WASHINGTON, July 23 (Xinhua) -- Soaring energy prices will yield sharp increases for corn and soybean production costs next year, cutting into U.S. farmers' profits and stretching already high food costs, according to a new University of Illinois study published on Wednesday.
Costs to get crops in the ground will jump by about a third in 2009, fueled by fertilizer prices expected to surge 82 percent for corn and 117 percent for soybeans, said Gary Schnitkey, an agricultural economist of the university.
"Roughly 80 percent of the cost of producing nitrogen fertilizer is natural gas, so as natural gas costs have gone up so have the costs of those inputs," he said. "Phosphorus and potassium are mined, and as energy costs increase, mining costs increase."
Along with fertilizer, grain farmers also will see hefty cost increases next year for inputs ranging from seed to fuel for tractors and other machinery, according to the study.
For example, the study projects non-land production costs for corn will total 529 U.S. dollars an acre (about 0.4 hectare) next year, up 36 percent from 2008 and nearly 85 percent higher than the average of 286 dollars per acre from 2003 to 2007.
However, with commodity prices high, the increased production costs should merely trim farm profits rather than sinking balances into the red, said Schnitkey, who predicts farmers will likely post solid earnings again in 2009.
While farmers will likely absorb some of the added costs, Schnitkey says consumers also should expect to pay more for products ranging from cereals and syrups to grain-fed beef.
"There's not going to be a reduction back to lower food costs as long as we have these higher production costs," he said. "Energy prices are driving a lot of what's going on and ultimately that hits the consumer."
