Farm input costs increase By WHITNEY PANDIL-EATON Staff Writer [email protected] August 14, 2009
A recent report by the National Agricultural Statistics Service showed a modest increase in farm production expenditures for the Plains Region between 2007 and 2008, but the shift in input prices this year has many producers on edge for 2010.
Farm production expenditures for the Plains Region, which includes North and South Dakota, Nebraska, Kansas, Oklahoma and Texas, totaled $74.2 billion in 2008, an increase of 1.2 percent from 2007.
The largest expenditure in the Plains, livestock, poultry and related expenses which represents 18 percent of total production costs saw a decrease of more than one-quarter from 2007 to 2008, although many experts in the state disagree.
"The cattle industry in the state was hit hard by drought in '08. Producers had to supply more feed and with less supply they had to pay more for transportation to get it where it needed to go so many easily doubled their expenses from '07," said Tim Semler, extension agent for Bottineau County. "That 25 percent reduction may have happened, but we bucked that trend seen elsewhere in the Plains."
Following livestock, poultry and related expenses, feed, farm service and rent costs rounded out the top four expenditures, accounting for more than half of all farm production costs. Farm services includes transportation costs, insurance, marketing charges, equipment leasing and other miscellaneous business expenses.
In 2008, the average total expenditure per farm in the Plains was $145,424, up slightly from $143,683 in 2007 and above the national average of $140,075. As the leading expenditure in the Plains, livestock, poultry and related expenses averaged $26,259, nearly twice the national average.
Although no finalized statistics yet exist, many believe this year's expenses have far exceeded those of the past two years.
"Fuel costs and feed costs have made a major change over the last year which has helped ranchers but the disasters we experienced this past winter and spring impacted our incurred costs above the annual maintenance on the 'to-do' list," said Julie Ellingson, executive vice president of the North Dakota Stockmen's Association and operator of a 200-head registered Angus ranch near Saint Anthony. "The price of feed is down but producers had to go through more because of the long winter and shorter grazing season this year so the high costs were still there."
The same was true for farmers.
"My input costs weren't a lot more expensive from 2007 to 2008, but prices were ridiculous for the '09 crops," said Darrin Anderson, a corn, soybean and wheat grower near Valley City. "I paid $500 to $550 for Anhydrous in '08 and in '09 I paid more than $1,000. The same is true for phosphate and in some cases seed prices."
Hoping to avoid future price spikes, Anderson has already purchased his fertilizer requirements for the 2010 crop and was surprised by his findings.
"I recently purchased Anhydrous for $425 per ton and phosphate for $310 per ton which are well below my 2008 levels," he said. "With probably the worst corn crop since 2004, it's my hope that this (price) trend continues into other areas (of production expenses) as well."
Semler, a farm management specialist, believes that to be the case.
"Our seed, fuel and fertilizer costs will be lower in 2010 than 2008 but expenses haven't fallen as fast as commodity prices have. We are seeing 35 percent of the highs we saw in 2008 commodity prices but fertilizer costs are still 60 to 70 percent of their 2008 highs," he said. "Operating margins continue to be thin, but producers can maintain as long as yields remain high. The fear now is that if yields drop (due to maturity or early frost issues) , that combining with low commodity prices will have farmers operating in the red."
