NASHVILLE, Tenn. – Canadian farmers aren’t the only ones fretting about soaring input costs.
An analysis conducted by the U.S. Department of Agriculture’s National Agricultural Statistics Service shows fertilizer prices rose 32 percent between January 2007 and January 2008. The cost of diesel fuel went up 35 percent over that same time.
Increases on the cost side of the ledger were masked by a 72 percent rise in the price of grain and oilseeds. But American farm leaders worry that is a fleeting situation.
They say it is only a matter of time before commodity prices come back down to earth, when grain supply catches up with demand. They doubt that input costs will be subject to the same gravitational pull.
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“I can see what makes wheat prices come back down. But I can’t see what makes nitrogen and diesel inexpensive again,” said Daren Coppock, chief executive officer of the National Association of Wheat Growers (NAWG) during a convention held in Nashville last week.
Richard Ostlie, chair of the American Soybean Association, has first-hand experience with rising input costs.
Diesel fuel has risen to $3.50 US per gallon from $1 three years ago. Fertilizer costs for his wheat and corn were $96 per acre in December 2007, up from $40 in the fall of 2006.
Equipment costs are on the rise as well. A farmer he knows ordered a John Deere combine back in December and was told it won’t arrive until February 2009.
“You know that along with that (delay) there is going to be big increases in price,” said Ostlie.
And then there are the land costs. In 2001, Ostlie purchased a parcel for his farm in Northwood, North Dakota, for $875 per acre. This fall he purchased a similar plot a half kilometre away for $1,940 per acre.
Today, Ostlie figures he could sell that land for $3,000 per acre.
He agrees with Coppock that input costs, equipment costs and land values are not going down any time soon but it is almost a certainty that crop prices will.
“They’re not going to stay where they are. I hope farmers try to plan for that and don’t lock themselves into huge capital investments,” said Ostlie.
Farm leaders are impressing upon policymakers in Washington, who are deliberating on the new farm bill, that while the farm economy looks rosy now it could quickly turn thorny.
Ostlie said politicians question the need for a $6.30 per bushel floor price for soybeans when prices now are in the $12 per bu. range.
But he recalls people making similar comments during negotiations for the 1995 farm bill, wondering why farmers were bellyaching when prices were high and showed no signs of coming down.
“Two years later we were in Congress begging for special help because the market had crashed and we were way below the target price,” he said.
Coppock said all it will take is one year of good wheat yields in key exporting countries for wheat prices to fall back down to $5 per bu.
“When they do, we need to have a net in place to catch people or we’re going to have a huge wave of rural bankruptcies and another 1981 farm crisis,” he said.
