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Cost of Production Outlook

Cost of Production Outlook. Southern Outlook Conference Atlanta, GA September 23, 2008. Lori Wilcox wilcoxl@missouri.edu www.fapri-mu.org. Overview. Macroeconomic impacts Prices paid by farmers index Costs of production Net return implications FAPRI Baseline process.

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Cost of Production Outlook

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  1. Cost of Production Outlook Southern Outlook Conference Atlanta, GA September 23, 2008 Lori Wilcox wilcoxl@missouri.edu www.fapri-mu.org

  2. Overview • Macroeconomic impacts • Prices paid by farmers index • Costs of production • Net return implications • FAPRI Baseline process

  3. $1 per gallon increase over the past 10 months with some recent decline $2.50+ per gallon increase over the past 4 years Source: http://tonto.eia.doe.gov/oog/info/wohdp/diesel.asp

  4. June 2008 = $10.82 a historical high followed by $10.33 in Oct. 2005 Source: http://tonto.eia.doe.gov/dnav/ng/ng_sum_lsum_dcu_nus_m.htm

  5. 2008 avg production = 1,700,000(MMcf) • within 3% of 1970’s avg. • 18% above 1980’s avg. • 11% above 1990’s avg. Source: http://tonto.eia.doe.gov/dnav/ng/ng_sum_lsum_dcu_nus_m.htm

  6. Source: Global Insight, August 2008

  7. August FAPRI-MU Baseline • WTI crude range $130 to $105/barrel ($120 avg.) • September 22, 2008 futures - $120.92/barrel • Natural gas range $9 to $10 per Mbtu • September 22, 2008 futures - $7.94

  8. Putting the Pieces Together Macro Net Returns Prices Paid Cost of Prod.

  9. 2nd Qtr 2008 fertilizer prices are 300-400% higher than average prices for 2002 Source: USDA/NASS Agricultural Prices

  10. Source: Yara

  11. Fertilizer PricesUS $/ton Source: USDA/NASS Agricultural Prices

  12. Source: FAPRI-MU August 2008 Update

  13. Source: FAPRI-MU August 2008 Update

  14. Source: FAPRI-MU August 2008 Update

  15. Source: FAPRI-MU August 2008 Update

  16. Prices Paid by Farmers - % Changes Source: FAPRI-MU August 2008 Update

  17. Putting the Pieces Together Macro Net Returns Prices Paid Cost of Prod.

  18. ERS Regions beginning in 1995 CR,WH,SB,SK CR,SG,WH,SB,CT CR,WH,SB,SK WH CR,SG,SB WH,RC,CT,SK CR,WH,SB,CT,PN CR,SG,WH,SB,CT,PN SG,WH,SB,RC,CT

  19. ERS Regions Prior to 1995 – Followed State Boundaries Pacific Lake States Northeast N. Plains Corn Belt Southeast I Delta Southeast II S. Plains

  20. Regional Mapping • FAPRI-MU • US cost of production model based on current ERS regional designations • US crop model based on state production mapped to COP model regions • Continued expansion of state-level model components (including those for ACRE) • Incentive to maintain current mapping

  21. Corn and Soybean Variable COP US $/Acre Source: FAPRI-MU August 2008 Update Variable Cost = Operating Cost + Hired Labor

  22. Cotton and Rice Variable COP US $/Acre Source: FAPRI-MU August 2008 Update Variable Cost = Operating Cost + Hired Labor

  23. Wheat and Sorghum Variable COP US $/Acre Source: FAPRI-MU August 2008 Update Variable Cost = Operating Cost + Hired Labor

  24. Variable Cost = Operating Cost + Hired Labor

  25. Variable Cost = Operating Cost + Hired Labor

  26. Variable Cost = Operating Cost + Hired Labor

  27. Variable Cost = Operating Cost + Hired Labor

  28. Variable Cost = Operating Cost + Hired Labor

  29. Variable Cost = Operating Cost + Hired Labor

  30. Putting the Pieces Together Macro Net Returns Prices Paid Cost of Prod.

  31. U.S. Corn Market Returns (Does not include Government Payments) Source: FAPRI-MU August 2008 Update

  32. U.S. Soybean Market Returns (Does not include Government Payments) Source: FAPRI-MU August 2008 Update

  33. U.S. Wheat Market Returns (Does not include Government Payments) Source: FAPRI-MU August 2008 Update

  34. U.S. Cotton Market Returns (Does not include Government Payments) Source: FAPRI-MU August 2008 Update

  35. U.S. Rice Market Returns (Does not include Government Payments) Source: FAPRI-MU August 2008 Update

  36. FAPRI Baseline Process • November 2008 – Preliminary Baseline • December 2008 – Baseline Review • Jan./Feb. 2009 – Final Baseline • Deterministic and Stochastic • Presented to Congress by early March • University of Missouri, Iowa State University, Texas A&M University, University of Arkansas, Texas Tech University, & Arizona State University

  37. Thank you and Questions? wilcoxl@missouri.edu www.fapri-mu.org

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