For more than a year, we have been reading in the press how using corn for ethanol production has driven up the cost of food to consumers. Some have suggested that because we are burning our food to make fuel, the cost of all our food has skyrocketed. Nevermind that we eat very little field corn, these pundits have suggested that the price of fruits and vegetables as well as the meat, dairy and poultry have all increased because we are producing ethanol.

Many of the same people had argued during the farm bill debate, that we should do away with subsidy for farmers because the free market system would take care of those who produce the product most efficiently. They suggested that millionaire farmers were getting welfare from the government.

The cost to produce corn and soybeans, the two leading cash crops in Butler County, Ohio, has increased dramatically in the past three years. In 2006, the cost to try to grow 150 bushels per acre of corn was $463 per acre, according to Ohio State University Enterprise Budgets, authored by Barry Ward, Leader Production Business Management. Ward estimates those costs will rise to $710 per acre in 2009. That is an increase of 53 percent in just three years. The same is true for soybeans; to try to produce 45 bushel beans in 2006 it cost $295. By 2009, it is expected to cost $467 to produce an acre of beans, a 58 percent increase.

So to meet expenses, a farmer who produces 150 bushels corn in 2009 will need to sell the corn for an average price of $4.73 per bushel and the soybeans for an average of $10.63 per bushel. If he rents the land instead of owning it, he would get to pay himself $100 per acre of corn and $69 per acre of soybeans for his labor, which includes a $20 per acre subsidy on each crop from USDA. If his individual costs are greater, the extra comes out of his share.
There are some major risks with our example. There is insurance the farmer can buy to protect against yield loss and price decreases. The yield can only be protected to 80 percent of his average production. Using our 150 bushel corn and 45 bushel soybean examples, if he insures at the 80 percent level, he would lose 30 bushels per acre of corn and 9 bushels per acre of soybeans before insurance pays. If this happens, he loses $42 per acre instead of making $100 per acre on corn.

In 2007 Butler County corn averaged 118 bushel per acre and soybeans averaged 30 bushel per acre. Even though the prices for corn and soybeans were, for the ’07 marketing year, at all time highs, you can’t make much money if you don’t have much to sell!

The grain market has followed the financial market into the tank the past several weeks. As of this moment, November ’09 beans are quoted at $8.80 on the Chicago Board of Trade which might mean a local price of around $8.10. Corn is trading at $4.42 which may translate into a local price of about $4.12 per bushel. If these would be the average selling prices for the ’09 market year, which begins September ’09, we could be looking at nearly $100 loses per acre of soybeans and $90 loses per acre of corn, even if we produce our target of 150 bushel corn and 45 bushel beans.

I’m sorry, those I deal with who are trying to make a living farming in Butler County are not getting rich, even with government subsidies. Most of the family farms in this county need at least one off-farm income to be able to afford to farm.

The views and opinions expressed in this column are those of the author and not necessarily those of Farm World. Readers with comments for Steve Bartels may write to him in care of this publication.