03

4.53

5.46 5.61

-6.00

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

12.00

2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F

Dollars per Bushel

Kansas Season-average Wheat Profit Margin Estimates

Margin w/ Government Payments Kansas Price Total Cost per Bushel

Source: FCA-ORP using data from USDA and Kansas State University.

Notes: For 2014-2018F, government payment is Agriculture Risk Coverage and excludes loan deficiency payments. For 2017 

and 2018, ARC payment is expected to be zero, compared with about 60 cents for Price Loss Coverage. 

Large loss due to 

low yield.

As of 1/22/18

Smaller loss due to record yield. 
Illinois corn producers’ expenses 

concentrated in rent, fertilizer, seed

5

0%

1%

1%

1%

1%

1%

1%

2%

2%

2%

2%

2%

3%

3%

8%

8%

15%

16%

32%

0% 5% 10% 15% 20% 25% 30% 35%

Light vehicle

Building repair and rent

Utilities

Misc

Storage

Drying

Insurance

Machine hire/lease

Building depreciation

Fuel and oil

Interest (non-land)

Hired labor

Machine repair

Crop insurance

Mach. depreciation

Pesticides

Seed

Fertilizers

Cash Rent

Source: 2018 Crop Budgets, Central Illinois - High Productivity Farmland, University of Illinois.

Expense Item for corn-after-soybeans production as a percent of the total

Assumes 100% of land is

cash rented.
Illinois soybean farmers’ expenses 

concentrated in rent, seed, machinery

6

0%

0%

1%

1%

1%

1%

2%

2%

2%

2%

2%

2%

3%

3%

6%

7%

9%

12%

43%

0% 10% 20% 30% 40% 50%

Light vehicle

Drying

Building repair and rent

Utilities

Misc

Storage

Building depreciation

Insurance

Machine hire/lease

Fuel and oil

Interest (non-land)

Crop insurance

Hired labor

Machine repair

Fertilizers

Pesticides

Mach. depreciation

Seed

Cash Rent

Source: 2018 Crop Budgets, Central Illinois - High Productivity Farmland, University of Illinois.

Expense Item for soybeans-after-corn production as a percent of the total

Assumes 100% of land is

cash rented.
Kansas wheat farmers’ top costs are 

custom field work, rent, fertilizer

7

2%

2%

2%

3%

5%

5%

6%

12%

18%

46%

0% 10% 20% 30% 40% 50%

Herbicides

Miscellaneous

Interest on operating capital

Fungicides

Seeds

Crop insurance

Labor (ex. custom field operations)

Fertilizers

Cash rent

Custom Field Operations

Source: 2018 Continuous Wheat Cost and Returns Budget, South Central Kansas, Kansas State University.

Expense item for continuous wheat production as a percent of the total

Assumes 100% of land is

cash rented.
Crop sector input prices paid seem 

impervious to declining crop prices

8

0

20

40

60

80

100

120

0

2

4

6

8

10

12

14

16

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

(Jan -

Nov)

CORN, GRAIN - PRICE RECEIVED, MEASURED IN $ / BU SOYBEANS - PRICE RECEIVED, MEASURED IN $ / BU

WHEAT - PRICE RECEIVED, MEASURED IN $ / BU CROP SECTOR - PRICES PAID INDEX, 2011

Crop prices, $/bu. Prices paid index (2011 = 100)

Source: USDA, NASS.
Cash rent and seed prices have 

declined recently, but still high

9

0

20

40

60

80

100

120

140

160

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

(Jan -

Nov)

FERTILIZER

CASH RENT

SEEDS & PLANTS

Index of Prices Paid (2011 = 100)

Source: USDA, NASS.
Most input prices continued to rise 

despite collapse in grain prices

10

-34%

-33%

1%

2%

4%

12%

12%

16%

29%

5%

-49%

-33%

-42%

66%

103%

24%

22%

109%

49%

31%

20%

68%

50%

240%

135%

126%

-100% -50% 0% 50% 100% 150% 200% 250% 300%

FUELS

FERTILIZER

CHEMICAL TOTALS

INSECTICIDES

SEEDS & PLANTS

MACHINERY TOTALS

INTEREST

LABOR, WAGE RATES

CASH RENT

CROP SECTOR

CORN

SOYBEANS

WHEAT

% change in prices (2005 - 2012)

% change in prices (2012 - 2017)

Source: USDA, NASS.

Percent change in crop prices measured in dollars/bu. Percent change in input prices based on index for prices paid, 2011.
Iowa corn farmers’ cost per acre 

is down just 14% since 2012

11

0

100

200

300

400

500

600

700

800

900

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Total Costs ($/Acre) - Landowner

Total Costs ($/Acre) - Tenant

Source: Iowa State University.

Dollars/Acre

% change in cost/bu.

2012 - 2017

Corn -42%

Soybeans -28%
Cash rents peaked in 2014 in some 

Midwest states; still rising in others 

12

0

50

100

150

200

250

300

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

ILLINOIS

INDIANA

IOWA

OHIO

WISCONSIN

Source: USDA, NASS.

Cash Rent ($/acre)

% Change 

(2012 - 2017)

ILLINOIS 3%

INDIANA 11%

IOWA -2%

OHIO 25%

WISCONSIN 21%
Lower cash rent can be critical to 

the survival of some farmers

13

 $(400)

 $(200)

 $-

 $200

 $400

 $600

 $800

 $1,000

Sep-00

Apr-01

Nov-01

Jun-02Jan-03

Aug-03

Mar-04

Oct-04

May-05

Dec-05

Jul-06

Feb-07

Sep-07

Apr-08

Nov-08

Jun-09Jan-10

Aug-10

Mar-11

Oct-11

May-12

Dec-12

Jul-13

Feb-14

Sep-14

Apr-15

Nov-15

Jun-16Jan-17

Aug-17

Iowa Corn Farmer Net Return/Acre - Landowner

Iowa Corn Farmer Net Return/Acre - Tenant

Source: Iowa State University.
Why Have Cash Rents Not 

Declined More?

 Landlords didn’t share in the high returns 

during “fat” years – now catching up

 Many expect that commodity prices will 

increase in coming years

 Intense competition to rent farmland

Source: Schnitkey, G. "Illinois Farmland Rents: 2017 State Values and 2018 Outlook." farmdoc daily (7):143, 

Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, August 8, 

2017.

14
Long-term interest rates have 

been rising since September 2017

15

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

Source: Board of Governors of the Federal Reserve System.

10-Year Treasury Constant Maturity Rate, Percent, Weekly
Short-term interest rates have 

been rising since October 2015

16

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

3-Month London Interbank Offered Rate (LIBOR), based on U.S. Dollar, Percent, Weekly

3-Month Treasury Bill: Secondary Market Rate, Percent, Weekly

Source: Board of Governors of the Federal Reserve System, IBA.
Interest rates are forecast to 

continue to rise

17

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Q2

2019

Q3

2019

Q4

2019

3-Month Treasury Bill

10-Yr Treasury Bond

3-Month Treasury Bill Forecast

10-Yr Treasury Bond Forecast

Percent

Source: Federal Reserve Board, Forecasts are from Wells Fargo Securities.
Summary

 The reduction in costs/acre have lagged the decline in 

crop prices

 Strong yields in recent years helped support incomes

 Cash rents have been declining in some Midwestern 

states, but, they are declining slowly

 Fertilizer and cash rents account for most of the decline 

in costs per acre in several Midwestern states

 Interest rates are rising, posing a risk to land values and 

cash flow

18
Questions

THANK YOU