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Farmers Face Higher Production Costs

Farming is already an expensive venture. But some of the costs to get it done are going up.
(ST. JOSEPH, Mo.) Terry McClatchey knows how expensive farming can be.

"Farmers have an extraordinary amount of money in the game," he said.  "When you're talking about machinery costs, and the land costs, there is an extraordinary amount of money in that process is on the edge."

McClatchey works for Ag Processing, Inc. a farmer-owned co-op that processes soybeans into a myriad of products.

In his observations, it's becoming even more expensive to farm for corn and soybeans.

"Some of the input prices go up depending how profitable farming is.  And over the last few years we've had high priced corn and soybeans," McClatchey said.  "The prices of corn are now lower than what it's been over the last couple years.  Here in town it's around four and a half dollars a bushel.  That's down from at one time seven or eight dollars a bushel."

A research team at Kansas State University looked at production costs from 1975 to 2012.

They found a 200-percent increase in the price of seeds and a 100 percent increase in the price of machinery and equipment.

"Recently we have seen profits and pretty nice profits for these producers, but as we continue to see those costs increase, at some point, one might expect those profits would go away," said Brian Briggeman, an agricultural economist from KSU.

Last year, extreme drought conditions made headlines. The drought lasted for months on end and crop yields took a huge turn for the worse.

This year saw a wetter spring - especially the month of May - which was good for early season soil moisture, but created a delayed planting season.

"Overall it's better than a year ago," McClatchey said.  "It was drier longer last year.  Even though they were put in a little late this year, our yield will be better on both corn and soybeans.  It's kind of a double-edged sword though; because of that better production, the prices are having some downward effect.  And that's where you get into the problem of profitability."

McClatchey also says there's not a lot of optimism that Congress will pass a revamped Farm Bill, which provides subsidies for expensive farming insurance programs.
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