“Concern about the war’s impact on input prices and input availability on their farming operations was paramount in the minds of producers responding to the March survey and was a major factor in this month’s decline in sentiment,”

said James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.

The March survey provided the first opportunity to ask producers how they expect the war in Ukraine to affect U.S. agriculture. Producers overwhelmingly said they expect input prices to be most affected (63% of respondents), followed by crop prices (33% of respondents), and livestock prices (3% of respondents). Responding to a related question, 19% of respondents chose “availability of inputs” as their biggest concern in their farming operation this year, which was equal to the percentage of producers who chose “lower crop and/or livestock prices” as their biggest concern.

Diving deeper into producers’ expectations for farm input prices in the upcoming year, 57% expect farm input prices to rise by 20% or more, and 36% think input prices will rise by 30% or more. And, just over one-fourth (27%) of producers say they’ve had difficulty purchasing crop inputs for the 2022 crop season. Producers report that supply chain problems persist across a wide range of inputs, with herbicides, fertilizer and farm machinery parts posing the most problems.

Producers continue to say that they expect their farm’s financial performance to decline in 2022 compared to 2021. The March Farm Financial Performance Index, which asks producers whether they expect their farm’s financial performance in 2022 to be better than, worse than or about the same as in 2021, was up slightly (4 points) at a reading of 87 but remains 30% lower than a year earlier.

“When producers think about how their farm will fare financially in 2022, it’s clear they do not expect commodity price strength to offset the dramatic rise in farm production costs they are experiencing,”

Mintert said.

Producers do not view this as a good time to make large investments in their farming operations as the Farm Capital Investment Index fell again in March. The index was 6 points lower than a month earlier and 59% lower than in March 2021 when it was near its all-time peak. In a pair of follow-up questions, 62% of respondents said their plans for farm machinery purchases in the upcoming year are lower than a year earlier, which is the most negative response to that question since May 2020. When asked a similar question about their plans for farm building and grain bin construction, 68% of respondents chose “lower,” which was the most negative response received to that question since its first inclusion in a barometer survey in May 2021.

Supply chain problems continue to haunt both the farm machinery and construction sectors and are one of the reasons producers don’t view this as a good time for large investments. For example, 42% of producers this month said their machinery purchase plans were impacted by low farm machinery inventories, consistent with industry reports that major machinery manufacturers are experiencing order backlogs.

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The first report concludes that farm production costs are likely to increase 6% in 2022, which follows a 12% increase in 2021. This continues a trend stretching back several years. Since 2013, farmers have seen almost all production expenses increase. For example, livestock and poultry expenses have gone up 46% and marketing, storage and transportation costs have increased 59%.

Farmers are seeing a number of production cost increases including:

• Rising fertilizer, seed and chemical prices, which now make up to 17.5% of on-farm expenditures
• Rising fuel and energy prices, exacerbated by uncertainty due to the Russia-Ukraine conflict
• Increased costs of labor, both on-farm and for agribusinesses serving farms
• COVID-19 disruption of labor markets and production

“The rising prices for fuel, fertilizer and other supplies create an unwelcome counterforce to higher commodity prices,” .
“Higher prices for crops are getting a lot of attention right now and of course help farmers balance the books, but when expenses are rising just as quickly or even outpacing revenue, the financial gains evaporate. Right now, there are serious concerns about whether farmers will be able to access the supplies they need to put a crop in the ground.”

said AFBF President Zippy Duvall.

AFBF is working to ensure the administration and Congress understand the severity and potential implications of increased production costs and the limited availability of some supplies.

Future Market Intel articles will explore the rising cost of production expenses like seed, pesticides, energy, machinery, land, labor, credit and water. A Market Intel analyzing fertilizer prices was published in December 2021.

Source: Farm Bureau

The post Farm Production Costs Expected to Increase 6% in 2022 appeared first on North America FarmQuip Magazine.