Published on 01/12/06

High costs will put squeeze on farm profits in '06

By Brad Haire
University of Georgia

Georgia farmers will likely have to spend more per acre to farm major row crops in 2006, say University of Georgia economists. They'll need to produce high yields to keep them out of the red.

Fuel and energy prices will remain high in 2006. The cost of inputs like fertilizer and chemicals will be higher, too, said UGA Cooperative Extension economist Don Shurley.

"This year will probably be one of the tightest years we've had in a long time," said Shurley, who has studied farm economics for more than 25 years. His focus is on cotton.

A Georgia cotton farmer will spend about $360 to produce an acre of cotton in 2006, he said. That's about 8 percent more than '05 and 20 percent more than in '04. The figure doesn't cover other costs like taxes, insurance, equipment loans or land payments.

Farmers in early '04 were spending about $1.15 for a gallon of diesel. But the prices started to climb later that year. In '05, farmers spent between $2.25 and $2.50 per gallon. Diesel is expected to be around $2.25 this year.

Fertilizer will cost more, particularly nitrogen, which is manufactured using natural gas. It will cost about $40 per acre, or 30 percent more than last year.

Georgia had a good cotton crop last year. Farmers planted 1.22 million acres. The average yield will be about 853 pounds per acre, a new state record.

It's hard to say what cotton farmers will have to yield per acre to turn a profit in '06, he said. They will likely get about 60 cents per pound for cotton this year.

"But it looks like now, to have a chance at a profit," he said, "they'll certainly have to have another year of good yields."

Corn farmers need nitrogen and water, either from rain or irrigation, to produce high yields. The rain is free. The irrigation and fertilizer cost. Farmers irrigate about half of the state's corn acres.

Corn farmers with irrigation spent about $400 per acre to make their '05 crop. It'll cost them about $458 per acre this year, said Nathan Smith, a UGA Extension agricultural economist.

Georgia corn farmers also had a good 2005. They planted 270,000 acres. The average yield was 127 bushels per acre, which is good for Georgia. If corn prices remain around $2.55 per bushel, farmers will have to make around 145 bushels per acre to make it profitable.

Peanut farmers don't have to use nitrogen. But growing peanuts in '06 will still cost more. Smith figures they'll spend about $400 per acre on nonirrigated land and $509 per acre on irrigated land. This will be about 15 percent to 20 percent more than what it took to grow peanuts in 2004.

Farmers planted 755,000 acres of peanuts last year. The state's average yield was 2,870 pounds per acre.

With prices around $355 to $365 per ton, farmers will need to grow at least 3,000 pounds per acre to make peanuts profitable this year.

All Georgia farmers will need to stretch their farming dollars, but not at the sacrifice of large yields. It will be a tight rope to walk. But their bottom line will depend on it, both economists said.

Brad Haire is the former news editor with the University of Georgia College of Agricultural and Environmental Sciences.