The cost of producing an acre of soybeans has risen 273 percent since 1975, and currently costs the average US farmer $443 per acre, according to data from the USDA’s Economic Research Service.
Seed and fertilizer expenses have been two of the biggest contributors to the increase in costs, rising 598 percent (to $58.10 an acre) and 343 percent (to $25.10), respectively. As new technologies have been developed, farmers have devoted a larger share of their crop budgets to fighting off disease and insects, including genetically engineered seeds to help with pest management. Studies have shown that hybrid and genetically modified seeds can significantly increase yields because of these traits. Chemical expenses, including pesticides, have risen 163 percent, to $26.80 an acre on average, since 1975.
Depreciation expenses have also had a major impact on the cost-of-production increase, rising 578 percent to $91 an acre on average. Greater reliance on physical capital, rather than human capital, to produce crops has led to an increase in costs associated with machinery and equipment. This trend parallels expenses for repairs and maintenance, which are up 306 percent, to $23.30 an acre, since 1975. Labor expenses, at just $3.30 an acre, increased 79 percent.
Land opportunity cost—essentially income that farmers forewent by keeping their land under cultivation—is the largest contributor to production cost per acre. It is $142.90 per acre, up 221 percent. Another big gainer is custom operations expenses—up 449 percent to $10.30 an acre—a catchall category that refers to costs specific to the crop planted such as soil tests and land preparation.
The only line item that is lower than in 1975 is interest expenses, down 96 percent to 80 cents an acre on average. In general, interest rates have declined in tandem with a big drop in consumer inflation rates since the 1970s. Of course, as US interest rates currently head higher, they could squeeze farmers’ budgets at the margin.
Indeed, US farmers are in the worst financial position they have been in decades. Net income for US soybean farmers, after a recent peak of $224.18 per acre in 2011, has dropped sharply and was just $31.40 per acre in 2017. Low commodity prices and the US/China trade war are expected to maintain pressure on incomes in 2018 and 2019.