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Cost of Production Where Are We At And Where Are We Going

Cost of Production Where Are We At And Where Are We Going. By Duane Griffith Montana State University Extension April 2008. As We Discuss Cost Related Issues, Keep Volatility in Mind. Types of Costs. Operating Costs (Variable Costs) Seed, Fertilizer, Chemicals, Crop Insurance

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Cost of Production Where Are We At And Where Are We Going

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  1. Cost of ProductionWhere Are We At And Where Are We Going By Duane Griffith Montana State University Extension April 2008

  2. As We Discuss Cost Related Issues, Keep Volatility in Mind

  3. Types of Costs Operating Costs (Variable Costs) Seed, Fertilizer, Chemicals, Crop Insurance Fuel, Oil, Repairs Vary with the level of production Usually on a per acre basis but can be lumpy Ownership Costs (Fixed Costs) Taxes, Interest (Opportunity Costs), Insurance, and Depreciation

  4. Feeling the Pressure Production response to high prices = Downward pressure on prices Prices will remain relatively high Increased acreage planted = Upward pressure on production inputs Fuel, Chemicals, Fertilizers, Insurance etc. Upward pressure on land rents

  5. Energy and FuelWhere is it headed

  6. World Energy-Figure8

  7. Energy Use by Fuel Type

  8. Short Term Projections-DOE-Energy Information Agency

  9. Diesel & Gas Price ProjectionsWeighted Avg. All Grades

  10. Chemicals • Many chemicals are petroleum based • Expect prices in the long run to rise

  11. Fertilizer

  12. Prices Expected to Decrease

  13. Summary for Costs • Some costs may ease in short run • Long term picture is upward pressure on production inputs • Move more towards the “Cost – Price Squeeze” we are familiar with in the long run

  14. Managing Costs of Production • Energy Use • Input Use • Crop Mix • Tillage Systems

  15. http://www.montana.edu/extensionecon/software/CropMixTillageSysEnergyPrice.swfhttp://www.montana.edu/extensionecon/software/CropMixTillageSysEnergyPrice.swf

  16. Current Cost of Production Estimates http://www.montana.edu/extensionecon/cropdownloads.html

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