The Shandong Province agricultural price information office reported that corn production costs were up 22% in 2010, yet farmers' profits still increased.
Shandong is the second-leading corn-producing province, accounting for 12% of national production. The corn area has been stable since 2007 and the province has undertaken some yield-improvement programs. Corn output reached a record of 19.215 million metric tons (mmt) in 2009.
In 2010, Shandong's corn production was up 1.3% from 2009, reaching an estimated 19.32 mmt, up 105,000 mt or .54% from the previous year. The yield was 438.76 kg per mu (6581 kg/ha), unchanged from last year.
The article says demand for corn from both feed and industrial uses was strong. Price monitoring data show the Shandong price of corn rose from 1.8 yuan/kg in January to a peak of 2.08 yuan/kg in September. Prices fell 4.8% in October as new corn came on the market. Government price control measures kept the price from rising during November and December. By the end of 2010 the average corn price in Shandong was 1.9 yuan/kg (about $7.20 per bushel).
The wheat price has risen above the corn price. This reversed some of the substitution of wheat for corn that occurred when wheat was relatively cheap, increasing corn demand.
The production cost surveys showed that the average sale price of corn for Shandong farmers was 1.94 yuan/kg (about $7.25/bu) in 2010, up 24% from the previous year. The avearge yield of surveyed farms was 475 kg/mu (7125 kg/ha). Profit per mu was 219 yuan per mu.
I calculate the gross value of production to be 922 yuan per mu while production cost was 724 yuan/mu. The article says net profit was 134 yuan but I don't see how they got this number.
They say production cost rose 22.1%. This includes materials and services of 300.54 yuan and labor 441.7 yuan but again the numbers don't add up. The main components of the cost increase were labor, fertilizer and mechanized services. The article says only 10 days of labor are required for corn in Shandong, but wages were up 9.7% to 42.57 yuan ($6.35) per day. Labor accounts for almost 60% of the cost (although they apparently didn't include land rental costs). Fertilizer and pesticide expenses increased. various fertilizer prices were up 7% to 16%. Pesticide expenditures rose 4.3 yuan/mu, up 35%. Mechanized services expenses rose, reflecting rising fuel costs, higher irrigation fees and more use of mechanized cultivation and harvest services. Fuel for agricultural use cost an average of 7.49 yuan per liter ($4.23 per gallon).
Somehow the profit per mu rose 11% despite cost and revenue both rising by similar rates (22% and 24%).