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Early season costs soaring in agriculture field

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The soaring cost of crop inputs and availability issues have been on the minds of farmers and others in the ag industry. Fertilizer costs in particular have been a source of frustration.

Fertilizer is a necessity for farmers, allowing them to achieve the yields needed to meet demand and keep their operations afloat. According to the American Farm Bureau Federation, fertilizer costs have risen as much as 300% in some areas.

As a result, Virginia farmers will likely have to tighten their financial belts in terms of initial growing season outlays. And those increased expenses may flow downstream to consumers.

“They kind of have sticker shock right now,” says Joe Koenen, an ag business specialist from Missouri.

Midwestern ag economist Gary Schnitkey says global supply chain issues have contributed to the increasing costs, as have weather events, and the ag industry is watching to see if there could be shortages for crop inputs. He expects farmers to be able to get what they need, although he doesn’t expect there to be a large surplus.

“I don’t think there’s going to be abundant supplies, but I think most of it will be worked out,” Schnitkey says.

Farmers may need to adjust herbicide plans, he says, as some types might be in shorter supply.

“Glyphosate and glufosinate seem to be the two that are in shortest supply,” Schnitkey says.

K.J. Johnson, a central Illinois farmer who serves as interim president of the Illinois Fertilizer and Chemical Association, says he generally thinks the supply situation will be adequate.

“I feel good with supplies, just the Roundup and the Liberty are going to be the tightest,” he says.

Johnson says those are largely produced overseas, and China has been slowing down production as it prepares to host the Winter Olympics in February. He expects production to ramp back up after the Olympics, but it remains uncertain just how available those herbicides will be during the growing season.

Schnitkey says the high costs of fertilizer might prompt some farmers to change approach.

“I think the key words will be — particularly on fertilizer or nitrogen fertilizer — will be cutting back,” Schnitkey says. “Cutting back will be a wise thing to do. If they haven’t put on their dry fertilizer, pulling back might be a good idea.”

In particular, he says if farmers have been doing a good job with soil tests and keeping fields at the recommended nutrient levels, they could maybe not fertilize for a year or fertilize at lower levels.

“These soil test levels are high enough, you can take a year off,” Schnitkey says.

He doesn’t expect input costs to decline in the near future.

“They’re going to be at elevated levels through planting,” he says. “Then we’ll see.”

Generally, fertilizer costs are tied to corn and soybean price action, Schnitkey says.

“Fertilizer’s highly correlated to corn and soybean price, and if those prices go down, the cost of fertilizer might go down as well,” he says. “No one’s really expecting that in the first six months of 2022.”

Natural gas costs have gone up, which contributes to rising anhydrous ammonia costs. Schnitkey says weather events may have played a role in the high costs of anhydrous as well. He says the cost of the product is tied to natural gas and corn prices, and the estimated cost based on those factors would be $900 to $1,000 per ton.

“We’re obviously well above that,” he says. “Until Hurricane Ida hit, we were tracking close to what we’d expect (for anhydrous ammonia cost).”

In addition, ag economists and crop input manufacturers have cited increasing costs for ingredients used to make fertilizers, as well as production disruptions at fertilizer plants around the world, as part of why costs have skyrocketed.

Schnitkey says he thinks the situation will gradually improve as this year progresses.

“I think we’ll begin to get normal later in 2022 and in the 2023 season,” he says.

However, he cautions that labor issues could continue.

“I think we’ll be in a quasi- permanent labor shortage,” Schnitkey says.

He says the COVID pandemic reduced the labor force, and it hasn’t been coming back to pre-pandemic levels. He says a lot of older workers decided it was time to retire. Also, unrelated to COVID, the U.S. has seen more gradual population growth and shifting demographics.

“Our population isn’t growing very fast, and it’s aging,” Schnitkey says.

These factors could contribute to ongoing labor challenges, he says.

Johnson says planning and communication are good strategies for farmers when dealing with higher input costs and supply chain challenges.

“This is a good opportunity, you need to have a good discussion with your crop supplier of what you need for this year,” he says.


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