Commodity Price and Input Costs
Changing prices for most agricultural commodities and the costs of inputs (in particular, fuel and fertilizer) make it particularly important to keep up with trends in futures markets and monitor your cost of production. These budgets are a good starting point for developing your own estimates, but changing economic conditions and governmental policies (such as encouraging production of biofuels) can alter the marketplace and affect your profitability very quickly. The commodity prices used in the corn, soybean, wheat, and oat budgets reflect 2013 futures prices (as of late June 2012) for delivery at harvest (adjusted for local basis). Prices for corn silage are set at nine times the corn price (eight to ten times the corn price is a commonly used estimate for valuing corn silage). Prices for barley and grain sorghum are set at 85 percent of the corn price (based on relative feed value). Forage sorghum is valued at 85 percent of corn silage (based on relative feed value). Canola price is adjusted from projected 2013 North Dakota prices modified for transportation. Hay prices reflect the average price received for all hay of a particular type; this is perhaps the commodity with the highest variability because of the impact that local supply and demand conditions, quality differences, differences in bale size (e.g., small rectangular, small round, large round, and large square bales), and transportation costs have on price. Input prices are likely to be volatile in future years because of uncertain supply and demand for energy and increased world demand for inputs such as fertilizer.