A report from Agriculture and Food Policy CenterPSAC, at Texas A&M University title “Economic impact of rising crop and input prices on PSAC representative farms” provides an overview of the economic impacts of rising crop and key input prices on the 64 representative farms in the center.
The report was compiled by Joe Outlaw, Ph.D., and Bart Fischer, Ph.D., co-directors of the PSAC in the Department of Agricultural Economics of the College of Agriculture and Life Sciences at Texas A&M, Bryan-College Station. Other department contributors include Henry Bryant, Ph.D., J. Marc Raulston, George Knapek, and Brian Herbst. The PSAC is part of Texas A&M AgriLife Research and the Texas A&M AgriLife Extension Service.
About the report
“This report follows a PSAC report information document who analyzed the impact of rising fertilizer prices on PSAC representative farms at the request of U.S. Rep. Julia Letlow, Fischer explained. “The current report analyzes the economic impacts of rising crop and major input prices on 64 representative farms across the United States”
The analysis was commissioned by Senator John Boozman, a senior member of the Senate Agriculture, Nutrition and Forestry Committee.
“Input suppliers around the world are struggling to keep up with demand for most major agricultural inputs,” Outlaw said. “While there are many causes, the most cited revolve around the pandemic and the resulting supply chain and distribution issues that have persisted.”
He said that in addition to supply chain and distribution issues, inputs such as fertilizers have also been hit with import duties by the United States International Trade Commission on solutions of phosphorus and ammonium nitrate and urea.
“These factors, along with the Russian invasion of Ukraine, both countries being major fertilizer exporters, have further limited fertilizer availability and driven prices even higher,” Outlaw said. “The Russian invasion also drastically reduced Ukraine’s corn and wheat exports, leading to higher crop prices around the world.”
Fischer said that while producers undoubtedly face higher input prices, it was less clear how those high input prices translate into increases in the cost of production.
“For example, some growers locked in input prices last year ahead of the sharp price hike, and we expect most growers to reduce input use in response to the price hike,” he said. he declares.
For this analysis, PSAC sent each of the 489 panel members of representative farmers an email soliciting the amount spent per acre on inputs for the 2021 crop year and the amount they plan to spend this year. The percentage change for each category was calculated for each respondent.
“This analysis focuses on the evolution of net cash farm income for 2022 compared to 2021 to determine whether projected increases in commodity prices are likely to offset increases in input costs as reported by agricultural panelists. representative,” Fischer said. “The cash balance at the end of 2022 is also reported to indicate whether net farm income is high enough in 2022 to pay all other obligations such as principal payments, family living expenses and taxes.”
He said projections beyond this crop year for input costs were not possible due to extreme volatility in input prices.
The 64 farms by type included 25 feed grain and oilseed farms, 11 wheat farms, 13 cotton farms and 15 rice farms. The results of the report showed:
- Net cash farm income of representative feed grains and oilseed farms is projected to decrease by an average of $534,000 from 2021 to 2022 across the 25 feed grains and oilseed farms.
- Representative wheat farms face an average reduction in net cash farm income of $399,000.
- Representative cotton farms face an average reduction in net cash farm income of $716,000.
- Rice farms face the largest reduction in net cash farm income per farm at $880,000 and a reduction per acre of $442.
Feedback from local producers
Matt Huie, a farmer and rancher from Beeville, said rising input costs have had a significant impact on operating expenses. On his farm, Huie plants about 50% cotton, 25% maize and 25% sorghum.
“The increase in fertilizers was the most notable in input costs,” he said. “There have been several increases over the past year, and currently we are paying more than double than the same period last year.”
He said the cost of chemical inputs such as herbicides and insecticides had also increased and taken up some of his operating capital.
“Some of these products are four times more expensive than last year, and due to supply chain issues, we also had difficulty sourcing them,” Huie said.
He said that due to rising input costs and drought, yields of his cotton and maize crops are expected to decline by more than 50% from last year.
Huie said that although raw material prices have been higher, they have still not been high enough to offset all the increased input costs.
“There will likely be declines in commodity prices in the not-too-distant future, but it’s likely that any reductions in input costs will be more gradual and won’t be enough to offset those price reductions,” he said. declared.
Huie said he estimates his operational costs will be nearly $1 million higher than last year due to increased inputs ranging from fertilizers to chemicals to fuel and other necessary supplies.
LG Raun, a third-generation rice farmer in El Campo, said he read the PSAC report and agrees with the findings, especially those regarding the impact of increased inputs on rice farmers.
“In addition to my fertilizer costs which have more than doubled, my energy costs have almost doubled and the associated costs for machinery, parts and labor have increased by at least 20% compared to the previous year. last year,” he said.
He noted that the loss of revenue due to rising costs would likely lead to a 38-year low in rice acreage planted in the United States.
“In Texas, we planted about 186,000 acres of rice this year, but we only plan to plant about 175,000 acres next year,” he said.
Raun noted that this reduction in planted acreage will also negatively affect suppliers, processors and others who serve the rice industry. He also said that with growers planting less rice, customers will have to look for other suppliers to meet their needs.
“Once you’ve lost market share, it’s pretty hard to get it back,” he said.
Raun said his budget projections indicate his rice farm will suffer a “six-figure loss” this year.
For context, Outlaw noted that net cash farm income in 2021 included a significant amount of ad hoc aid.
“Absent another injection of aid in 2022, we estimate that significant increases in input prices will lead to a huge decline in net cash farm income in 2022 compared to 2021,” he said.
Outlaw noted, however, that despite significant reductions in net cash income from 2021, high commodity prices will likely keep most PSAC representative farms in the black.
“The notable outlier is rice, where two-thirds of rice fields will suffer losses in 2022,” he said.
Outlaw also noted that much of PSAC’s analysis hinges on producers’ ability to lock in high commodity prices at average yields.
“But with drought ravaging half the country and many other areas facing excess humidity, that assumption may be too optimistic,” he said. “This is perhaps the most important point to note, as growers begin to plant a crop that will require them to put huge, even historic, capital at risk.”